Fidelity National Information Services Stock

All right. We're going to kick off the next session. My name is Will Nance. I cover the payments and fintech. It's the first fireside chat, I remember to introduce myself. And I am really delighted to have FIS CEO, Stephanie Ferris as well as CFO, James Kehoe with us today. Really excited to have you guys with the conversation yet again here at the conference.

Yes. Thanks for having us.

All right. Stephanie, thanks for being here. I wanted to start big picture. The stock has had a tough couple of years. When we look at the numbers, yes, there's puts and takes. We talked about capital markets and earnings. So banking has been growing sort of high end of the range. Margins are expanding. Year-to-date, free cash flow is up a lot year-over-year. As you sit here today, how do you assess the health of the franchise in the end market. And when you think about what the market might be missing, what are you most focused on delivering from an execution perspective to help sort of turn that around?

Yes. I think the health of the franchise is good, it's strong. We're focused on what we can control, which is really to the point you made, how do we ensure that the banking business returned to the growth trajectory we expected. As you said, it's performing at the high end. We've been focused on margin expansion. That's been a very big focus for us. We're really pleased with the first half of the year and feel good about the rest of the year, all the way into free cash flow. And as you know, in the last quarter, we raised our free cash flow guide.

In addition to that, we've been focused on quality of earnings. We're really looking at our acquisition and integration costs and bringing those down, which obviously shows up in the free cash flow. So for us, it is about execution, and being focused every day on how do we get up and deliver revenue, margin expansion, free cash flow and high quality of earnings.

In terms of what the market doesn't understand, it's a tough one, right, in terms of the industry and the sector that we're in with respect to AI. I think we've been really pleased. Banking is definitely in -- has a growth agenda. And we're seeing banks take advantage of M&A, whether they want to be buyers or sellers. We're seeing them focused on building out their digital currency stack. We're focused on them. In general, talking about how do we modernize the bank from a technology standpoint. And then we're all focused on cyber, Mythos, Project Glasswing as a general category and really focused on closing any holes that any of us have there. So really highly focused on execution.

Yes. So let's continue that. You've talked about this as sort of a generational moment in banking, deregulation, record M&A and now the intense focus on AI. What are you hearing from clients today in terms of technology budgets? And when you -- if you could characterize the spending that people have on technology, is it broad-based? Are you seeing prioritization within the budget towards AI-specific dollars? And overall, how does the environment feel for FIS?

Yes. I think in terms of technology spend, in general, it continues to grow at 7% to 8% overall. That's been a trajectory that we've seen, well, I think, for the last 10 or 15 years, where banks are spending continues to evolve. Obviously, CISO's budgets are pretty big. We can participate there in terms of product capabilities with our fraud products, but we don't typically serve in the CISO world, but we're very linked with CISOs in terms of making sure that our products and services are all closed from a vulnerability standpoint. So we do take advantage of some of that spend with them.

They aren't reallocating, I would say, from bank modernization or technology modernization into cyber because generally, they're doing really well. And so they're in an environment where they have an ability to grow. They have an ability to buy or sell. They're really focused on how do they generate net new deposits.

So when I think about where our bank CEOs spending their time and how are they talking to us in terms of where they want to grow, they know they want to be and continue to be very competitive around deposit gathering. And when they think about deposit gathering, they think about, do I have the right digital assets to be able to gather deposits? Do I have digital account opening capabilities to gather deposits? Do I have in terms of -- do I have digital currency capabilities if you're a commercial bank and you want to gather deposits from commercial customers or make commercial loans, you have to have capabilities out for those treasurers be able to take advantage of digital currencies like Circle. We have products like Money Movement Hub, where you can plug in any of those capabilities.

So banks are really focused on making sure they have the deposits they need to fund their balance sheet. And then they're looking at spend inside the banks in terms of AI, where can they really get after with the regulatory costs of being a bank. And so when you think about things like that, you think about suspicious activity reports, AI, money laundering and fraud are very big places and cost pools that banks spend a lot of human capital on. And so we have been in partnership with Anthropic, building out our first agent that's focused on AML and SAR filing.

And you're seeing -- we're seeing a very large interest in that because it's just trapped costs. that banks have been never able to get after. Now when you talk to banks about that, they're not usually looking to take out those costs and drive margin expansion. They're looking to reallocate those costs again back to how do we grow the franchise. So they're very much focused on how do we take advantage of this point in time where we have a nice balance sheet, and we have nice margins and start to really reinvest in the bank in the capabilities that they need, depending upon where they are.

And I think from an FIS standpoint, we feel good about all those categories. We feel good about having a conversation with the CISO on cyber. We feel good about having conversations around how to prevent fraud, which is a huge locked cost. We feel good about having an agentic agent going after fraud and money laundering and then we'll go after credit card and debit card disputes. So we feel good about that. And then bank modernization, we have all kinds of stuff. So we feel really good where the spend moves and occurs, but that is something we keep our eye on every year in terms of where our banks are spending.

Let's talk a little bit about the Anthropic partnership. That was one of the bigger announcements this year. You said the financial crimes agent will land in the back half with BMO and Amalgamated, nothing in the 2026 guide for that. Where does product development stand today? And how quickly can the revenue road map broaden beyond just financial crime?

Yes. So it's going really well, right on target in terms of having our first agent up and running inside BMO and Amalgamated end of the year. So we will be off to the races in terms of selling this capability out to the rest of our financial institutions in 2027. We're having a lot of conversations to figure out how to price it correctly in terms of making sure we get the biggest and fastest adoption we can. It obviously creates a huge amount of value for the bank because it does unlock a bunch of locked costs for them.

We are talking about how do we really launch. One of the reasons we partnered with the Anthropic is we have a very big distribution channel out to financial institutions. So we are working on our go-to-market and our pricing and our product capabilities to launch in 2027, a very material way and start to generate revenue on that agent. Right on the back of that is we are starting to build and work with our next set of banks on credit card and debit card disputes.

Another really big capability that is locked inside banks. When you think about calling and you dispute on your credit card or your debit card, there's a lot of manual labor you calling the bank, the bank then has to call the merchant. The merchant has to do something in Visa and Mastercard. A lot of locked costs in there. We think -- and a lot of it is coming off of our systems that we deploy in the banks. We think there's a big opportunity there. So the flywheel on agents should continue to get faster and allow us to really deliver real incremental value to our banks and unlock a different bag for us.

Great. James, I want to get you involved here. Any notable callouts this quarter as it relates to the outlook or anything that you'd flag to investors about the way you're thinking about the second half of the year?

No, I'd just reiterate what we said before. We reaffirm our guide for Q3 and the full year. And then as we look at the shape of the second half, we mentioned this before, in banking, we had an M&A contribution in the first half of 100 bps. There's no M&A contribution to any great extent in the second half. And then -- so the overall growth rate will moderate slightly in banking. In capital markets, there's only 1 real call out. It is in the third quarter of last year, was exceptionally strong on -- in capital markets at 9%. So that will be a tough comp in the third quarter, but we'll see a strong acceleration from that level in the fourth quarter.

I do want to reemphasize one thing. Both businesses will deliver mid-single-digit recurring growth for the year. We're pretty happy about where we are exiting the year on that basis.

Let's stick with that theme about recurring revenue growth. You've been citing this metric around recurring ACV. I think you were up 20% in the fourth quarter, 24% in the first quarter. Maybe if you could help us understand what has fundamentally changed on the sales side to drive that? And how you think about the durability of reoccurring revenue growth in banking as that backlog converts to revenue?

Yes. So as we came into 2023, we really refocused the commercial engine on making sure that we were selling the products that had the right margin to deliver the revenue expectations, but also the margin expansion. And so it's really, really important that we continue to focus on that recurring revenue and the recurring sales because if we get too focused on PS or we get too focused on license, you don't have a highly recurring, high-margin profitable business that you can bet on that will deliver our expectations.

So we -- I aligned on a Chief Commercial Officer and really focused him on selling the right recurring product with the right level of margins. So -- sorry, the right level of margins so we can deliver the ultimate margin commitment we made. Bringing the TSYS acquisition on obviously helps that. It is almost all recurring revenue with very high margin, so it gives us a lot of confidence in recurring as we go forward. But that's we've really had our Chief Commercial Officer and all our product leads focused on that versus on every dollar of revenue accrues the same value to the firm because it doesn't. And so we've been really -- that's been really important for us.

Got it. And then just on the nonrecurring side, I think selling higher quality, higher margin recurring business has really been central focus since you took over as CEO. You have seen a meaningful uplift on the nonrecurring side in the first half in banking. I think license activity in the first quarter termination fee, which I think most people understand in a second. But maybe just unpack on the license side, like what drives the net new license activity in the business how you just think about that about the contribution of licenses going forward?

Yes. So one of the benefits of the franchise is that we have a lot of partners in our ecosystem that become vendors of ours. And so -- and they're also SIs on the other side selling to our banks. So as we look across our ecosystem, we end up paying a lot of our vendors and partners and also see them on the other side of the ecosystem with us. So our Chief Commercial Officer and I have been really focused on how can we turn these costs and cost partners into revenue partners for us. So we started this year in the first quarter with a couple of big SIs that we thought we could partner with that we have partnered with in our back office capabilities, and they came to us and said, "Hey, we think we could also be a partner with you in terms of distributing your products."

So big licenses to sell those, we ultimately think they deliver recurring revenue over time. And we think this is a really interesting opportunity for us. We took our first shot at it with a couple of partners. So that was the first quarter. Do we think that's -- it won't happen every quarter, and we're trying out a model to see if our -- we have our own distribution, can we enable other distributions of our product? Can that create more revenue for us? TBD, as you look -- as we look at the opportunities out there. So that's kind of the genesis of that big license in the first quarter. And then to your point, a bit of a termination fee in the second quarter around Huntington Cadence, which kind of is episodic with bank consolidation.

Yes, that makes sense. Okay. I wanted to talk about the LFI focus of the business. I think it's something that you guys have been emphasizing more recently. It's always been a hallmark of FIS' business. 72 out of the top 100 clients are now consuming across banking, payments and capital markets. They have significantly higher ARPU. I think on paper, when you look across the big 3 providers in this space, it looks like everyone has sort of the same products. And as somewhat indistinguishable. Can you talk about what is genuinely different about serving the large FIs versus what it's like in a community bank or credit union?

Yes. I mean, first of all, I would say we serve community banks and that is as important of a channel as our large financial institutions. But they are different channels and how you serve them and how they want to consume products is very different. So starting from large financial institutions, they're very sophisticated technology consumers. They're typically looking for best of breed. They may or may not want your products to be integrated and you have to have high levels of scale, resiliency in cybersecurity. The way they want to be serviced is different than the way community banks. If you think about community banks, their model, they want to make sure that everything is fully integrated. They obviously want best-of-breed if they don't think we're giving it to them, but they would prefer to have a one-stop shop in terms of a provider. The way we provide service to them is very important. They serve their communities. It's a higher touch model than the large financial institutions have.

So I think they're very different channels, and we serve them very differently. Also, in the large financial institution part of the market, typically, if you're a large bank, you are serving commercial banking customers, so do the community banks. But if you think about serving commercial banking customers, these are sophisticated corporates. They typically require a pretty sophisticated money movement capabilities and including having digital currency capabilities. We make these capabilities available to all banks regardless of large financial institutions or community banks. But if you're a larger size or your focus in the community bank market, we have the best-in-class products and services for that commercial bank segment. So whether you're a large or a community bank, we just do hands down. It's been a marquee segment for FIS. And so that's where I'd say we're very differentiated. We also -- so maybe I'll pause there.

Yes. No, I think that's great. One of the other topics that's come up a lot, and it's probably come up more in the context of larger banks has been the idea of core modernization. The idea large banks hollowing out the core. You recently did an acqui-hire in the orchestration space. And so I'm just wondering what you're hearing from the largest banks on the modernization road map? And where you see the biggest opportunity for FIS to facilitate versus maybe the opposing view that we've heard in the market about this maybe being a disintermediation risk for some of the incumbent providers?

Yes. We actually call it bank modernization because it's really -- banks are no longer focused on big bang core migrations at the very large. It's just -- it's too big, it's too risky. And so as they look to modernize their bank, and this is of the largest size, a fairly sophisticated, they're looking to hollow out their core typically, which means they want to pull out the customer master. They want to pull out the project -- product master. They want to have an orchestration layer that goes across not just their deposit core, but also their commercial core, their mortgage, core in their consumer core. Remember, there's a lot of cores inside of a bank. And so banks have been moving in a hollow out journey. It's an expensive way to go. It is definitely an evolution we've been seeing in the market.

And we did do an acqui-hire to your point where we brought a team on with a set of capabilities that is very, very fantastic in this space. And what we think is differentiating is completely AI built, dual-cloud hot-hot, never had that before, and that is also starting to become a requirement in the market. As resiliency continues to become a very big deal, you can also be in the cloud, and you could be in your own data center. So these are cutting-edge capabilities that we're seeing the largest banks want to have and have an orchestration layer to be able to do that. So we brought that team in. They have a fantastic set of assets, and we're looking forward to some pretty exciting announcements in the future.

Very good. Maybe we'll turn to TSYS or Total Issuing, I think as we're now calling it, the business is growing in the mid-single digits. You've owned it now for a couple of quarters. How do you feel about visibility to the mid-single-digit growth algorithm that we've laid out? How is the cross-sell conversation going? And I think it's growing 6% right now. What would you attribute some of the above trend growth that you're seeing in the business?

Yes. So I think -- it's been a fantastic acquisition for us. It fits exactly into our existing customer set with a product that we did not have. It brings in highly recurring revenue with high margins and a very, very easy view in terms of a mid-single-digit grower there. That being said, it is going very, very well. We're tracking towards our cost synergies. I think we shared that in the last quarter. We're continuing to feel really good about our revenue synergies. We think those take longer, just given these are really big banks with long time frame. So we feel good about it. It is tracking above expectations when we originally bought it. I feel really good about it.

I would say it's better management, but to be fair, William, it's probably from the prior management in terms of why it's tracking better. But we do feel really good about it, and it continues to execute in a really strong way for us.

I think you called out a large account conversion with an existing client this past quarter, contributing to, I think, you called out one of the largest customer migration in the history of the industry. How impactful is that migration to overall growth? And how do you think about kind of the persistence of that 6% growth in the business?

Yes. So if you're -- this is evidence of one of the standout value propositions of Total Issuing Solutions. So if you're a large bank having and migrating a large card portfolio from your existing provider to Total Issuing, they are best-in-class. I've never seen so many accounts migrated in my entire life with literally not one issue. That is a core competency of Total Issuing Solutions.

So when you think about if you're a large bank anywhere, and you're going to move an entire consumer card portfolio. Remember, that's a revenue to you. That's not core banking, which is a cost structure to you. You want to have a lot of confidence in a team that's been able to do it and proving it at scale over time. So honestly, I've never seen anything that big. I've been in and around the industry and hats off to the Total Issuing team. They did a fantastic job. That's likely a little bit of why we're accruing at a higher-than-expected number for us. And so we feel really good about it. The client was very happy with it. A little bit more to go, but really great outcome.

That's great. I think one of the topics that sort of dominated conversations about this business year-to-date has been around the competitive environment. I think you said this past quarter, rolled out an all-in-one debit and credit offering with their Pismo and DPS platforms. So how are you thinking about just competitive dynamics for this business? And are there any ways that you could frame just how much overlap you actually have with competing solutions in the market on the business side?

Yes. A couple of things. One, we talked about large financial institutions versus community banks, large financial institutions buy best-of-breed. They're never going to move to a debit, combined debit credit environment. That's not how they operate. And a lot of large financial institutions run credit issuing and run some of their stuff in-house and run debit. So I don't see a combined debit credit issuing value proposition for large financial institutions. In addition, I do think it's relevant down in community banks and credit unions, where I think they're seeing some potential traction.

I think you've probably heard Ryan, the CEO of Visa, also clearly articulate the large financial institutions is not where he's looking to win in this space. Remember what I just talked about, it would be a really hard decision to migrate a humongous portfolio to a competitor who's never migrated anything of that big size or scale. And the other challenge, I think, for large financial institutions, to the extent that you would decide to migrate, for example, to Visa Pismo, you would never have any leverage with Visa Pismo again because you fundamentally you can't change brand. So I think for large financial institutions, it doesn't make sense. I do think for community banks and credit unions, and he's talked about fintech, it could make sense there.

Got it. That makes sense. All right. Let's pivot a little bit over to capital markets. You announced the strategic review of select products within the capital markets portfolio. Can you talk about just the parameters that you're putting around that process? How are you defining strategic fit in the business? Are there financial requirements around dilution, stranded costs, capital return that we should be thinking about as this plays out?

Yes. And I'll ask James to pipe in if he thinks I'm missing something, especially around the financial criterion. So we are looking inside capital markets in terms of, is there a set of products and solutions that don't overlap with our existing clients and don't make sense for us to be an owner and could be a potential sale. When we think about the sale and the requirements on the returns, we obviously have to think about we are committed to pay down our debt. So can we get a value for the product or the solution that allows us to continue to pay down debt either and -- pay down debt and get back to share repurchase faster or pay down debt to a period in an amount such that we could ultimately then incrementally do more share repurchase. But it all does depend on the returns.

Do you have anything you might want to add?

No. I'd just add, we're staring at the ones that have the least fit with the client base. And then secondarily, could it be accretive to top line growth over time? And I think we'll manage through the accretion dilution impact. It depends on the share price at the time. With lots of pieces to work through, our goal would be to get back to share repurchases sooner rather than later.

Got it. Okay. All right. So sticking with capital markets. The other aspect last quarter that came up was around guidance. I think you pointed at the low end of the range, the quarter before, reduced the full year guide this past quarter. Do you feel like the trajectory of that business has stabilized. Any changes in expectations around what that looks like, not just for the remainder of this year, but over the next couple of years. And then just big picture, how are you thinking about the growth algorithm going forward and the mix between recurring revenue growth versus license and professional services?

Yes. I will let you take this one.

Lot of questions there. As I said, we reaffirmed the full year guide. What we said last quarter was looking out into 2027, we expect a modest deceleration on both adjusted and on recurring. And as I said earlier, we'll exit the year on a 5% recurring. So let's take that as a base. It's got about one point of M&A in there. So obviously, we're not doing M&A next year. However, the last point of M&A will be more than offset by 2 factors. One is the attrition that Stephanie talked about on the last call. Clearly, the UBS-Credit Suisse doesn't repeat. So that's a point accretive on Q2 lower attrition. And then better conversion of the ACV already sold, we'll probably give you another point.

So we see, as I said, a modest deceleration from the 5% despite losing M&A contribution. What we do see in the business pipeline is pretty healthy across the products too, and the ACV sales and recurring are solid on a year-to-date basis. So we're cautiously optimistic. But we -- this is a business that's still doing a mid-single-digit recurring and expected to do so longer term.

Got it. And we talked a lot in the banking discussion about reoccurring revenue versus licenses. Is that a different conversation in capital markets? And how do you think about driving growth on the recurring side in that business?

Yes. I think that's potentially an opportunity versus the long-term growth rate on recurring. We would -- we have a strong preference for less license -- episodic license activity and more recurring, but it needs to be managed over time. So we would expect in general, accelerating recurring and declining license activity.

Got it. Okay. James, I'm going to keep you involved here. The company has pivoted towards focusing more on GAAP free cash flow as kind of the primary metric. You changed that around guidance. I think that's been a big focus for investors as well. You raised the guide on free cash flow in the most recent quarter. And then you've laid out this path to $3 billion plus by 2028. The big topic of conversation, I think, revolves around onetime expenses. So I'm hoping you could talk about a breakdown of the onetime expenses. How do they break down today and your line of sight to getting those -- managing those numbers down over time?

Yes. But I still want to go back to what you said first, which is the cash flow story on a GAAP basis. We called up $100 million to $2.2 billion. That's a 36% growth year-on-year. And it's coming from numerous factors, and we have a long pipeline to get to the -- a huge pipeline to get to the $3 billion. But we're very confident on the $3 billion by 2028. Onetime expense is one of the levers. The biggest lever is actually EBITDA. The second biggest is onetime expense. You saw in the most recent call, we did reduce the total onetime cash expense from $800 million to $730 million. If you take that $730 million, what's in there, what do we spend on, around $275 million is on the TSYS integration. Another $90 million is on other M&A activity. So that can be taking Worldpay out of our systems or integrating those tack-on acquisitions. So 50% of the total onetime cash spend is on M&A or integration activity.

And by the time we get out to 2028, that number will be substantially lower just because TSYS will be for all intents and purposes integrated by the end of call it, change on change, that's well over $300 million. The other big spend item on the current year sales, that's around any given around $200 million, big spend item. That will, over time, moderate more over the period. We've taken a strong commitment on this. And what we've said in past forums is we expect the original $800 million to be below to reduce by at least 50% over the next 2 years. And we're well on the path to that. You saw in the current year, taking out $70 million. It was, I think, a 15% reduction in the core FIS spend. So we're going to be dogmatic about this and look on reducing this. And it is a key driver of the continued improvement in free cash flow.

Yes. Makes sense. Okay. Last question here just on capital allocation. Deleveraging has been a big priority in the aftermath of the TSYS acquisition. You're at around 3.5 turns with the target to get back to high 2s range. Buybacks have been paused, targeted to get back to buying back stock middle of next year. How are you thinking about the capital allocation framework, I guess, into 2028 when things are more normalized once you're through that deleveraging? And what would make you consider something other than share repurchases as a use of cash?

I mean, at our current stock level, nothing. I mean, we would do all share repurchase. There's really nothing that we could do beyond that, that would have any incremental value. So I mean, I wish we were in the market right now. I think we'd love to be, but that's the plan. So just can't even imagine anything that would accrue any kind of value besides the share repurchase. Very much look forward to getting back in the market.

Yes. Makes sense. And I guess any opportunities for accelerating the time line to get there? We talked about the capital market strategic review. What are some of the frame -- what are some of the guidelines around that?

No, I think that's exactly it. And it's not limited necessarily to capital markets, and we've been actively pruning the portfolio, but we will look at, to James' point, the construct of is there something that doesn't fit with the existing portfolio might be dragging the revenue growth down. It does have an EPS dilution accretion effect. But given where the share price is, if we can get back to repurchasing shares faster, that may go away on us. So that's our focus.

And just for the long term at the risk of doing math on stage, $3 billion plus of GAAP free cash flow in 2028, your leverage constraints in the business. Obviously, you've got a healthy dividend. What governs the payout ratio beyond that?

Say that again, the last piece.

What governs how much of the remaining after dividends that you would consider allocating towards share repurchases, I guess, asked a different way...

Essentially, that's what Stephanie said. I think the first thing is to fully fund internally the capital expenditures and ensure resiliency, cyber, cyber investments, investments in growth. And then left over, we will continue to increase the dividend in line with EPS. And we have a large investor base that places a high premium on the dividend. And then simplistically, all the rest goes back to share repurchase. Could there be a situation 3 years from now or a small tack-on comes along and you do something, yes, but our primary goal is our share price is way too cheap and it would be a tragedy to not buy back the stock as quickly as we can.

And the same goes, if we divest something of any magnitude, we will have a discussion with the agencies as to the deployment of some of those proceeds against share repurchases. But what's important is we need to exit this year having hit our commitment with the rating agencies and we're well on track with that. And then they will obviously give us much more leeway when we get into 2027 on the deployment of any divestiture proceeds.

Makes sense. Okay. Well, I think with that, we're just about out of time. But thanks for being here again. Really enjoyed the conversation.

Yes. Thanks, Will.

Good day, and thank you for standing by. Welcome to the FIS Second Quarter 2026 Earnings Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, George Mihalos, Head of Investor Relations.

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 3. 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 as a result of new information, future events or otherwise, except as required by law.

Please refer to the safe harbor language. Also, throughout this call, we will be presenting non-GAAP information, including adjusted EBITDA and 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.

And with that, I'll turn the call over to Stephanie.

Thanks, George, and good morning, everyone. Several years ago, we laid out a bold multiyear plan to reposition. We committed to reaccelerating growth in our banking business, improving our margins and driving increased cash flow. Every one of those actions was in service of 3 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 thesis 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 have 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 5. Our second quarter results are strong and demonstrate the duality 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 6. 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 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 prebuy.

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 consumed 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 trading system in capital markets.

And 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 3 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.

We're 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 side.

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 7. Let me remind you of the thesis 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. And importantly, that platform serves the same set of financial institutions, FIS has built its business around.

The strategic fit was there from day 1, same clients, complementary capabilities, 1 integrated value proposition. In the quarter, we won 2 new very large financial institutions, a top 10 Latin American bank and a top 10 private sector commercial bank in India. And on renewal velocity, we continue our momentum of renewals. And since the start of 2025, we've renewed approximately 1/3 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 that was our use. [Technical Difficulty] Please U.S. banks on 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 thesis though is the Better Together story. It's starting to compound. Enterprise-wide ACV sold to joint clients grew 35% year-over-year in the first half. Put simply, strengthen complexity at scale plus a modern road map is driving commercial momentum. This is exactly what we envisioned when we brought these businesses together.

Total issuing strengthens FIS. FIS strengthens total issuing and clients are choosing the combined proposition. I know there's been some concerns around Visa Pismo entering the space and disrupting our business. You heard from the CEO of Visa last week that their strategy around Pismo is to target small to midsized 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 thesis 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 8. We are providing additional detail on this segment because it is important to understand the factors shaping performance through 2026. Capital Markets operates across 3 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 1 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 1 point of organic growth for the segment.

First quarter interest rate 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 rebasing our capital markets guide to reflect actual first half trends with modest reacceleration in Q4. As part of that same disciplined 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 9. AI is becoming an increasingly important driver of growth, innovation and client across FIS and is increasingly a core driver of how we build, sell and serve. Today, we have 10 AI products in market, 200 customers live on those products and a pipeline of more than 500 opportunities. Adoption is showing up across borders of the business.

On engineering, our teams are seeing 1.5x to 2x throughput and 30% fewer defects. On servicing, we've launched 5 agentic programs with manual tickets down 70% and triage time down nearly 75%. And on the workforce side, we now have more than 40,000 active AI copilot users, generating over 16 million total assisted actions. The partnership we announced with Anthropic earlier this year has moved from conception to execution. Together, we're advancing AI-powered anti-money laundering and agentic fraud capabilities that combine Frontier AI technology with FIS' regulatory-grade infrastructure and deep domain expertise.

Taken together, our AI investments are compounding in our products, in our productivity and on our client conversations, and they're becoming a differentiator that is showing up in commercial outcomes.

Turning to Slide 10. Let me leave you with this. The bold multiyear plan we set in motion is delivering the outcomes we committed to, a more client-centric FIS a simpler business and a stronger financial position. Our commercial engine is strong. Our total issuing acquisition thesis is compounding. Our investments are in real products, real productivity and real client conversation. We acknowledge the challenges in the capital market segment and are actively addressing them. With that, I'll turn it over to James.

Thank you, Stephanie, and good morning. Overall, we delivered solid results in the second quarter with a strong performance on cash flow. Revenue grew 5.3% on a pro forma basis, with banking coming in above the high end of its outlook and capital markets closer to the lower end. Pro forma EBITDA grew 7.4% with margins up 113 basis points, ahead of our outlook of 75 to 110 basis points.

Margin expansion was led by favorable product mix and cost savings with a very strong performance from the banking segment. Adjusted EPS increased 8.8%, led by EBITDA growth. Cash flow was stellar more than tripling to $525 million, reflecting the EBITDA growth, lower cash taxes and accelerated actions to reduce onetime cash expenses.

Our leverage ratio decreased to 3.5x, and we returned $270 million to shareholders, primarily through dividends.

Turning now to our segment results on Slide 13. Banking Solutions had a good quarter. Pro forma revenue increased 6.1% with banking up 5.6% and payments growing 6.4%. Recurring revenue grew 5%, steady with the first quarter and in line with our expectations. Nonrecurring revenue grew 21%, primarily led by strong license activity which is skewed more towards the first half of the year.

Adjusted EBITDA advanced 10.6% with margins expanding 178 basis points reflecting favorable product mix, continued cost savings and integration synergies. Overall, another strong quarter for banking solutions.

Turning now to Capital Markets on Slide 14. Capital markets revenue increased 3.2% with recurring revenue growth accelerating to 5.3% from 3.6% in the first quarter. Nonrecurring revenue grew 12% as the team executed on select license opportunities. Professional services declined by 17% and fell short of expectations due to lower sales and a slower-than-anticipated conversion of backlog.

Margins were slightly lower than prior year as the timing of operational expenses more than offset favorable mix. We do expect margin expansion in the back half of the year as these timing impacts normalize. To be clear, we believe in the strength of the capital markets business, but we are not pleased with our performance against expectations. As Stephanie laid out, we have taken a number of actions on a number of fronts, and these actions will lead to improving results as we exit 2026.

Turning now to Slide 15 for a quick update on our year-to-date results. Revenue increased 5.9%, with banking at 6.9% and Capital Markets at 3.1%. EBITDA margins expanded by almost 100 basis points on a pro forma basis, reflecting favorable revenue mix, cost savings and integration synergies. We generated approximately $1 billion of free cash flow in the first 6 months of the year, bringing our trailing 12-month free cash flow to $2.2 billion and allowing us to increase our outlook for the year.

Now let's turn to our full year outlook on Slide 16. We are forecasting adjusted revenue growth of 4.5% to 5% as compared to 5.1% to 5.7% previously. We are reiterating our banking revenue growth outlook. As expected, second half growth rates will moderate compared to the first half due to a much lower contribution from M&A and a smaller growth contribution from nonrecurring revenue.

Overall, we are feeling good about the banking business. We expect steady organic recurring growth in the second half despite more difficult year-over-year comparisons. Capital Markets revenue growth is reduced to 3% to 3.5%. This is a 225 basis point reduction compared to our prior outlook of 5.5% growth and includes a 120 basis point impact from lower professional services, with the remainder coming from slower recurring revenue growth.

Both professional services and recurring revenue are negatively impacted by 2 factors. Firstly, sales are behind plan in the first half of the year. And while we anticipate improvement over the second half, the slow start to the year has and will impact our revenue over the course of the year. Secondly, the team assumed faster implementation of the robust backlog and pipeline that we had and exiting 2025. And we are tracking behind the targeted conversion time lines.

Entering the year, we anticipated mid-to-high single-digit recurring growth, and we now anticipate mid-single-digit growth. While we are not providing a formal 2027 outlook, I do want to help frame the key drivers as you think about the future growth trajectory of this business. Recurring revenue is expected to accelerate from 2026 levels, lower attrition and improved conversion will more than offset approximately one point of headwind from the absence of M&A.

License and professional services in aggregate is expected to decline as we continue to transition this business to recurring revenue. Overall, we anticipate that Capital Markets adjusted and recurring revenue growth will accelerate modestly in 2027.

Turning now to margins. We have reduced the EBITDA outlook to reflect the lower revenue projections for capital markets. and we now anticipate full year margin expansion of 85 to 105 basis points broadly in line with our prior outlook of 95 to 110 basis points. Adjusted EPS is expected to grow 7% to 8.5% and given our strong execution in the first half, we are raising our free cash flow outlook by $100 million to $2.2 billion for the year.

Now let's turn to our cash flow goals on Slide 17. Free cash flow is a story of strong execution. First half cash flow is 2.5x prior year levels, and the latest 12 months is already running at over $2 billion. Strong execution and faster-than-expected reduction in onetime cash expenses have allowed us to raise our free cash flow outlook by $100 million to a range of $2.15 billion to $2.25 billion. This represents year-over-year growth of 36% at the midpoint. A meaningful step-up on the 19% growth we delivered in 2025 and well above our prior outlook of 30% growth.

We have a clear path to greater than $3 billion of free cash flow by 2028 driven by growth in EBITDA dollars and a disciplined reduction in onetime integration and transformation expenses. Our increased guide for 2026 is a positive step in building confidence that a $3 billion in 2028 is well within reach.

Turning now to onetime cash expenses on Slide 18. We are moving quickly to rationalize non-GAAP cash expenses and the results are evident. We are reducing cash cost by $70 million to $730 million at the midpoint. Legacy FIS non-GAAP cash expenses are reduced by 17% compared to our original guide, reflecting disciplined cost management. And let's be clear, we intend to build on this success over the rest of this year and into 2027.

Looking further out, we are confident in our ability to significantly reduce onetime cash expenses. Combined with EBITDA growth and strong execution, this improved trajectory underpins our confidence in delivering free cash flow of greater than $3 billion in 2028.

Now let's turn to Slide 19 for an update on our integration synergies. The total issuing solutions business is performing very well and we are very much on track to deliver against our synergy targets for 2026 and beyond. We've captured $13 million of cost savings year-to-date and we are tracking close to the high end of our $30 million to $40 million full year target. We are reiterating our goal of over $150 million in EBITDA benefit by 2028, with cost synergies of $125 million and revenue synergies of $45 million.

Lastly, we have an extensive pipeline of revenue synergies and we have a long runway with over $125 million of revenue synergies across our global footprint.

Turning now to our third quarter outlook on Slide 20. We are projecting pro forma revenue growth of 2.9% to 3.7%. In banking, we expect pro forma growth of 3% to 4% as we lose around 100 basis points of M&A contribution compared to the second quarter. In addition to lower M&A, the outlook reflects more moderate nonrecurring revenue growth compared to the first half in line with our expectations.

In capital markets, we are projecting growth of 2.5% to 3% with M&A contributing 105 basis points. Recurring revenue growth is expected to pace ahead of adjusted revenue growth. Company EBITDA margin will expand by 80 to 100 basis points with margin expansion across both segments and adjusted EPS is expected to grow 4.6% to 7.3%.

In summary, we had a solid quarter across most metrics. We are reiterating our banking growth outlook but reducing our projections for capital markets to reflect current performance. EBITDA margins are projected to expand by 85 to 105 basis points, broadly in line with our prior outlook. Finally, we delivered excellent cash flow results, and we are increasing our full year outlook to $2.2 billion at the midpoint, reflecting growth of 36%.

With that, operator, could you please open the line for questions?

[Operator Instructions]

Our first question comes from Tien-Tsin Huang with JPMorgan.

I appreciate you going through the puts and takes here. I just want to better understand the capital markets piece, if you don't mind, just the weakness in the professional services. Was that broad-based? Are the clients choosing cheaper forms of delivery? Are they prioritizing other tech projects to ramp instead. Just again, trying to better understand what drove the change in expectations from your delivery team?

I think I'll start, and then James can potentially quantify it. No, we think this is on us. We don't see any trends in market that are changing here. we had expected -- we had come into the year with a strong backlog in professional services, and we had leaned in hard to continuing to accelerate both sales and professional services and the conversion of that backlog.

So the miss is on us. It's not a market condition. What I would say broadly, though, is we don't expect our nonrecurring professional services items to be growth on a go-forward basis. We are focused on recurring, but we're acknowledging this miss in PS because we did plan for it to grow, and we do think the miss is operationally on us.

Okay. I appreciate you on that. Then on the -- just on the -- you're reviewing some of the products within Capital Markets, Stephanie, you mentioned that. Can you share a little bit more on how this will work? Are these stand-alone products within capital markets. I assume some of that might be bundled with some of your other contracts or perhaps these are just stand-alone, just give us a little more flavor?

Yes. That's a great question, Tien-Tsin. Thanks for asking. So within that -- as I talked about broadly, just taking a step back, capital markets is primarily serves large financial institutions. And so when you think about it, it isn't a stand-alone business. And that's what we really tried to express here in terms of within FIS, our largest financial institutions consume across banking payments and capital markets.

So when you think about whether you're a large financial institution, you're taking our trading and asset services products as well as our commercial lending products as well as our consumer lending products, as well as our banking cores and our payments capabilities. So important to understand -- that being said, within the capital markets portfolio, there are products, not businesses, but there are several products that don't strategically fit with our business.

And what I mean by that is they may not serve that set of large financial institutions or they may be products that don't meet the strategic fit of what we're trying to accomplish, like risk management solutions or we have some data analysis products that we may not sell to that existing FI base or if we do this set of products isn't within the natural solution ecosystems, we've really focused the business around.

So we're going to really focus -- we've always been focusing on them, by the way, and harvesting them to the extent it makes sense. We're going to double down on that. I just want to be clear, though, it's not a capital market segment sale. It is looking at products within the segment that don't fit the overall company's strategic profile.

Our next question comes from Dan Dolev with Mizuho.

Great progress on the banking and lowering the cost base and specifically on raising the free cash flow guide. I have 2 questions, Stephanie. More on the banking side. So how did like TSYS performed this quarter? What are you seeing on the competitive landscape here? And then I have a quick follow-up.

Really pleased with the Total Issuing Solutions business, Dan. And by the way, thanks for the comments. It performed in line with the payments growth for the quarter. As you know, it is a significant part of that growth. I mean we're really, really pleased with how the Total Issuing Solutions business is growing organically. And then we're seeing how well it fits inside the FIS ecosystem.

I think in terms of the competitiveness we're thrilled with how competitive we are here. I gave some of those key insights here because I know there's been a lot of concerns around Visa Pismo. I mean, guys, we serve the largest financial institutions here we win 80% of the time. We are very competitive. We are the large-scale player. I think you heard from the CEO of Visa. This is not where he's focused. This isn't where big banks are looking to bring things internal. This is a scale game and we continue to win very strongly here. So feel really good.

And then as you think about us bringing this together and putting it together underneath an FIS ecosystem, on a year-over-year basis, I also shared some of the key wins. We're selling more together than we did individually. So really pleased with the performance here.

Great. And then just a quick follow-up. I noticed about 30 million new accounts on file converted over the last 12 months in the presentation. How should we think about this KPI going forward? And what can you do to reaccelerate this down the road?

Yes. No, it's a great point. The team here is pretty fantastic at converting accounts. You can imagine there was a very large player in the U.S. who bought another player in the U.S., and we heavily have converted a significant amount of those accounts. Quite frankly, it's been the biggest conversion I've ever seen, and I've been around fintech a long time, and it's gone. We've done a couple of tranches, a couple more to go, and it's gone absolutely flawlessly. So huge shout out to the total issuing teams there.

I think as we go forward, you should expect to see -- I'm not going to comment on a number of accounts but this is -- we win in the U.S., in the large space. And then globally, I don't want to discount our prime product because it wins not just large but also up and down the stack and is quite competitive. So this is an important metric for us as we continue to move forward, and it continues to grow across the platform. I'm extremely pleased.

Our next question comes from Vasu Govil with KBW.

I guess, Stephanie, just first on the strategic review within Capital Markets. Could you provide any parameters around the size of assets under consideration? And when should investors expect more clarity on the outcomes of the review?

Yes. Thanks, Vasu. No, not yet. I mean, obviously, transparently, we look inside the portfolio of the entire company. You've seen us move on assets. So we're always looking from a rationalization standpoint. I think with respect to capital markets, though we're going to do a deeper dive. I don't have a number for you, and we'll come back to you as soon as we have something.

Got it. And then I guess a quick. One on AIS that continues to be a big topic in the industry. I wanted to ask, AI is also driving sophistication of cyber threats across the financial ecosystem. So -- are you seeing a need to reaccelerate your investments in security and fraud prevention? Or do you feel like those requirements have already been contemplated in your long-term outlook?

Yes, as that's a great question. Cyber is one of our biggest technology spend. It has been and it continues to be. We don't see a need to invest more. We continue to prioritize our investment around cyber and resiliency is absolutely critical to us. I do see significant amount of investment broadly across the industry. And so when you think about us as compared to a smaller player, I think we're much better positioned given how much you have to invest here. I also think being in Project Glasswing gives us an opportunity to fortify our defenses much more deeply as we think about being a scaled player here.

We take our position in the industry very seriously. We do spend a lot on it, and it is continuing to be the biggest threat we have. It will continue to be a prioritized effort for us. The good news for us is we have a significant amount of technologists. So when we find the vulnerabilities, it is not all going through one team. So it's not sitting in a funnel. We can allocate those -- we have the vulnerabilities we can clear pretty quickly.

Also, my cyber team has done a fantastic job in terms of using AI itself to once we find the vulnerability or have the attack to be able to be more productive with clearing the vulnerability or identifying and moving on the attack by identifying our own capabilities. So really pleased with our cyber team who continue to work for us 24/7.

Our next question comes from Darrin Peller with Wolfe Research.

Stephanie, could you just revisit the comments you touched on with regard to Pismo and the competitive landscape for a moment. And just just to sort of set the record streak given how many questions we get about it. Maybe help us understand the bundling and the cross-sell and just why you have a right to win, both the core banking side but also the issuer processing side.

Yes. So maybe I'll refresh some of the conversations that I had in the prepared remarks. Just to be clear, we serve the largest financial institutions globally. And we have -- just in terms of evidencing the competitive market, we have continued to renew our clients, evidencing competitively. We're continuing to keep share. We're winning new business at significant pace. Our win rate is over 85% when you're competing for large financial institutions with over 1 million accounts on file.

We were pleased to announce new net -- sorry, completely new top 10 banks around the world. So when we are competing, we are winning. How are we winning? We have the scale and the products and the capabilities. We are the only known processor that can convert accounts at scale and size. We've never had a failed deconversion or migration. Above and beyond that, I think it's important to understand and highlight the comments the CEO of Visa said, he's not focused in this area where we play at all.

So I think the notion of Visa Pismo is going to disrupt total issuing solutions is very challenging to prove -- given our renewal velocity, given our net new wins and given that the fact that Visa has told you very clearly, they're not competing there. The competitive market is perfectly aligned for us to continue to win.

Just on the Bing segment. Can you just highlight what are you seeing right now, A, in the top few areas of demand from your customers? And then when you think about decision-making, just given we've heard some checks that institutions are holding back on decisions given AI and whatnot. I mean it sounds like you're not seeing that in capital markets, so at least it was more self-inflicted, I suppose.

But on the banking side, you're going looks like results were strong. So what are you seeing there in terms of both what areas are the most demand and then decision-making timing?

Yes. I mean I think I've talked about this before. The banking demand environment is really strong. So when they're talking to us, they're talking to us about wanting to make sure that they can continue to compete in the payment space whether it's with digital currencies or debit and credit capabilities serving not only consumers and commercial, large commercial customers, but also SMBs.

So payments continues to be a very big place where there's a lot of demand. We see a lot of demand around fraud and data. Fraud cost in the bank is escalating at very, very high pieces. So there's a lot of demand in our fraud ecosystems. There's a lot of demand for data and data capabilities as banks want to ingest this data so that they can start to utilize AI internally. There's a lot of demand around lending and lending capabilities. There's a lot of demand around modernization and wanting to modernize and we don't see banks putting decisions on hold, not in the areas that we're working on.

We've been having a lot of conversations with banks as well in terms of cyber and making sure that they and we are already for cyber rely on us that's very important. It's not necessarily a product, but it's a capability. They know that we need to have and they need to have and we work together very closely. So we don't see the decision -- the delayed decision-making. Now again, they don't buy hardware from us. So if they are reallocating capital somewhere, it's not from the areas that we're focused in.

Our next question comes from Andrew Schmidt with KeyBanc Capital Markets.

Stephanie, James. Maybe just ask about just technology strategy within the banking segment -- so you have the, obviously, emphasis on the core and the digital surrounds. But there's been a renewed focus on hollowing out the core. Maybe just talk about position in that environment. Obviously, the core remains important. And I think you made an acquirer recently about with an orchestration platform, kind of a core light strategy. But talk about maybe the strategy when it comes to FIS' ability to adapt if things abstract beyond the core.

Yes, Andrew, thanks for the question. This is a very interesting and found an exciting time for FIS. As you know, we hold the unique position in cores up and down the stack.

So our strategy really aligns with how banks want to modernize the banks. It's less about hauling out the core and how do they want to modernize and what do they modernize first. And so if you're in the very largest financial institutions and really, really, really large banks, they'll start talking to you about wanting to hollow out their core because they're running their own cores. And so they're starting to think about, do I want to have a ledger do I want to have an orchestration layer? Or do I want to have a customer master.

And as you know, we run very large cores today. And we have done an Aqua hire, and we're very excited about it. It brings a set of capabilities and frankly, a leadership and a leader and a team inside FIS that helps really start to put those capabilities in and around our existing cores, such that we can now start to modernize our core from the inside out. Our customers don't have to modernize their own cores or if they want to modernize their core and go to a full hollowout strategy, we have those capabilities.

So very excited. More to come on this topic, Andrew. We think we're uniquely positioned because we do serve these largest banks generally, and we're a much safer bet in terms of moving from an existing core and hollowing out your core with us. We have, as you know, all the surrounds, as you think about hauling out the core, including payments and all your value-added services. But this is a topic that we're looking to start talking to you about by the end of the year, we're hoping to have some pretty significant wins so more to come on this.

But we think we're uniquely positioned given that we have our existing cores. We have our modern banking platform, and now we have capabilities that we brought internal that will allow banks to either modernize on their existing core or completely hollow out their existing core with capabilities we have.

Got it. Yes, those are really interesting pickup. Stephanie. Maybe just double down on cap markets for a second. Just -- I heard the comments on mid-single-digit recurring and then modest acceleration of 27%. Maybe just dig a little bit into those assumptions, just confidence that we can attain those. And I don't want to use it were derisked, but maybe just how you feel about those assumptions going forward.

Yes. Maybe I'll comment qualitatively and then James can add on if he thinks I've missed anything. I think as you think about -- and this is why we wanted to try and provide some detail on the prepared remarks, as we came into 2026, -- we man with strong new sales momentum, and we knew we were going to have a point of attrition as a headwind as UBS closed and deconverted the CS capabilities in our treasury and asset services business.

So we came in with a strong new sales outlook, but new attrition was going to increase a point on us. So as you thought 2027, we're going to get -- we'll grow over that and have attrition go back to more normalized rates. I think the other thing that we expected as we came into 2026, that frankly just didn't occur was we thought about the lending portfolio that had historically driven an organic growth an organic point of growth inside our segment which really struggled, as you know, in 2025, we expected that growth to reoccur.

Unfortunately, as we came into 2026, we're not seeing that organic growth, and we're not banking on it for '26. And I wouldn't bank on it for '27 either. So I think as you think about going into 2027, we should benefit from a stronger recurring number as we exit the year in the mid-single-digit range and then we should get a point benefit from attrition grow over.

And then maybe I'll turn it over to James on how to think about kind of the rest of the pieces.

Yes. Just to repeat, this year we'll end somewhere in the mid-single digit, call it, 5-ish kind of range. And there'll be no M&A next year. So we take that out. And as Stephanie said, you're asking about the level of confidence the attrition this year was really pushed up by that one client consolidation. So that will disappear next year and that back 1 point.

And then the other piece is conversion. And we have, I would say, medium to high confidence on that. Essentially, the recurring NPS that wasn't converted in the current year or due to the late time lines will come back next year. So it gives pretty high levels of confidence to that. As we talk through this, I would not ascribe any upside on lending. The interest rates are incredibly -- they're just stuck where they are right now and we can't count on any improvement on that.

So we are looking for acceleration overall in recurring. And we do anticipate Q3 to be mid-single digit with some acceleration in Q4. So you don't have to wait until well into 2027 see improving prospects. And then on PS and license. This is a business that is in the low 70s in terms of percentage of recurring and our banking business is 85%. Over time, we want to more aggressively grow and step up the recurring growth rate and deemphasize license and PS. So expect those to be flat to down next year.

Our next question comes from Jason Kupferberg with Wells Fargo.

I wanted to start on the Payments business. I mean it's actually now the largest of your 3 businesses. You were up 6% for the second straight quarter. Is that level of growth sustainable in the second half just based on the account conversion backlog that you're seeing and pipeline of new opportunities?

Wow, that's a specific question, Jason. I think -- yes, just weighing through that. I'll let James shuffle through his paper so he can try to get to an answer, but maybe I'll talk about it. We're really pleased with payments. You're right. It is the biggest part of our business, which is why -- what gives us confidence around FIS continuing to maintain mid-single digit -- to be a mid-single-digit grower. As you know, in order to do that, we needed to have the total issuing solutions business inside the FIS ecosystem because payments in general the credit issuing side adds some pretty nice growth for us. In terms of total issuing, it is growing at the same pace as the overall payments business.

I don't have in front of me the expectations of payments as we go in the back half of the year. And I'm not sure that we guide to it.

We want to avoid guiding to it. What we would say is the -- we do expect it to continue at similar levels -- 2 is it will outpace banking just in general and longer term. And it definitely will stay in this mid-single-digit range. So we're incredibly happy with it, and we're incredibly happy with the position of thesis within that portfolio is doing well as well.

Okay. Yes. No, that's good color. That's what I was looking for. And I just wanted to circle back on capital markets as well because it sounds like we're talking about company-specific kind of execution related challenges. So just on the professional services side, any issues in terms of not having sufficient resources to perform implementations of the backlog? Or has there been just some mis-scoping? Or do you think in hindsight just some of the projections on timing were a little too aggressive? I just wanted to kind of unpack what you think some of the root cause is here?

Yes. I'd be clear on one thing. It's principally the PS call down, which is call it half the overall capital market is about $90 million in revenue. A little bit more than half is PS. The principal issue is actually. It's not really the conversion, it's sales in PS. We had a pretty large miss in the first half in terms of call it, ACV sales. And unfortunately, that is a disproportionate impact on the P&L because anything sold in the first half converts at about 75% in the current year.

So unfortunately, this is already sold. And so I would say, the largest part of the PS is actually lower ACV sales and then there is a conversion part to it, but it's not the biggest amount. And conversion was a little bit different. We said bulls on the timing and conversion of an existing pretty strong backlog and pipeline, and we've just missed against the execution of those. So it's purely on that. But I would say probably predominantly a sales issue in PS.

Our next question comes from Will Nance with Goldman Sachs.

James, I appreciate some of the color that you provided next year in capital markets. I wanted to dig through some of the dynamics on the banking side. So the 2-part question. I guess, first on the nonrecurring revenue growth in banking, what's driving that 21% growth in the first half of the year on a -- or in this recent quarter on a pro forma basis?

And then I guess more importantly, as we look out into 2027 what kind of grow over does that represent? Is that going to be a headwind to overall banking revenue growth and then the second part is on the large bank issuing conversion that you mentioned. It seems like TSYS is running around 6-ish percent kind of in line with the overall payments revenue growth on a pro forma basis this quarter. So just how are you thinking about some of the puts and takes as that normalizes and as the nonrecurring revenue growth normalizes into 2027?

Two big pieces as you look at term fees because I think you're looking at the year-to-date. I think in the second quarter, we had some term fees. These are probably pretty well known in the market, Huntington, Cadence and Genius Bank so they drove up. That's kind of brought to 12% above a normalized growth rate. And then you'll recall in the first quarter of the year, we signed some large strategic deals that had a onetime license contribution in the first quarter, but drive recurring revenue over a 5-year horizon.

We didn't get into the specifics of with whom but these are large deals will become part of the business model going forward, more engagement with third parties to become alternative sales channels. And we're saying in the second half is we're returning to a normal level of license activity and the bigger deals and term fees are behind us.

The other thing I might add is recurring. So as you know, license and term fees can be a little bit volatile quarter-to-quarter which is why it's tough to guide this business on a quarterly basis. But if you look at recurring and banking, feeling really good about that staying nice and steady for us. I think his comments in the prepared remarks talk about obviously, as we get into Q3 and Q4, we're not -- we're lapping the M&A contribution, but it's still staying up there and even against tougher comps from the prior year.

So banking recurring continues to be really strong. And as you mentioned, payments continues to be a big contributor of that. On expectations, I think you keep asking us to guide on payments. We'll come back to you as we come into 2027 in terms of how to think about the segment. But broadly, I think banking, in general, if you think about banking from a core and digital standpoint, typically would be a lower single-digit grower and payments would be more to a mid-single-digit grower. That isn't guidance for 27%. That's just how to think about the pieces of the segment as you think about market growth. Obviously, we're driving a lot of synergies across both banking and payments as we bring total issuing into the solution. So there'll be some acceleration there. But we'll come back to you in -- as we guide for 2027.

It's really a tale of 2 stories here as well. While we had execution issues in capital market sales the actual sales performance in the banking business is super strong. And I want to emphasize that it's actually the recurring is in line with plan in the first half of the year, and actually, PS was slightly ahead. So it really is down to execution. And then when you look at growth versus prior year, we've had double-digit growth in the banking -- total banking solutions ACV for quarters in a row -- but actually, the second quarter being high double-digit growth in banking ACV. So we're super happy about the sales performance in banking. I'm not happy at all about the capital markets performance in sales.

And then just a quick one on the strategic alternatives for capital markets might be another one for James. I know you talked about just some of the considerations around asset sales tax leakage, stranding costs and leverage levels overall. Just how are you thinking about feasibility and the puts and takes of profitably offloading businesses in capital markets? And I guess, how does that weigh into the decision to either offload or keep a business?

Yes, it's tough because the businesses are all highly integrated in the core infrastructure. So every time you take it out, you don't see -- you don't see a proportionate reduction in the fixed cost, and that's what we always struggle with. But I think we need to take decisions that are creating the right portfolio to drive back quickly to sustainable mid-single-digit growth in the capital markets business. And we probably have to take some choices on lower growth products and address the cost structure appropriately. It is tough to make it work. They all will have leakage on all will have leakage, but we just got to work through that.

Our next question comes from Bryan Bergin with TD Cowen.

So my first one is just a clarification on the capital markets view. So to offset the trading in the asset services headwind, you mentioned an expectation of lending contributing to offset that. But was the 1Q weakness in the loan syndication area is expected to reverse? Or are you holding that constant at lower 1Q levels. And for the rebased 2026 outlook.

I think you mentioned an assumed acceleration in 4Q. If that's the case, is that just based on lapping comps or something else you have visibility to?

The acceleration in 4Q, I think, is a more general comment across all of capital markets that the attrition starts -- you start lapping the attrition. So that is less of a pull down. and there's more of a contribution from sales sold earlier in the year. So that's where the acceleration is coming from, and we have pretty good line of sight to it. What we said about 2027 is in our remarks is we're not counting on a rebound on the lending business. Those businesses that were small businesses that were impacted by the volatility of interest rates. -- that's the only comment.

I think in general, if you look back for time, lending was a huge contributor to the overall growth rate and the overall growth rate lending is down in the current year. So it has pulled down versus the long-term trend rate, the business quite a bit.

Got it. Okay. Understood. And then my follow-up just as it relates to AI productivity. Can you comment on your progress adopting AI internally, particularly with efficiencies in engineering and customer support? Just any KPIs you can share as far as resource intensity, product velocity, things like that?

Yes. I think that we're at beginning innings. That being said, I think we've been really focused on productivity in general. And you can see that really coming through as we've expanded margins on a year-over-year basis. So we're using our cost programs plus AI, but what I would say is we've leaned in hard to AI in 2026.

I think we gave some of the stats on Slide 9, 1.5x to 2x throughput we're seeing in AI engineering, 30% fewer defects. We're certainly getting a more productive and better quality technology organization. In the servicing side of things, we have put in some agentic capabilities that have allowed us to take our manual tickets down by 70% and our triage time down by 75%.

I think at this point, yes, it is driving productivity, but probably more importantly, it's driving a better client experience as well as faster product delivery for our clients. And so while we feel like AI is a great opportunity for us internally, we focus on it being productive as well as creating a better client outcome and client experience, and we think we're seeing both of those.

And that's an unlock, I think we'll expect to see as we go into '27 and '28. pretty excited about what we can do here.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good afternoon, everyone. This is my favorite part of the Mizuho Tech Conference every year is the fireside chat with Stephanie. So thank you so much. Stephanie, I have the honor of having Stephanie Ferris here, President and CEO of FIS, and welcome.

Thank you.

Thanks for being here. Well, I have a lot of questions, and then we'll see where it goes. But how about we start and kick it off. Maybe let's talk a little bit about the demand environment, tech spending for banks. Has the environment changed at all with some of the geopolitical uncertainty out there?

It's a really interesting time. What I would say in banking is -- we are in the middle of a generational moment in banking and financial institutions. There's 3 big things that are happening that are significantly driving a period of growth in banking, I think we have not seen since the -- before the Great Financial Crisis. The first is the amount of deregulation. So if you think about -- and this is true globally as well in the U.S., there's been a pretty big rollback in terms of global regulation and local regulation so that banks can now participate in economic growth. And that in itself is pretty big and pretty important.

The second thing I would say is the bank's ability to grow both organically as well as inorganically. And you've seen M&A come back at record levels, like we haven't seen before in probably over a decade. And I think that's been long overdue in terms of smaller banks as well as large banks wanting to grow acquisitively, and you have definitely a set of buyers and sellers. And so you have a great opportunity where the regulatory costs are coming back. Banks can invest in growing their franchises organically. They can invest in buying and growing their franchises inorganically.

And then the third pillar is with the advent of AI technology. And for those of you who haven't been in and around the banking system, they typically absorb new technologies with a wait-and-see. And what I would say is they're pretty excited about the opportunities in front of them with respect to AI. So those 3 things together are a generational moment. So when you think about FIS, Dan, as you know, we've really worked hard to simplify our story and serve financial institutions purely.

And so, the underlying market and client and customers that we serve are growing at record levels like we haven't seen before. And what that means is they have money to invest back in their business and their franchise. And clearly, technology is a place they're doing it.

And maybe let's touch on something very exciting, which is the Anthropic partnership that you have. And can you help us maybe think through how your banks are approaching AI? And what is the appetite for adoption? What areas they're focused on? And is there more opportunity for cost-cutting or revenue generation for them?

Yes. So let's zoom out and talk about AI within banks and financial institutions. I had mentioned that they're pretty excited about the opportunity, primarily for two reasons. One is because they do want to use the capabilities to grow revenue inside the bank, whether they want to drive digital currencies that they're now allowed to participate in or tokenized deposits, or grow through more in the top-of-the-funnel, have more abilities to grow digitally at a lower cost. So think about them growing their franchise.

They're spending a bunch of money like probably every company is in terms of on AI and driving those really high return-on-investment areas. At the same time, they're very focused, and this is more in the large banks because from an FIS standpoint, and we in the industry provide these capabilities out to regional banks and below, they're looking at costs that are inside the franchise that they've been unable to unlock for a long time. So think about regulatory and compliance. And the one example that we're doing with Anthropic is financial crimes. So in financial crimes, you're required to file Suspicious Activity Reports.

The requirement is no different depending on a big bank or a small bank. It takes a lot of regulatory cost and human capital to do it and getting it wrong is quite punitive for a bank. So there's a really large cost structure inside financial services that has never really been able to be tackled. There's technology that has provided the reports to do it. But with what we're pursuing with Anthropic is really getting after unlocking a lot of that cost. And then when you talk to banks, they want to take those savings and again, distribute them back into building the bank. With respect to Anthropic, we're very excited about that partnership.

As you know, Dan, we announced it at our Emerald Conference, which -- where we have over 4,000 clients attend. They're very excited. So Anthropic came to us. They've been working with the largest banks, as you know. And they were very focused on helping unlock these technology costs with banks. But what they quickly figured out and why they needed to partner with us, is you need a lot of regulatory and compliance know-how to be able to do something like that. So we have a partnership where they are contributing forward-deployed engineers, and we're working alongside them to learn how to build these types of agents. They are 8 proprietary agents of FIS, and then we will distribute those agents throughout our banking clients.

And that's just first of many agents to come, but we're pretty excited about it. We have 2 bank partners that are launching with us, BMO and Amalgamated. And early signs in terms of the cost savings coming out of this particular Financial Crimes Agent is between 70% to 90% of cost savings. So we think this is a big opportunity for FIS to deliver and really TAM-enhancing capabilities into these banks. And next up, thinking about things like card fraud and disputes or item processing, places where FIS naturally resonates as our technology sits there inside the bank, and there's big, laborious costs inside of a bank that they'd like to take out and redistribute.

Maybe stay on the topic of AI, which is obviously very topical. So how concerned are you about AI advancements driving banks to in-source and build more solutions internally?

Yes, literally 0. And here's why I think about that. If you're a very large bank, you're JPMorgan, you've already in-sourced your technology. You're not going to continue to take it in-source. You've already done that. The banks below the SIFI's really -- they've outsourced their technology because we can do it better, faster, cheaper for them and on their behalf. So when you think about AI, why would they want to take that technology, unbundle the whole thing and then drive it throughout the bank. That's not where banks are focused.

Banks are really focused on how do I take this cost structure that's inside my bank that's been permanently here because of the regulatory cost of being a bank and how do I unlock that? It isn't about how do I -- because they already have really cost-effective, cost-efficient technology from us. So that's number one. The second thing I would say from an AI standpoint, and you've probably heard this from some of your companies here today, deploying AI capability is pretty expensive. So tokens are very expensive, and you have to take out human capital to provide that level of savings to offset it.

So you have that combined with the fact that these banks are regulated. And so one of the things they rely on us for is can you provide the regulatory oversight for all the technology products and services. And so when they start to think about deploying AI, they're focused on tackling those costs. They're focused on really trying to use their existing partners because when they do, one, it will be cheaper for them because we obviously leverage the cost of technology across our platform; and two, because we're able to provide a lot of reassurances around this agent is compliant with all the regulations. It can get through your privacy.

It can get through your cyber, just like that's what we do for the entire industry today. So for me, innovation, whether it's AI or digital innovation, is going to go through this industry. The moat -- I used to think the moat for this industry was data, and we do have a lot of data. It's our bank's data. I actually think the moat for this industry is really around regulatory compliance and know-how because every single thing that we do has to meet some sort of regulatory requirement inside and on behalf of the banks.

And that's where, when they start to think about, well, I buy or code something. Sure, you could. The question is, how do you make it compliant? How do you get that through your regulator? Everything has to be auditable, evidenceable, has to get through every piece of regulatory regime, or else you're risking the franchise. So I think that's some of the benefits we give the banks as we deploy.

And another concern has been and noise, I would call it, more than concern has been around Visa's Pismo, which is entering the core card-issuing market in the U.S. So what differentiates your products from Pismo's offering? And what is it you think the market is not understanding about how strong your competitive moat is right now?

Well, as you know, we bought the total issuing services company from Global Payments. We closed that transaction in January. It is the premier largest credit card processor in the world, serving the largest financial institutions at great scale. They've done it for 25 to 30 years. Many competitors have come into the space and tried to move the likes of Capital One, JPMorgan, Barclays, et cetera, off of that platform. So the first thing I would say is what differentiates us is that it is a large-scale platform serving over 90% of the card-issuing banks in the world today.

And that's not to say that it could never be disrupted, but Pismo showing up in the market doesn't necessarily mean a whole lot to me other than there's another competitor there, and we can compete. I think the second thing I would say with respect to Pismo and Visa -- I respect Visa as a competitor, of course, but they bring to the table in terms of a product set that can be very relevant, I think, more down market as they bring debit and credit together. If you are a very large credit card processor, you don't need debit and credit running on the same platform. In fact, you're never going to have debit and credit running on the same platform. That is going to be more of a down-market opportunity.

The other thing I would say potentially around large issuers is why would they ever have be single-branded with Visa? That would allow them to have no leverage over Mastercard. So I think there's a lot of things that you need to think about in terms of the positioning of the TSYS acquisition, which are the top 20 banks in the country. So now how to think about it inside the walls of FIS. So that was TSYS, if you think about it standalone and how has it been very competitive and been the biggest and baddest processor and why we were very excited to bring it inside the FIS ecosystem.

So now think about it. We serve every large financial institution. We have all kinds of products inside all of these banks, take core, debit, credit, card processing, trading and asset services, lending. There's a lot of capabilities inside all of these customers. So adding credit card processing to the capability set was very complementary. And very important for FIS as we thought about trying to grow in payments. You can't grow in payments without a pretty big credit card processing capability.

But we believe that we bring a lot of value when you think about how we bring FIS and the power of FIS to bear, probably how Visa thinks they bring Visa and the power of Visa to bear. I think the final thing I might say around it is I think like 65% of our revenue is renewed through 2029. So I think we're in a pretty good spot. I've been asked that question before. Can you tell? Yes.

Well, we wanted to focus on the biggest issues hopefully today. It's good we're there. And maybe go back to Anthropic because obviously, that partnership is very exciting. Can you talk a little bit about -- give us a little bit more insight in how this deal came together? Why did you pick them? Why did you pick Anthropic? Why did they pick you as a partner, which I think says a lot about FIS. And we've seen some of your peers announce partnerships with AI companies. So what is really unique about this partnership?

Yes. So Anthropic came to us. I think you've heard Dario say there's 3 industries where you need a lot of deep expertise to go along with frontier models, Financial Services, Life Sciences and actually Health Care. Because entering these markets in these industries, you need to have a deep set of expertise inside those industries. And so Anthropic has been spending time with the largest banks. And they had tackled a bunch of these or tried to tackle a bunch of these capabilities inside banks. What they said was a couple of things.

One, if we go one by one by one into financial services, given the size and scale, it's going to take us a long time because we have to get through the bank's cyber, we have to get through the bank's legal, but they could probably do that, by the way. What they said to us is we could rebuild, for example, we could build a Financial Crimes Agent on behalf and with the bank. What we can't tell the bank is, is it compliant? Does it meet all the regulatory needs of the bank? Does it have the cyber capability that it needs? Can it be auditable? Can it get through a bank's internal audit, external audit, regulatory audit.

And so they said to us, you really bring a couple of things. One, you bring that regulatory compliance know-how and horsepower -- and you have a pretty big Professional Services organization. So we think you would have the ability as we build these agents to go configure them and drop them in your banks. So for Anthropic, we were a really good and important partner because while they tried to think about going direct, they found very quickly that inside financial services, to get to FIS and banks, you do have to go through the existing providers. We do provide a huge amount of value. So that's how it came together, and we were really excited to partner with them. I think culturally, we do get on pretty well.

They do understand the importance of banks and banks to the economy and to society. We're obviously a part of Mythos and the cyber -- all the cyber tools that they're rolling out. And I might make a comment on that in terms of one of the other benefits, an important part of those of us who serve this industry is providing that cyber capability to these financial institutions. The majority of our banks rely on us to be their Technology and Operations organizations for them. And so they need us to keep them safe, and we take that responsibility very seriously. So we invest a ton of money in cyber and are working with all of our banks and talk about resiliency in cyber with them quite a bit.

And in terms of the agentic stuff, you're starting with Financial Crimes. And the question is, obviously, why? And maybe broader deeper here is when do you expect the agent to be in the market? And is this going to be a new revenue stream? Are you replacing something? Maybe just give us a little bit more color.

Yes, it's a great question. We focused on Financial Crimes for a couple of reasons. One, the TAM is huge. And it is a TAM that really hasn't been addressed in agentic form. There's folks that have had technology that they've deployed, but being able to take out -- keeping the human-in-the-loop, by the way, but being able to take out a certain amount of cost is something that's TAM-enhancing to both Anthropic and to FIS. I think the special sauce around -- the agent is scheduled to come out at the end of this year. We have 2 bank partners that are in design with us, Bank of Montreal, which is a larger bank and then Amalgamated Bank on the smaller end.

The reason why this Agent works for us and why we chose it besides the fact that there's a lot of cost there is performing a financial crime, so filing a Suspicious Activity Report is no different in any bank. It's not proprietary. There's nothing special about it. They need to get it right every single time. It has to be right when they file it. But it's not anything special that any bank says to you, Dan, Hey, I'm a better bank because I can file SARs more quickly. SARs are required to be filed in great compliance.

And so that's one of the things as we think about where we think we make a lot of sense where we should deploy Agents, it's places where we can add value to the bank by saving them time and money, where there's a big TAM-enhancing opportunity for us and where the bank is using a combination of our systems and their systems so an agent would make sense. So we focused there. There's a lot of places inside a bank that makes sense in those types of guidelines. So it will become available at the end of this year.

And I actually asked the team, why does it take so long? And the answer is it doesn't take a long time to build the agent. It takes a long time to test the model because this is not -- this has to be exact. When you build a model that creates a SAR filing, every single time it has to be the same. So the model building, which is a proprietary model that we're building with Anthropic and the Agent, by the way, is our IP has to be right every time. So that is what takes a long time training of the agent. And that's where the forward-deployed engineers and FIS are learning how to train those models. And that's why it's so valuable for us to be partnering with Anthropic.

That was actually going to be my next question, but I mean maybe we can -- so the Agent is owned by FIS, not by Anthropic, I think you answered it. And can you talk a little bit about the pricing, the -- how do you envision the pricing model going forward in revenue?

It's a great question, and we're spending a bit of time on it because we're thinking about just like all of our products and services, what value does this provide to the bank. So it should create a very good Return on Investment for the bank as they deploy the Agent. They should be able to, in a very safe and secure manner, reduce cost inside their regulatory and compliance group. The question then becomes, okay, how do we price that agent. So we are working with Anthropic to see how other folks are doing it.

What I will say, the other benefit of partnering with us as a bank, when you think about the cost of the token, the cost of the token will get passed through. So there'll be the price of the agent plus the cost of the token. One of the reasons the smaller bank came to us to talk about why they wanted us to work with us to build an agent is they had started to go out and build agents on their own. The challenge is a couple of things. One is who was going to create a bunch of tech debt in their bank, who was going to keep the agent up?

How are they going to run it? It was running on top of a bunch of systems. But more importantly, the cost of the agent and the tokens were cost-prohibitive for a small bank. So when you buy an Agent from us, we've negotiated a token cost at our rate at a very large consumption rate. And so you get the advantage of working with a negotiated token cost at the higher -- just like in any technology versus if you were going to do it yourself. So more to come.

And some of the questions we're getting from investors these days is, okay, well, -- there's a lot for FIS here in this partnership. But what is in it for Anthropic?

A couple of things. One, they have a partner that helps them distribute agents out into the financial services industry safely and securely, one. So we act as a distribution channel. Two, we act as a product development capability for them; and three, they get the token -- the benefit of the token consumption as we deliver it through our existing customer base.

And is this an exclusive deal? Are you...

No, we aren't exclusive to them and they're not exclusive to us. And I think we both felt like that was really important because we needed to compete on the benefits and the merits of our -- what each of us do really well. And the world changes. But I think for right now, we are each other's probably biggest partner in the financial services space, and we're very committed, and we're very excited about what's happening here.

A few more minutes. So let's maybe shift gears. Obviously, FIS has a tremendous amount of data within financial services, deeply integrated solution and long-term relationships. So how do you respond to the concern that you're letting someone like Anthropic see everything and potentially take advantage of it?

Yes. They don't see everything. So the model is proprietary to us. And we have protections around the agent itself. It is our IP, it is our agent. So they don't -- I mean, they see everything under the same thing as a Claude provider sees everything. So it goes through their token system. So I don't -- that being said, we're always very protective of when we partner with someone and making sure we have the right protections because we do bring a very healthy set of product capabilities and regulatory know-how, and we've made sure we protected that.

Anthropic is continuing, obviously, to create more and more value, and we would expect to see them want to distribute to banks as they build out their products. But what we've agreed with them is if we want to take their products going forward, we're happy to do that, and we can drive that into the distribution as well. As you know, this space is evolving quite well. But right now, I'm not worried about them. We've protected ourselves legally in terms of what we're bringing to the partnership. So I don't think there's a risk there.

Okay. And I got a couple more questions, and this is very insightful. Maybe take a step back and think about AI more broadly. What are the areas and functions from both cost and revenue opportunity where you're deploying AI with success these days?

Yes. So zooming out. So when you think about -- there's 2 places in the revenue side of things. So we just talked about one that we believe is TAM enhancing with the Anthropic partnership, which is an Agent that gets after a set of returns and costs for clients we've never been able to get before. Then there is AI we're enabling inside of our existing technology and platforms that may significantly increase the benefit of that capability. Cash flow forecasting, for example, has been significantly improved as we've used Generative AI to make it better.

So in that scenario, that makes our existing product better, we can charge a premium price or possibly it just becomes this is the cost of the new product in market. So that's how to think about revenue. It's both existing and driving new revenue growth in the existing market, but then there's TAM-enhancing revenue. The other piece, I would say, that's getting pretty material inside banks and in general, and this is why, again, from an FIS and an industry standpoint, critically important. No matter what you're doing with AI, you need real-time data. You need real-time data. It has to be sourced. It has to be secured. It has to be householded. It has to have privacy. It has to have lots of things around it.

So we are -- and we launched this at Emerald as well. We have created a data platform. If you remember, we have 74 billion card transactions, 900 million core accounts that go across our platform. If you're a bank, you consume those and you have multiple data feeds coming from us. We have created a data platform that puts all that data together in one platform, feeds it to you real time. That could be one piece of source of data. The second can be we can build a model on top of it, you can build a model on top of it. So again, these are data TAM-enhancing products that we're putting on top of our existing set of platforms.

Now moving internal to the firm. So talking about how are we deploying AI inside of FIS, which is, I would say, equally as exciting as what we're doing externally. There's 2 places we are materially focused. One is in our technology organization to drive AI-first capabilities, and it's pretty consistent with what you've heard everywhere else, how do we drive developer productivity and how do we drive more product out of our existing engines.

The second place is in our client support organizations. And those 2 organizations make up the majority of the company's employees. And in our client support organization, I have a Chief Client Officer. And what she and I are most excited about is less about the expense and more about how can we fundamentally change client support. So today, remember, we're a B2B company, and we swivel chair. So if you have a problem with my technology, you're using my core banking software and you need help or an issue, you will swivel chair over to a ticketing system.

This is a little bit old school here in B2B world, but this is how we live. We envision a way where with agentic AI, we could take those same customer support capabilities and put them inside the existing product and make the support actually differentiated and take down the cost at the same time. And we can do that because of the agentic and workflow capabilities that were built inside the swivel chair over here and put them over here. So we have a lot of things we are exploring in the client organization. So both places, technology and in client and support. And both in terms of, yes, we think there's cost opportunities, but also we think there's some real value that can accrue to the firm.

Two more questions on my end, very helpful. I think earlier this year, you mentioned that you are more than quadrupling AI spend. So just for housekeeping, does that include Anthropic or not? And then how are you prioritizing the future AI investments, i.e., are you spending enough? Or do you expect that spend to go up over time?

Yes, it's a great question. When we announced that, no, it did not include Anthropic spend, so more spend. The way we think about it is, yes, we would expect to spend more in AI, but no, we would not expect to spend more in total. And so really focusing on return on capital, return on investments and making sure that we get more productive in terms of our capital allocation and taking away from the lower returns and putting to the higher returns. So obviously, the AI piece is going to develop a higher return.

But I don't see it significantly increasing the dollar of capital we would have. I do think -- to be fair, though, I do think the cost of AI is rising. I think it's underestimated what the cost of AI is. And what I mean by that is if you are a large technology company, you do have to make these investments and then you have to make a decision, how are you going to pay for them. They are not free, they are not cheap. And so you have to make sure you get the right return out of them. I think you're hearing people start to talk about the cost of tokens, they're expensive.

And so if you want to make sure you have a commitment to capital allocation and returns, then you are going to have to make sure that you're either getting more revenue or you're taking out costs. So I do think the cost of AI, especially in large-scale enterprises, we are potentially underestimating. And I think what you're seeing, though, to be fair, is I'm not meaning to say there's going to be exploding technology costs. What I mean is you're going to see people start to become very, very focused on where the return is on the cost. So are you going to turn Claude Code on for your entire organization? Or do you want to make sure you're getting your Return on it and it's delivering the revenue and the cost savings that you want.

So I think it's important, especially from a technology standpoint because by default, everyone thinks the cost of technology is going down or becoming free. I also think the cost of cyber should not be lost on anyone. The cost of cyber for every single company, every single bank is going up -- it's going to go up astronomically, and we're all going to have to manage it. And it is a big risk for the banking industry and is one of the benefits of being with a large provider like us because we spend a significant amount of money on cyber.

And the cost of cyber is escalating given the -- what the bad guys now can do with AI just alongside us as the good guys. We take that very seriously. And it's another reason, by the way, why if you think about you're a big bank and you're going to bring all your technology inside, you just need to triple it with respect to what the cyber costs are going to be to protect yourself.

And then last question on my end. In terms of build versus buy or achieving your AI goals, like where do you see the balance and especially as you look to de-lever over the next year or so?

Well, I'm focused on de-levering. So there is no buying. So we are very focused on de-levering from now until the end of 2027 because we need to get our debt paid down related to the total issuing transaction. So there is no buying per se of M&A. I think what is interesting is acqui-hires that can sometimes be categorized as M&A from an accounting standpoint. It's interesting. I think in AI, though, specifically, it's such a new area. There's not a lot to buy right now. And I think it's easier to hire folks.

But look, the industry is new, and we'll see what evolves over time in terms of capabilities and products and solutions. And one of the things I love about Fintech is it's very dynamic. And our job is to make sure we have the best products and services available to our banks. And if we don't, that we have an open ecosystem and API environment so they can pick best-of-breed. And then if it gets too good in the future, we need to make sure we either partner with them or buy them. But at this point, we're very focused on debt paydown.

Great. Well, just about time. So thank you so much, Stephanie. Always a pleasure to have you.

Thank you. Appreciate it. Thank you.

Thanks, everyone.

So this is -- my name is Tien-Tsin Huang. I'm the payments and IT services analyst at JPMorgan, and it's been a great day, great sessions with a lot of different companies. We have FIS here to close out the day. With us from FIS, we have Stephanie Ferris, CEO; and James Kehoe, CFO. Thank you both for being here. So nice to have you.

Thank you. Thank you for having us.

Yes, for sure. So we're a little bit late, forgive us. So I thought I'd just kick it off, if that's okay. I know I asked it on the main earnings call, Stephanie, but it's always important to hear what's happening from your clients. You visit a client conference. What were the 2 big takeaways if you wanted to share? What did you learn? Where are you encouraged? Where could there be some room for caution and that kind of thing?

Yes. So we did. We just had our Emerald Client Conference. We had over 3,000 client and prospects there. I would say the theme was immense positivity in the financial institution space. I haven't, Tien-Tsin, seen this much positive momentum and tailwind in this space probably since before the great financial crisis. Banks feel really good about where they are, if they're going to grow organically. They feel really good about where they are, if they want to sell themselves.

They feel really good about where they are in terms of if they want to buy somebody. I think that the consumer is holding in there. Lending is holding in there. They have the opportunity to innovate in places where they haven't historically been able to participate in the financial services spectrum. So broadly, up and down the market, the sentiment is really strong. I would say from a banking standpoint, when you combine that with the opportunity that the banks have around AI, for me, it feels like a generational moment in financial services. In terms of where they're focused, so it tends to be in a couple of places regardless of what size of bank you are.

The first thing is they're really focused on funding their assets, so deposit generation. And deposit generation is taking a different construct, whether you're small, medium or large, whereby you are going out and you are talking to your commercial lending customers and talking about, hey, I really need you to put your deposits with me here at my bank because I provided you with your lending capabilities. In return, those customers then start talking to the bank about happy to do, but I need 2 things from you. I need really sophisticated or broadly sophisticated money movement capabilities.

So when you think about ACH, wire, real-time payments, digital currency, all of those capabilities, you can't just be one of them. And I need pretty sophisticated digital capabilities. So whether you're a commercial banking customer and you have treasury management needs, you need to be able to move money when you need to move it and whatever capability you need. And then obviously, there's quite a significant amount of fraud capabilities that come with that because money movement is fairly sophisticated. So there's first the focus of deposit generation and what capabilities you need around that.

So when you think about FIS, so many conversations around where we are with money movement, our digital consortium that we launched as a part of that, where we're bringing together a set of regional banks to start with the tokenized deposit capability. So again, leaning into digital capabilities within money movement. Then the other thing I would say is broadly around digital. So if you think about how banks sell and service -- all of us want to be able to continue to go on to our mobile app. And when I talk about digital, I don't just mean they have a mobile app. Of course, they have a mobile app.

However, we all want to be able to and they want us to open up new accounts digitally. So let's just say, for example, I wanted to open up a credit card or a HELOC or home equity or however, I want to be able to go on to my digital app and do that. Historically, banks have not enabled those capabilities because there is a significant amount of fraud. When they open those up online, they have historically gotten just completely land-blasted with fraud. So when we talk to them about digital capabilities and wanting to be able to do that, we talk about account origination capabilities that go across their different cores, and we talk about a significant amount of fraud capabilities you have to have to enable those digital capabilities.

And then finally, the place that took a ton of activity was around data and AI. So -- and I'll take them separately even though they build on each other. So in terms of data, no matter what size of bank you are, if you are trying to do anything with AI, you need data and real-time data. So we launched a data platform whereby you can access, if you're a customer of ours, your data in a real-time way across debit, credit, core, et cetera. You've historically always had those, but you had to come to us in every different system. So we stood up that data capability. We have a significant amount of demand coming from just providing those capabilities.

And then we can work with you if you want us -- want our help in terms of building a model, for example, we did with one of our regional bank customers who was a TSYS customer and a core customer, where we built a model for them and with them on top of their data to say, this is where we think you should increase your credit card consumer lending lines, so we can do that or we can just give you this data and you can build on top of it. So all of that had a huge amount of momentum. And then there's obviously the Anthropic announcement that we took. But I'll pause there.

We'll probably have to talk about that.

We'll probably talk about that, yes.

Maybe before we do that, that's a great summary. We've had some of your IT services peers that are servicing banks and of course, in a different way, the consultancy or with point solutions. And there's some complexity around spend, right? It's evolving. It's positive in the aggregate, but some things are getting left behind, some things are getting overfunded. How are you seeing the budgets behave here? Is it predictable? Is it going in the places that are aligned well with FIS?

You mean in terms of where banks are spending on technology...

Generally speaking in terms of their discretionary as well as their core spend?

Yes, yes. So I think banks have been pretty consistent, as you know, over time, 7% to 8% growth. They've been in varying levels and they go in and out of cyclicality in terms of where they allocate. So it's been pretty consistent in total, but you need to make sure you're in the categories where they're spending money. And so top of stack, just for perspective, banks are spending and will continue to spend a lot on Cyber. We do as well.

We don't provide Cyber products, but Cyber does continue to be a big category of spend for them. Then when you start to go into the next pieces of spend, it really aligns with where I just talked about. They have to spend on digital because it's their sales and service engine. They have to spend on payments and money movement because they need it to fund deposits. They have to spend on data and AI because they know they need to get after some of the cost that are inside their bank. And what I mean by that, I don't mean technical costs, I mean the actual regulatory costs and the people burden they have.

And so those are the place -- and then fraud. Fraud is a very significant cost for the bank. And it's not -- it continues to go up, not down. And it's in things like check titling. I mean the amount of fraud that banks are spending on is very significant. And so when you look at where they're spending, that's where we see their spending and the demand is right in line with where our products serve. Core itself has been pretty low on the total. It's been low for a long time.

Generally, banks don't want to change their core unless we're not serving them well. I mean that's been generally true. So in order for a core to -- a bank to decide to change their core, we, the collective industry, just aren't doing a good job or there's a capability they need that we're not delivering. I would say that's not their ideal of where they would want to spend money because they really want to spend money on growing the bank, protecting the bank versus like a core conversion.

One other thing I would add is a lot of -- there's so much M&A in the -- so people are putting off potentially core decisions because they're buying other banks or they're making a core decision because they're buying other banks. So that also can tend to be, as you know, and up and down, we tend to accrue the benefit of that. And I might add that from our standpoint, we're obviously on the larger side of the industry here. We've been seeing account growth historically, overall accounts on file growth in the 4% to 5% range. It has ticked up to the 6% range. So we are seeing banks grow as they grow organically and through M&A.

Right. So better account growth is great. Look, because all this complexity going, you answered it, right? Some things are getting pushed down in priority and then some get pushed up. But from a core perspective, it sounds like this is still pretty steady, but be surprising.

Yes, for sure.

So let's do the Anthropic deal. I've been surprised by how much airtime's gotten in terms of airtime beyond our investment community world. I'm sure you've gotten questions about it since you have announced it. But can you maybe just hit the high points of maybe what's underappreciated? I think how it came together is really important, right? They came to you. And the most common question I get is still, Stephanie, you know James, right? Are you feeding the beast, right? Are you feeding a beast? Is this something that's going to come back to maybe hunt you down the road? You speak with a lot of confidence about that. Can you hit on that?

Yes. I think what you're seeing, whether it's Anthropic or the digital consortium or any new innovation, what you're seeing in financial services, which has historically been true, and I think if you listen to Dario, he would also say it's true for health care and life sciences. Because of the amount of regulatory and compliance complexity in this industry, it is always easier and almost the only way to get through is through the technology providers that live here because what we have, and this is why Anthropic came, they have been spending a lot of time with very large financial institutions trying to tackle some of these big problems.

What they found out pretty quickly is I ran into an FIS system every time I turned around, and that system has a lot of complexity inside of it that has regulatory rigor and they could redesign a process flow, for example, but what they couldn't do at all was say, is it compliant with everything it needs to be compliant with. So when they came and talked to us about let's do something together inside the industry. And I might say we're not exclusive with each other. So that's okay. So they obviously -- they're giving us some of their deployed engineers, so we learn to build and then we'll build on our own.

The agents are ours to deploy and build. They can't go deploy -- take all the learnings from us and go deploy the competing product. So when you think about the space, the reason why a lot of these players, and you'll see Anthropic won't be the only one, need to partner up with us is when you start to talk about financial crimes and you talk about needing 17 different reports and in order to build that financial crimes agent, I have to pull someone from my fraud group, my SARs group, my compliance group, my regulatory privacy.

And all of that has to be brought in to test the agent and make the agent work. Anthropic can't do that. And so that's where they said, look, there's this huge amount of opportunity inside every financial institution. We can help you build the model. We don't have the regulatory expertise to make this work. So that's what's so unique, I think, in this industry and why there's less of a disruption risk. I think the other challenge for banks and why they're looking to their technology providers is when you buy something from FIS or any of my competitors, you know it can pass your Cyber team.

You know it can pass your regulatory team. You know it is SOC compliant. It has privacy around it. If you -- and if you're going to go build without that, you have to get all of your teams compliant with that and the cost of the token itself is expensive. So when you're getting an agent out of FIS you're getting the benefit of the negotiated token costs that I've put together as a company versus you building individually. So that's some of the construct around it. I think it's TAM expanding. We've never been able to, as an industry, get after these costs, help banks get after these costs that they have around their regulatory burden.

I might say one other thing I think is really important. You don't hear any banks say we're planning to take down the cost and let the people go. What they want to do, what banks want to do is take down the cost and redeploy it on how to grow their bank. So this isn't a cost exercise for banks in any way, shape or form. It is truly helping them allocate human capital from things that they don't view to be value add that they need to comply with over into growing their bank or serving their customers. I think that's really important because I'm not sure the AI narrative is getting out there correctly. And I can say on behalf of the banks that I speak with, that's what they're trying to do.

So the financial crimes is the first wave -- should we expect -- I don't know how soon if it's weeks, months, quarters, should we expect a lot more that will come behind this? Is that innovation burden on you? Do you share that does that work.

It's a great question. Yes, you should. The innovation burden is on us then. So obviously, Anthropic provides the AI capability, but we build the agents. You should expect to see more in places where it makes sense for us where we own the systems already, the regulatory know-how and expertise, and we can deploy it across our entire bank channel. There's lots of places inside a bank where, for example, card fraud disputes, chargebacks, we have a lot of systems, and that's a lot of manual workflow. That we think we could add a lot of value to deposit loan offs, item processing, things where there's a lot of people coming off our core systems and multiple core systems, we think we can provide agentic capabilities.

The one interesting thing I would say, Tien-Tsin, is one of the things we're going to build the financial crimes agent and land it, it's going to take us in the back half of the year. Part of the push on why does it take us so long is that agent has to be trained exactly right every time. So part of the time frame of building the agent, and it will depend on the complexity of what we're building, is there is no room for error in filing a suspicious activity report, not one error.

So that has to be trained to exact an exact place. And what Anthropic would tell you is they can't train it they can't train it because it's our experts that have to tell them it's right or wrong. They can help us do the testing and the testing harness capabilities, engineering piece and teach us how to do that in a really good way. But the training and the testing we're doing with our bank partners.

Okay. Okay. So last point, TAM expanding these products that we can expect these agents that are going to come out, TAM expanding? Or could it be a substitute for some of these products and the ancillary work that you've been doing today?

No, these agents are TAM expanding. The reason why I say that is in early tests, and that's why it's going to depend on how it ends up, but 90% of the process -- the cost of the process goes away. There's always still a human in the loop. So there's a lot of value being created for the bank. And so when we -- and in terms of the cost being taken down inside the bank. So that's a TAM expanding opportunity.

Good. So let's bring it back to the business and thinking about ACV? I'm glad you sharing that metric, by the way. I know we've talked about ACV for a bit because...

George one let us do it, so continue filing on it...

I think the ACV piece, right? We -- I know bookings can be a little bit dangerous to focus on. But you had some pretty big numbers on ACV, right, up 24%. Cap markets was up even more than that. So how does ACV layer into the growth algorithm. For FIS? How should we use that metric?

Yes. It's pretty critical because it shows the long-term demand for the products, are the products hunting in the market. And the 24% in Q1, that follows a 20% in Q4. So how does the algorithm work? The sales ACV in Q4, some of that will start showing up in the income statement in the latter part of this year and most of it next year. Some of the Q1, but not very much will show up in Q4 of this year. So there's always a timing lag on when you see it. What it is shown as well is validating the strategy on the growth vectors. It's coming from digital. It's coming from payments and it's coming from lending.

And these were set up 24 months ago as strategic priorities. Banking, remarkably consistent, 13% growth in both of the quarters. That's great. It's the consistency that's even more important. We're seeing it across money movement hub, new product, again, the linkage to innovation. We're actually seeing it across core. There's -- we're seeing good demand in general across core ACV. And as an aside, we're seeing Accounts Under Management, call it in our core systems, up mid-single digit.

And that's been pretty consistent over the last, I think, 6 quarters. So this is the fundamental health of the business. Capital Markets, you mentioned it up 45%. That's following at 30-something percent, again, boosted by lending. Yes, we did call out some short-term lower volumes in our lending business, but it's not the product. The software we're selling is going into market. It's just the volume offtake has been lower, and that's entirely temporary. So what this bodes incredibly well for is you will see an acceleration in recurring revenue in the Capital Markets business in the latter half of this year.

So we're not telling you, hey, wait 2 years and everything will get better. There's going to be an acceleration in Q2, a further acceleration in the second half and definitely a strong acceleration when we get to 2027. So that -- it is the goal, which is reduce the dependence on large episodic licenses and focus much more on recurring. And that has been incredibly successful in banking. 85% of our banking business is recurring.

Capital Markets is more like a 72%, 73%. And this is not going to be overnight. This is a gradual build of recurring in capital markets. So we're super excited by this. And I'm especially excited because the margin profile of the products we're selling is far better. And you're seeing it in the first quarter results. We're up 100 bps on or 87 bps in margin. It's equally coming from cost and favorable product mix. So the composition of the products we're selling, especially within banking is much more profitable.

And is it repeatable? Is there -- can you replenish the ACV given what you see in the pipeline and sales activity?

Yes. And essentially, if you think about it, that's why we call out payments in most of the ACV numbers. Our payments business, in general, if you take banking, payments products are more profitable. And then within banking, all of the products are decently profitable. There's only -- there's like a commercial and processing business in there that's less profitable than the average of banking. But we're pushing payments because it's a very profitable segment.

And then within banking, digital and core are focus areas because they're more profitable in general. And it is, it's entirely sustainable, and it is our commercial strategy. Sell more recurring and sell more profitable recurring, and we've been largely successful, especially over, I would say, the last 9 to 12 months has been a huge success.

Okay. Good. So we'll keep asking you on the ACV metric. So we'll see if George won't be mad at me for asking. So let's bring it back to the stock then, right? I think that the quarter was good. There was a negative reaction to the quarter. Now that you've digested it and you've been talking to investors, what do you think were the key sticking points? And has that changed how you want to discuss the rest of the year, the visibility, the conviction, that kind of thing?

Yes. I think the reaction was twofold. One is the capital markets guiding to the bottom end of the range as a result of the volume from the lending activity. Our approach there was just to clear it in terms of be very transparent about it and not create volatility and no hope that it needs to come back. And if it does great, but if it doesn't, fine. Also, given the strength of the banking business, which if you remember, Tien-Tsin, people didn't believe that we could ever bring back, and I think it's proven that it's back.

So feeling good about that overall and that being more towards the upper end of the range and then overall confidence in the margins, we just felt in an effort to be transparent that we needed to do that. It's obviously a pretty severe reaction to that, which was unfortunate, but we will continue to be very transparent, and we'll continue to feel good -- really good about where the banking business and the capital markets business are, which is why we've shared also a lot of the ACV information. I think the other thing that obviously -- unfortunately, the market took the wrong way for us was our Anthropic deal.

We couldn't have been more excited about that. We announced that at our client conference. I can tell you it was a breathtaking moment for clients. I mean they were extremely excited about it. And for them, the feedback even to us was like this feels like a different company with the amount of products that you're announcing and capabilities you're bringing out to me. Unfortunately, AI continues to take an up and down scenario view within our industry and broadly. But that one was surprising to us in terms of that was played back negatively.

I'm hopeful that after spending a lot of time on it, people will believe in the opportunity there. I don't see -- I just -- while I do think there could be some disruption over time, I just don't see where banks come into their core banking and the majority of the payment processing and digital capabilities and start bringing that in-house. I don't know how they could do that given the level of complexity, regulatory regime.

And then really where they're focused, like I said, is talking -- is really how do I get after the cost of doing business in banking is the cost of my -- the people stack against my regulatory. And so that's really where they're spending a lot of time. But hopefully, we'll keep talking about it. But those from my standpoint, were the 2 things, I think, that potentially drove the negative react.

And we still have the same great visibility, which is you take the midpoint of the guide, the revenue is 5.5% growth, 2 is 100 basis points on margin. And then it's the cash. We would have expected a more favorable reaction, thanks to the -- we doubled cash in the quarter, which we're targeting a 30% increase on the year, high-quality earnings and conversion. And we're looking forward to another great Q2. And I think it will substantially de-risk the entire full year.

And especially on the cash agenda, when we guided -- when we gave the -- on the earnings call, we did insinuate that we could do better on the full year on cash. [indiscernible] Aggressively our onetime costs. So onetime costs are coming in lower. The cash is really, really strong. So I think there's a bunch of upside. And we just got to be really focused and capture that between now and the end of the year.

Yes. No, I think that way on the cash flow front that there was some room there. So yes, so it's funny. I was thinking about -- thanks for going through all of that. I agree. I think as you put the proof points up, especially on the Anthropic stuff, that will solve itself. I feel good about that. That's why we're recommending the stock.

It was funny to me. I don't know if it's funny to you, but we went through the call, you spent a lot of time on Anthropic and of course, the quarter and the puts and takes of volume on Capital Markets didn't really talk about TSYS, which is a pretty important transaction. I guess that's a good thing. But I just wanted to make sure I ask you and to check because it's a big undertaking.

I'm curious at this point now that you've owned it for a little bit, any surprises there? Have you rethought some of your platform decisions for example? I know everyone is asking about synergies, but I'm strategically, is the thesis still intact?

Yes. It's a great point. And you should expect to hear more from us over the next couple of quarters because it is a really important asset, and we treat it as such. I would say, generally, the thesis behind the acquisition still stands. It is a fantastic asset. It makes perfect sense within the FIS ecosystem. Having -- and now when you think about AI being a capability inside banks, having debit credit core is really highly valuable, more valuable than we ever thought originally coming into the acquisition.

I would say broadly, at its highest level, it's performing really well. If -- I think we shared that it's growing at the same level as overall banking. It continues to have a nice growth trajectory. The margins are really good. It helps support an ongoing strength in the banking recurring business. I would say teams-wise, which is the hardest part with acquisitions is actually culture. I think the culture is going really well. The teams within the total issuing business are melding really well within FIS.

We all serve banks. We serve the same customers. That's going really well. The commercial momentum, the Chief Commercial Officer is having a fantastic relationship with the total issuing President, and we're really seeing fruits come. Now as I said, when we bought it, these are really large sales cycles and long sales cycles. So we feel good about the revenue synergies, but consistent on they will take some time. We would expect to see those show up in '27 and '28.

Cost synergies for us, and that's part of why the margin, I think, continues -- we feel good about it, come in more in the back half of the year. And for us, it's not a huge amount of cost takeouts. It's more facility consolidation because we really care about this asset and in terms of making sure that we continue its growth -- so for us, the cost synergies, we feel really good about. They're baked in our forecast and largely, they're done. And then you would expect to hear more from us around modernization and things like that over the next couple of quarters.

Yes. I know there's TSYS Cloud, and there's a lot of different platform decisions, but it doesn't sound like there's been any change in the platform side?

No change for right now, yes.

Okay. Good. So I had to ask.

You have to ask me about Pismo.

What's that?

Yes. You have to ask me about Pismo, -- it's okay. You can do it.

Visa was here.

They were.

We talked about it. They were excited about it, but they also acknowledge, right? It's...

It's ledger.

It's the beginning, it's on the ledger side. But it is creating questions and they also bought Prisma and Nubank. So they -- that's more Argentina, I know. But it does feel like, as you and I have talked over the years, Stephanie, right? Swim lanes is always changing. When Visa does something, we have to pay attention. Is this a big shift from a competitive landscape standpoint in your mind? How do we interpret this?

So I think there's 3 different things, and so we can talk about it. I think, first of all, I agree. Visa entering credit processing, which is what I think they've really done. So Visa has been in debit processing. But Visa entering credit processing, I think, is a meaningful move for them, and we all need to be really focused on it. And when I mean all of us, I also mean not my competitors, but also brands. So I think we take everything that they do seriously. I think let's talk about international. International from a Pismo or Prisma perspective, I think we feel really good with where our Prime product is. It's generally equally as competitive and is the product that's in market.

International?

For international. And so for us there, we feel really good. We compete really well. And there's a huge market for us all to compete and the 2 of us -- it's not the 2 of us or anyone. So I think internationally, very competitive. I think when you think about the U.S., I think about Pismo more of a debit credit story, a debit credit brand story. We're definitely seeing them show up. We're definitely seeing them show up in terms of trying to drive that consolidated story.

I think there's very big competitors as well, us being one of them that are fighting equally. And so we will see how they go. I think the Pismo, Wells piece, and I think you heard Ryan talk about that, that's a ledgering thing in a big bank. I'm not sure that's really where their strategic positioning is. But Wells is a ledger isn't necessarily what I think the broad strategy is. And I think there's big competitors, and we will compete alongside our core and debit and credit capabilities as well.

Yes. No, thanks for being candid about that. We can only track it. We'll see what the real ambitions are and how it ties together with the branded business. But yes, there's always change. Sticking with networks then, let me ask you about your debit network. You have the fourth largest one, which I think sometimes gets forgotten in the -- very much. In the mix of everything else.

But in the wake of Capital One, Discover, and Pulse and what happened there and the extraction of value from that now you own a much bigger piece of the market around card processing. Does that change the potential for synergies with the debit network? Or is there potentially more value for that to be somewhere else? I mean there's a lot of questions there, but I'm curious how you're thinking about the asset.

Well, I think owning a network is highly valuable, whether it's a debit network or a credit network. And as you said, we actually own a couple of networks. And you can see now that banks owning networks, they can use them for different things. I think from us, from our standpoint, a lot of the money movement -- not a lot of it, but much of the money movement demand that has come, we hired over the last couple of years, a different leader for our network business and have driven quite a bit of network business into FIS, which is a very high-margin, high recurring business.

So I think we have a very competitive network, and we continue to compete there against all the existing players. It will be interesting to -- I have no interest in selling my network, but I do think there's really interesting things to do with my network, and we've been talking to various banks about that. It really depends on what banks want to do with their networks. I think Capital One is an interesting first play, and we'll see if some of the other banks want to do something with networks PBD. But from our standpoint, we really like our network. We value our network, but we also are very interested in doing strategic things if banks wanted to do that.

Okay. I asked Mike the same question. Something very similar, and there's a view on the on us network and the synergies with merchant and everything else. But yes, they see value in owning it and more potential for synergies and kind of the stay tuned, I think, is pretty similar. We have less than a minute. Time flies really quickly. I have like 10 more questions to ask. I thought the one -- I know James and I have talked about this with George. I don't know if it's a good question to end on, but I'll ask it anyway. Philosophy on pricing.

I know that's something that's important to investors. I know you spent time on thinking around price and beefing up the team there. And switching costs are high for a lot of your business. And it's always been hard to articulate to investors why pricing on renewals are what they are when switching costs are very high. So is that -- is there an opportunity there to maybe be a little bit differentiated or thoughtful maybe with the infusion of AI or something else to change the mindset around pricing at FIS?

It is a quagmire when you look at it just from the outside in because there's not that many providers in this space. So you would think there'd be a lot more pricing power than there is. You've heard us talk about putting pricing back in CPI and price escalators back into our contracts to be fair to us because over the last 10 years, when there was no price escalation, we had negotiated those out. So those are back end.

And most banks, that's a very fair ask, by the way. They see the price inflation, they understand it and they can accept it. I think the notion -- and the other thing I would say about this industry is when we are contracting in this industry, it's a multiyear, 3-, 5-, 7-, 10-year contract. People aren't willing to operate and allow themselves to be completely open to a full-variable price. So it's different in that way. I think we have brought a lot of pricing discipline back into FIS.

And we've seen some positive momentum there. I don't -- I just don't see pricing being a mechanism where it'd be like a 2% to 4% grower in our overall base. I think the way to think about the value of pricing is more around you -- for a net new piece of business, you, for example, bring in the core and then you sell all the surrounds. And that's how you think about gathering your price because ultimately, it's not about the core price at the end of the day, it's how many products you can serve around to that customer base, and they want to buy those products.

So I think to be fair to the industry, that's maybe not very clear in terms of -- you know the value of the core and the surrounds, but the pricing lever itself is really around building and delivering new product at a price that's market and not compressed. But it's a tough one for this industry. And I come out of merchant where you have a much easier mechanism to price because Visa and Mastercard change their price every first quarter and third quarter. So there's an opportunity to reprice. This part of the industry doesn't have that opportunity.

Right. But mixing into the right types of business where the value is high should drive the net positive pricing that you've been talking about?

You have to make sure that what you're selling is in products of high margin that have high demand, that have organic growth and that can be implemented in a short time period. That's why what you sell really matters. That's why that commercial excellence and that commercial momentum we've been focused on is so absolutely critical because not only does it reorientate the top line, it ensures you deliver the margin expansion you need.

Good. I know we're over time. Stephanie, James. George, thank you all for being with us. Thank you.

Thank you.

Good day, and thank you for standing by. Welcome to the FIS First Quarter 2026 Earnings Call.

[Operator Instructions]

Please be advised that today's conference is being recorded.

[Operator Instructions]

I would now like to hand the conference over to your speaker today, George Mihalos, Head of Investor Relations.

Good morning, everyone. Thank you for joining us today for the FIS First 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.

With me on the call this morning are 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 financials.

Turning to Slide 3. 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.

Also, throughout the 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 are not financial measures as defined by GAAP. A reconciliation of our non-GAAP information to the GAAP financial information is presented in our earnings release. And with that, I'll turn the call over to Stephanie.

Good morning, and thank you for joining us. Q1 was a strong quarter for FIS, not just in terms of our financial performance, but in terms of what the performance signals about the trajectory of our business, we outperformed across every financial metric, revenue is strong, margins expanded, free cash flow, more than doubled, and our commercial momentum, particularly on new ACV reached new levels.

Earlier this week, we hosted our annual client conference focused on community and regional banks with over 4,000 attendees. There, we announced an industry-shaping agreement with Anthropic, a first of its kind in financial services, which will usher in an entirely new era of modern banking.

We also unveiled a number of new solutions, including our new data and AI platform, our new digital asset platform, Lyriq, and Project Keystone, our new tokenized deposit bank-owned network that includes 5 U.S. banks.

The comment thread across all this progress is that today's innovation runs through FIS, not around us from the world's leading financial institutions to the most advanced AI firms and the future of digital currency, they are all running through FIS. I told you last quarter that FIS is better positioned today than it has ever been before, and we are excited to be leading the next era of modern banking.

Now let me walk you through the strategic highlights of the quarter, and then James will take you through the financials in detail. Turning to Slide 5. I'll start with the headline. We delivered 6.5% pro forma revenue growth above expectations. Adjusted EBITDA margin came in at 39.6%, with margin expansion of 87 basis points driven by favorable mix and cost savings.

Adjusted EPS of $1.36 represents 12.4% growth year-over-year. And the metric that stands out most, free cash flow of $474 million, up 111% versus the prior year.

Turning to Slide 6. Equally impressive, our recurring ACV growth of 24% year-over-year is signaling strong commercial momentum. The pipeline is converting and the market is validating our strategy. Banking recurring ACV increased 13%, with capital markets up 45%. Across some of our key growth vectors, Money Movement Hub ACV tripled as we continue to see strong demand from regional community banks. Lending grew 63% and digital ACV was up 25%.

ACV is a leading indicator of our future revenue. We started 2025 focusing on our commercial excellence in high-growth verticals like digital. And by the end of the year, we had scaled that momentum across the entire enterprise. And what you're seeing in our first quarter of 2026 will translate in a durable, predictable revenue growth and margin expansion in the quarters ahead.

Turning next to Slide 7. I'm proud of our team for their execution and in particular, what our commercial wins foreshadow for the future. But what gets me really excited is something that has defined FIS since the beginning and defined us still. Innovation and financial services doesn't just happen in this industry. It runs through FIS. For more than 50 years, through every market cycle, every technology shift, every moment of disruption, FIS has been where financial innovation takes hold. That was true when we built the infrastructure that runs the modern bank and it's true today.

The most important innovations and financial technology right now, AI, digital currency, data are all running through FIS. That's not a coincidence. This is why AI leaders like Anthropic choose to collaborate with us. We sit on 73 billion annual payment transactions across approximately 1.1 billion accounts on file. And now the FIS data and AI platform brings those data sets together as fuel for real-time AI native future.

Last week, we announced Project Keystone, a first-of-its-kind digital asset collaborative bank network with digital currency flowing through us. Why us? Because we are trusted based on a decades-long track record, because of our rich system of record data, because of a bank-grade compliance network built over decades. And now we have built a trust by design, agentic architecture for what comes next. Unlike horizontal data platforms, FIS brings the regulated infrastructure system of record data and compliance architecture that makes AI deployable in banking today. That is a durable advantage. It is our modern competitive moat.

Turning to Slide 8 for highlights of our Anthropic agreement. What makes this different from a vendor relationship is what it will deliver, co-built financial crimes agent for financial institutions, combining Anthropic's frontier AI capabilities, with FIS' scale, data and regulatory expertise. With the engineering knowledge transferring to FIS to build the agents that come next. This is a deeply collaborative model with Anthropic's forward-deployed engineers embedded alongside ours to design and build this agent from the ground up and enable us to scale them across our platform.

FIS provides the foundation through our data, governance and infrastructure, ensuring AI operates safely and effectively in a regulated environment through our trust by design architecture philosophy. To be clear, FIS owns the agent and the regulated infrastructure, everything that is deployed to the bank. Anthropic provides the underlying LLM model. Client delivery remains fully owned and protected by us.

Our strategy reflects a shared recognition that scaling across financial services requires deep regulatory expertise and bank grade infrastructure alongside advanced AI models. Our first agent focuses on financial crime, one of the most urgent and costly challenges for banks today. With an estimated $2 trillion in illicit funds moving through the global financial system, creating a $35 billion to $40 billion spend across the industry.

BMO and Amalgamated Bank are our design partners for this first agent. The co-built agent will automate the evidence gathering and analysis, reducing investigation time from days to minutes. Our goals are to significantly reduce cost per case and decrease low-value manual work. Investigators remain in control with the agent. Enhancing decision-making rather than replacing it. This human-in-the-loop design is essential to trust in regulated banking environments.

This is the beginning of a broader road map of purpose-built agents across the banking life cycle spanning credit decisioning, deposit retention, customer onboarding and fraud prevention available to our clients through a single governed data and AI platform.

Turning to Slide 9. This collaboration is also a concrete example of our broader orchestrated intelligence architecture, where AI, data and regulated infrastructure work together at scale to deliver real regulated outcomes for financial institutions. Orchestrated intelligence is how we describe the way FIS brings AI to life in banking as a coordinated architecture where models, data, governance and workflow operate together in a way, no single technology provider can replicate alone.

The word orchestrated is intentional. Anyone can deploy an AI model, what's hard and what FIS uniquely provides is the orchestration layer, connecting Frontier AI to system of record data, routing it through bank-grade compliance infrastructure and delivering it through the trusted relationships we have with financial institutions and regulators around the world.

Our Financial Crimes Investigation agents are our first proof point and operate end-to-end across the full financial crimes life cycle. It plans, decides and acts in alignment with regulatory requirements and governance frameworks. This same architecture and the same orchestration is what will power every agent that follows, across credit, fraud, onboarding and beyond, regardless of the LLM model used.

The orchestration across the AI model in a regulated industry is the difference between trust and risk. Ensuring every decision is transparent, compliant and auditable and ensures planning, decisioning and action are consistently informed by bank grade controls. This is defining a new category of participation in financial services. And is shaping the next era of modern banking. And FIS is a platform it runs through. We own it, and we distribute it.

Turning to Slide 10. To close my remarks, Q1 was a strong quarter on every dimension. Revenue was strong. Margins expanded, free cash flow more than doubled and commercial momentum continues to build. More importantly, the strategic narrative is connecting to today's generational moment. AI, data and digital currency, the key market trends run through FIS.

I'd like to thank our colleagues around the world who wake up every day to help us advance the way the world pays, banks and invests. I am confident in our full year outlook, and I'm confident in the trajectory of this business.

With that, I'll turn it over to James for the financial details.

Thank you, Stephanie, and good morning. We had a great start to the year, exceeding our outlook across all metrics, with notable success on margins and cash flow. Revenue grew 6.5% on a pro forma basis with both segments coming in above the high end of the outlook range. Pro forma EBITDA grew 9.4% with margins up 87 basis points year-on-year, ahead of our outlook of 35 to 55 basis points. The margin expansion was driven by positive mix across both segments and continued strong execution against cost optimization programs.

Adjusted EPS increased 12.4% to $1.36. Free cash flow more than doubled to $474 million reflecting the strong EBITDA performance and disciplined management of working capital and capital expenditures. This puts us in a great position, the first quarter is typically the lowest point for cash flow. Historically, accounting for only 13% or 14% of the full year. This first quarter result already delivers 23% of the full year guide of $2.1 billion. Total debt was $21 billion with a leverage ratio of 3.6x and we returned $260 million to shareholders, primarily through dividends.

Turning now to our segment results starting on Slide 13. Banking Solutions delivered another strong set of results, building on the momentum we saw in 2025. Pro forma revenue increased 7.7%. With banking advancing 10% and payments growing 5.9%. Recurring revenue grew 5.2%, in line with our expectations and now accounts for 85% of segment revenue. Nonrecurring revenue grew 58%, led by strong license activity as we signed new distribution agreements with two leading technology partners. On a pro forma basis, EBITDA advanced 15%, with margins expanding 240 basis points led by favorable mix and continued cost savings. Overall, a strong start to the year for banking solutions as we continue to execute strongly against our commercial excellence initiatives.

Turning now to Capital Markets on Slide 14. Capital Markets revenue increased 2.9% coming in above the top end of our outlook, thanks to a 125 basis point timing benefit from a license sale that closed earlier than expected. Absent the favorable timing impact, revenue was broadly in line with our expectations. As discussed on our last earnings call, the first quarter revenue profile includes a 5 percentage point license renewal headwind due to an exceptionally strong performance in the prior year.

Recurring revenue increased 3.6% in the quarter, reflecting some softness in lending related to macro volatility and this negatively impacted recurring growth by approximately 130 basis points. While we view these lending impacts as transitory, we do expect some continued softness and have factored that into our outlook. The first quarter will be the low point for recurring growth as we project a rising contribution from previously closed new sales over the remainder of 2026 and into 2027. Additionally, we intend to continue to prioritize recurring sales and deemphasize episodic licenses, and this will also accelerate recurring revenue growth. Nonrecurring revenue grew 2.8% and professional services declined by 1%. Capital Markets EBITDA advanced 7.9% with margin expansion of 160 basis points to 51.6%. Similar to banking, the strong margin gains were fueled by favorable mix and cost savings.

Turning now to Slide 15 for an update on our full year outlook. We are reiterating our full year outlook across all key metrics. We continue to target pro forma revenue growth of 5.1% to 5.7%. With banking at 5% to 5.5% and capital markets at 5.5% to 6.5%. Banking, which now accounts for 75% of total revenue is currently tracking closer to the upper end of its full year range with strong momentum across key growth verticals such as digital banking and our network and money movement businesses. Capital Markets is tracking closer to the lower end of our full year revenue guide as we assume a more conservative outlook for lending activity over the course of the year.

As you have seen, we had a strong start on margins, and we are on track to deliver pro forma margin expansion of 95 to 110 basis points and this will drive adjusted EPS growth of 8% to 10%. Lastly, we doubled free cash flow in the first quarter, and we have good visibility into the remainder of the year. we are confident in the full year cash flow target of $2.1 billion.

And now let me remind you of our longer-term cash flow goals on Slide 16. The we expect free cash flow to double by 2028 to more than $3 billion. Our strong start to the year continues the journey we have been on since last year. We're trailing 12-month free cash flow, already approaching $1.9 billion. We also anticipate strong cash flow growth in the second quarter positioning us nicely to meet or exceed our full year target. Importantly, looking beyond 2026, we are confident in delivering more than $3 billion by 2028. And continuing to grow cash flow at a multiple of earnings growth.

We anticipate adding an additional $1 billion of free cash flow over the 2 years from 2026 to 2028. And the building blocks are clear: growth in EBITDA dollars and a significant reduction in onetime integration and transformation expenses.

As you have seen, we are executing strongly against our cash flow targets as our focus on commercial excellence, profitable growth and cash optimization continue to bear fruit. This will allow us to delever closer to our 2.8x leverage target, at which point we intend to meaningfully increase capital return to shareholders.

Turning now to our second quarter outlook on Slide 17. Both adjusted revenue and adjusted EBITDA will grow by more than 30% year-on-year, with EBITDA margins increasing by around 170 basis points. Pro forma revenue growth is projected at 4.9% to 5.5%. Banking is projected to grow 5.5% to 6% and Capital Markets at 3% to 4% growth. As I mentioned earlier, Capital Markets includes a 125 basis point impact from license timing and around 50 basis points from softer lending volumes. Capital Markets recurring revenue growth will outpace adjusted revenue growth.

Underlying demand is strong, with first quarter recurring ACV sales up 45%, building on 34% growth in the previous quarter. This positions us for accelerating revenue growth going forward. EBITDA growth will continue to outpace revenue growth as we drive favorable product mix and execute against our cost management programs. We anticipate margin expansion of 75 to 110 basis points with margin expansion across both operating segments. Adjusted EPS is expected to grow 7% to 10% for the quarter, primarily driven by EBITDA growth.

In summary, we had a good start to the year across all financial targets. Pro forma revenue increased 6.5%, with both segments ahead of expectations. Margin expansion was healthy and we are on track for 95 to 110 basis points of expansion for the year. Finally, we delivered excellent cash flow results, and we are confident in our full year target. With that, operator, could you please open the line for questions?

[Operator Instructions]

Our first question comes from [indiscernible] with Mizuho.

It's actually Dan Dolev from Mizuho. Stephanie, guys really, really strong results. Congrats from our side. I have a question and a quick follow-up. So on the Anthropic deal. Is there anything that makes this partnership unique. People want to know why you partnered with them. And then it seems that there is some concern in the market that AI players can use these types of arrangements to enter new market and then longer term, try to disintermediate the existing players, how do you think about that? And then I have a quick follow-up.

Yes. Dan. Appreciate it. So we're really, really excited about this partnership. It's unique in a couple of ways. First of all, we didn't just sign a contract with Anthropic where we're going to use Claude Code. I mean that wouldn't be exciting. What's exciting here is that Anthropic came to us because after working with the largest financial institutions in the world, what they quickly figured out is that you have to have deep trusted expertise, regulatory compliance capabilities. It's not just a matter of taking data and repurposing it for process flows.

So what we're excited about with respect to this partnership is they're putting their forward-deployed engineers with our engineers and our deep SMEs around each of our agents, so taking financial crimes first. As you can imagine, in terms of creating a financial crimes agent, it has a lot of regulatory and compliance systems and processes that you have to comply exactly with. So they're putting their forward-deployed engineers with our teams we are building together alongside our first two banking partners, and we're going to build up a set of agents which we're very excited about.

In terms of can they use our -- this capability and then go disintermediate us, absolutely not. So these are our agents, they are owned by us. Anthropic, it gets paid based on the token usage of the agents. We own all of the IP and we own the distribution. So think about them -- I mean, they're unique because of their fantastic LLM models, but think of them like a cloud provider, a cloud provider can't get into the significant capabilities here. So we don't see that being a risk at all, and Anthropic would tell you as well in order for them to get into these highly complex and regulated industries, they need a partner like us to do it.

So I'll turn it back to you, Dan, for your second question.

Thank you for clarifying it loud and clear. So my second question, Stephanie, is, is there any revenue contribution from the engagement contemplated in your outlook? And when do you expect that to start? When do you expect the agent to be in the market?

Yes. So as we said in my prepared remarks, we would expect this agent and then other agents to be in the market in the back half of 2026. As you can imagine, this is a really, really complicated space and has to be tested quite deeply so that it gets the exact answer is correct from a compliance and regulatory standpoint.

So nothing is contemplated in our guide in 2026. We would expect to see revenue come forward as we deploy those agents into the market in 2026, but we'd expect to see revenue really take shape in 2027. So nothing in the guide currently.

Our next question comes from Ramsey El-Assal as with Cantor Fitzgerald.

I wanted to ask about the Capital Markets recurring revenue being pressured a bit by macro volatility and lending. Could you give us more color there? Is it on the securities finance side, on the corporate and commercial side, what more precisely is the nature of that pressure?

Yes. So it's in the loan syndication part of the market. We talked about this last year. Unfortunately, with these macro things happening, we are seeing people shy away from the lending activity that they would normally be doing in the public markets. And so we took the opportune -- obviously, it was impacted in the first quarter, and we expect it to be impacted in the second quarter. Specifically, debt issuances are down. You can look at that across the market.

Given this little bit of volatility, we just leaned into it and for conservative purposes, assumed that it would continue through the remainder of the year. We wanted to be conservative here and kind of take the volatility out of it. But it is in debt issuances, Ramsey.

Just one thing to point out is the ACV is very strong. You'll have seen in Stephanie's presentation, the recurring ACV sold in the first quarter in the lending business is up 60%. And similarly, it was up 60% in the fourth quarter. So it's not a software or a product problem. It truly is just a temporary slowdown in the market.

A quick follow-up. Visa announced that their subsidiary, Pismo signed some core business with Wells Fargo. I was just curious if you're seeing any changes related to Pismo and the competitive environment, are you expecting any new competitive dynamics to emerge from that and kind of not entry but a more active role in the U.S. market that Pismo is playing.

Yes. We were glad to see that finally come out because I think there's been a lot of swirl around that. A couple of things. Wells Fargo, absolutely no impact. We don't do consumer credit card processing there. We do do commercial credit processing there. We don't do their core. And I think you probably heard from one of my competitors, Pismo isn't a core, it's a ledgering capability. So as you think about very large banks as they do core modernization, they are looking for ledgering but we don't think it significantly changes the overall core market, it is in a full end-to-end core.

In terms of -- so for Pismo in terms of core banking, I don't see them materially moving anything in the market. With respect to Wells, we have absolutely no impact on that. And so the last thing I'd say on Pismo obviously, they've expanded -- or they brought it to market in terms of credit and debit. We feel really good about the total issuing capabilities there. We are the largest credit card processor in the U.S. And are happy to report that we have greater than 35% of our total issuing contracts have been renewed out through 2029. And even anything happening with Pismo in the credit world, we feel really good about our competitive positioning. So are hopeful that some of this underlying concern around Pismo starts to die away now.

Our next question comes from Tien-Tsin Huang with JPMorgan.

Stephanie, I'd love to hear a little bit more, if you could share, from your client conference, specifically what clients are telling you on the TSYS acquisition, the competitive positioning there? And the client demand for your three platforms? And also on the bank budget side, what are you hearing are budgets fully funded? Is there some paralysis given all the AI momentum and discovery and pilots, et cetera. Just what's happening on the budget front?

Yes. Well, thank you for asking. It was a fantastic conference. I -- this is my fourth year as the CEO in the conference, and I think it's our best. What I would say is the banking industry is really strong. The fundamentals, and I talk about a generational moment in banking right now. The fundamentals of banking are strong. They're all very healthy in terms of liquidity and capital. Regulatory is falling away. They're very focused on either growing organically or through M&A. And as you know, Tien-Tsin, we tend to be the beneficiaries of that.

So I would say the underlying market is strong, which means the technology budgets are really strong. And so the feedback we are getting is the announcements we made are exactly where they're looking to spend money. So they're spending money in digital because, obviously, we're all continuing to interact with them in a digital way. They're spending money on payments, and they're really looking for how they're going to be able to compete in a digital currency way. So our Money Movement Hub is resonating. You can see that with the sales. They're just off the charts. Our tokenized deposits, the Project Keystone announcement was very excited. We had people saying just sign us up on that. So the payment space for them is really hot.

And then the other thing I would say is AI. So you can do AI if you're a very large financial institution, you can afford to partner up with Anthropic and take on that cost. When you get much below there, and this is why we're very excited about our partnership and it's not much below there, you actually can't afford to spend all your money on this technology. And so they are looking -- and you're looking for us to help you really think about how do you deploy it in a regulated way. How is it auditable, how is it traceable, how do they make sure they can do it to take out the cost, but also how are they think -- what are regulators thinking about what they're going to do with it.

So demand is really strong. The market here is strong. We're excited about being solely focused in this market, not just in the U.S. but globally. And as we talked about from a community bank standpoint, I don't take the opportunity to just make the statement clearly. This is our Regional Community Bank conference. It's very strong. We are not receding from this market. It is a very key market for us, and it continues to be the majority of our core wins come from this cohort. We are very excited about our Horizon core that's best-in-class here that we continue to win on. So I would say, very, very positive, Tien-Tsin. Thanks for the question.

That's a good complete answer. And maybe pulling on something you mentioned in response and also to what you said to Dan's question, this concept of the banks wanting to own the agents themselves, Stephanie, are you suggesting -- and I think it's an interesting point, is the line on insourcing versus outsourcing the agent going to be similar to the threshold you see for larger banks choosing to outsource their core account processing. Is that one way to think about this ownership of the agent, if you will.

No. Banks are looking for us to develop the agents and deploy for them. They're not looking to own agents themselves. I mean, even the large banks would be very happy, and we've talked to them about the financial crimes agent because where they would like to spend time on their AI as their own internal processes where we don't make any sense to help them.

But when you think about where we land inside these banks, whether you're big or small, all of our systems that you have to use and then how everything has to be regulatory and compliant, there's really no benefit for a bank to own their own financial crimes agent if it's going to be the exact same as everybody else's, which it is because there is no difference and no value prop to filing a SAAR between a big bank or a medium-sized bank. So I don't see a view where banks want to own their own agents at all. In fact, they're very excited about us kind of taking -- getting after a lot of these costs because they're using multiple of our systems to tackle a lot of these processes and workflows that have deep regulatory capabilities in them. So they're very happy to leverage our agents. It's faster to market for them, cheaper, et cetera.

Our next question comes from Darrin Peller with Wolfe Research.

If you could just touch on the latest on the synergies and cross-sell potential and really how it's going? In terms of seeing opportunities in your customers for TSYS and issuer processing more broadly between what you already have on the debit side and the credit opportunities you can bring. So just an update there would be great. And really what's embedded in the outlook now in terms of synergies, just remind us again?

So maybe I'll take the customer side, and I'll let James remind everybody on where we are on synergies and the outlook.

As we talked about when we closed this transaction, I think everybody, including all of our customers felt like it was a really good fit. TSYS being inside merchant acquired didn't make much sense for them. And so they're very happy for it to be underneath our umbrella. And we are actively in conversations in terms of the value of not just debit and credit together but also core. And in fact, one of the key use cases we've launched with the First Bank of Puerto Rico that we talked about is a commercial or consumer credit card line increase where what's uniquely different is we can now take their TSYS data plus their core data, put it together and create a very rich experience where they can actively increase credit line increases to customers, which drives a lot more revenue for them, which they couldn't do before.

So we're getting a lot of interest and people are very excited. That being said, as you know, these are very large banks and sales cycles here take a bit of time. And so we are actively engaged with all of them and we look forward to reporting on revenue synergies in the future. I think we had always said we thought it would be in '27 and '28 as those take hold. These are just very large customers with long contract cycles.

I'll turn it over to James in terms of what we have in the outlook with respect to cost synergies.

Yes. The long-term goals you're aware of $125 million on cost synergies. And we said that in 2026 we would deliver somewhere between $30 million and $40 million. The first quarter, it was kind of $1 million, so it was insignificant. So we will start formal reporting in the second quarter as we expected synergy flow through to be mostly in the second half.

And then on the revenue synergies, $125 million as well, longer term, $45 million by 2028. This year, we basically said it would be a minimal impact on the income statement of the current year. And none of the guidance has changed at this stage.

Understood. James, if I look at the results of the numbers, I mean, it looks like you had better nonrecurring on the license deal and a little bit maybe of the lower end on capital markets trending now as you talked about, I guess I'm just curious, on a more of a recurring revenue basis, what are the puts and takes? Is there anything that's providing upside to your initial thought for the year putting aside the license sale and just how the business is trending versus your initial expectations from a guide standpoint.

I think what excites us -- and I'll maybe answer a slightly different question, I think I'd draw attention to the ACV, the Q1 ACV, which was up 24%. And you'll recall that Q4 was up 20% as well. And the composition is remarkably similar. You got banking in both quarters, up 13%. And Capital Markets up 34% in last year and 45% in Q1. So the demand is clearly there. That's what we're really excited about. And then within this, the quality of the demand, we're selling much more of the payments business and a big skew to that, lending is very strong, digital is strong. So the growth factors are driving this number.

So what we're looking forward to is accelerating growth. I think you're going to see it most on the Capital Markets business. It was a little light in the first quarter because of the lending business slowdown. It will accelerate in the second quarter, and we will exit the year with strong momentum on recurring, on the capital markets business.

So I think what -- the thing we didn't like so far was just this lending thing. The rest of the business is doing remarkably well and with remarkable consistency, and that's what I would say about the banking business. And we're spending a lot of time on the quality of the recurring. The pipelines are pretty strong going into -- you've gone into Q2 as well. So the outlook for ACV in Q2 is good as well. So that's why -- that's -- I'm not saying it's really a change, but it's really encouraging us and giving us confidence on the long-term recurring trajectory of the business.

Our next question comes from Will Nance with Goldman Sachs.

I wanted to circle back to Project Keystone. I was wondering if you could spend a little bit of time talking about the outlook for that initiative. When we think about the banks and the ongoing discussion between the banking industry and the crypto industry around stable coins, one concern seems to be around systemic risk to deposit bases from competing factors. So how do you think about the value of tokenized deposits relative to stable coins. And how this Project Keystone kind of insulate the banking industry or kind of address the bank of the industry's concerns. And I have a follow-up.

Yes. Thanks, Will. So I think, look, the banking industry appreciates and wants to lean into digital assets and capabilities. I don't think you're seeing them trying to block them and they're actually pretty excited that they're able to participate in it. I think the challenge for them has been where the real use cases are. And so when you think about Project Keystone, what we're hearing from banks is, look, we know we need to be in and have stable coin capabilities. We don't see a humongous demand from clients in terms of specific use cases. But what we're focused on here with them is really bringing them together around tokenized deposits as the first use case, which steps them into digital asset capabilities. And it's a use case that the banks care about. It is an actual use case for them, that makes a ton of sense.

We have a digital asset platform, Lyriq, that is tried and true and tested outside of the U.S. and we've tested it inside the U.S. So we're excited about this capability. And we think bringing these banks together and to start just on this tokenized deposit use case first. And creating this network for them and on their behalf is pretty exciting because it's an actual use case that they want to work on and that will create value for them.

Where it goes from there in terms of how to think about stable coins, et cetera, this is a great step for them in that direction. And I think you see -- you can see with the 5 U.S. banks and boy, the demand we've had after we announced it is pretty stunning. You can see that they're very excited about getting on board with digital currencies. They know they need to do it, and they want to make sure they do it in a regulated and compliant way and they know they need network capabilities.

And from an FIS standpoint, we're not interested in competing with our customers. We never said FIS was going to issue a stable coin and compete. And so this is perfect for us in terms of we can provide the digital asset platform and then help build out the tokenized deposit capabilities. And this is an enablement factor, again, where innovation is running through FIS versus around that.

And then if I could just follow up on the banking revenues, more numerical question. On the nonrecurring revenues that you called out new distributor relationships, could you just maybe double-click on how that -- how you expect that to continue going forward? Is that sustainable? Does this create a grow over issue next year? And just the general outlook, given how strong the nonrecurring revenues with their banking have been over the last several quarters?

Yes. Yes. Yes. So you've heard me talk about buy, build and partner. You've heard me talk about how important I think we are as a franchise player with the marquee set of clients, global technology or scale technology. And so you've been seeing us partner whereby we'll bring great products into our distribution where partners can sell into our base, their products. At the same time, we are starting to activate partnerships where we're activating resellers to be able to sell our products.

Again, because we have best-in-class products. We have a great distribution channel, but we can always use more sales force around the world. And so we partnered up with 2 in particular, and they are going to be out selling some of our key products to future customers like digital, for example, like Money Movement, et cetera, and it goes across banking and capital markets.

So you saw us have a pretty big nonrecurring revenue number there. I do think it will create a grow over for next year, but that's not the purpose of the partnerships, it's really we sold them the capability so that they can now distribute our products, and we expect to see revenue come through in '27 and '28. And as they become distribution partners of ours.

Recurring revenue come through.

Yes. Recurring revenue should come through as they sell our products around the world and help us distribute. Hope that helps, Will.

Our next question comes from Rayna Kumar with Oppenheimer.

I just want to go back to the competitive environment for a second. Any like observations, any changes that you've seen this quarter versus previous quarters? And like specifically, are you seeing more than usual RFPs? And secondarily, are you noticing any additional competition outside of the top 3 market share leaders?

So I think that what I would say broadly is, first, this is an industry where there's certainly -- there's more than 3 players. I know there's a top 3, but there's enough room for all of us to compete and win. What I would say around the competitive environment is it's competitive. It continues to be very competitive. I think -- as you would expect, I think there was a lot of excitement that there would be a ton of core activity coming out of one of my competitors' announcements.

I think that, as you would expect, core is pretty sticky. It's painful to change your core. And so there is an opportunity -- always an opportunity for people to retain core. At the same time, I do think that the market broadly, besides competitive, is looking at digital capabilities, money movement capabilities, lending capabilities. And those are things that you can't -- that are core agnostic. And so when you think about where banks are trying to spend money and where they're trying to make sure that they can grow their customer base, it's less around the core because they're focused on, ultimately, digital sales and service, how do they stay relevant in a digital currency world. And so that's where -- that's why we've been focused on high-growth verticals, and those tend to be core agnostic.

So I think the -- I guess, the long and short of it, Rayna is the competitive environment is competitive. I'm not sure I'm seeing any new increased competitors or competition. I think that the kind of the usual suspects are around. I don't see a broad-based new competitor, but we're always on the lookout. I hope that helps.

Our next question comes from Jason Kupferberg with Wells Fargo.

I wanted to just start circling back on Anthropic. If you can talk a little bit more about the go-to-market strategy, maybe some of the economics behind the partnership. I know you said Anthropic is getting paid for token usage, but is FIS paying Anthropic at all for access to their engineers or any of the knowledge transfer involved? And any color on how many resources, how many people, both companies are committing to the partnership?

Yes. I think, look, we have a very exciting enterprise agreement with Anthropic, the thing that's just like many others, the thing that's very unique about this is us jointly where they're contributing there for deployed engineers with us to build agents. So that's what makes it unique and very exciting. I think as you think about, like I said, ultimately, the build of these agents, they are FIS' agents as we deploy them. We will price them like all agents are priced. We have to work that out still. But the value to Anthropic of the agreement and the capabilities is really obviously to get more financial institutions using the agent and using their LLM and ultimately taking on the value of their LLM through tokens.

So I don't know that there's -- Jason, much more I can say than that, but that's how to think about it.

Understood. Understood. And then just looking within Banking Solutions, James, I appreciate the disclosure of the subsegments. We had banking growing 10%, and we had payments growing 6% pro forma in the quarter. How should we be thinking about those relative growth rates as we proceed through the balance of the year?

Yes. I think I'd maybe look at it slightly differently. The banking business had an overproportionate benefit from those licenses that we spoke about, so those long-term distribution agreements. So the 10% is probably overly boosted by that relative sort of result in the payments business.

I think the best way to think about this is both businesses are growing on the full year at roughly the same amount, especially on recurring. But what I would say is, in general, the payments business will grow faster on recurring, probably by 1 point, at least 1 point. So as you look out on this business, I would say that the structure of the business and the markets they operate in, they'll both be reasonably close to the full year banking guide, but payments longer term will outpace the banking business, especially on the recurring.

And the reason why that's important as you think about quality, we've been emphasizing a couple of things here across all the businesses. One, we are leaning into recurring revenue that's really, really important in terms of the health of the business going forward. We're also leaning into, as we said, the higher growth verticals where we see real organic growth as well as very high margins. And that's all resulting in revenue and product mix, which gives us a lot of confidence as you think about our margin expectations, we're very happy with the margins in Q1. You can see we're committed throughout the rest of the year. I know there's been a debate around our ability to get there.

This -- it's really important that we lean in and continue to drive recurring revenue growth in these high-growth verticals because that's what gives us the confidence in terms of durable revenue but also durable margin expansion. And so we're really excited about where we're seeing everything deliver.

Our next question comes from Andrew Schmidt with KeyBanc.

Broader question, just on AI in terms of organizational structure and productivity. Obviously, you've heard a lot of announcements from others in terms of faster product development, organizational structure changes, things like that. Curious how you think about this and the opportunity to sort of accelerate product velocity and streamlined processes, things like that.

Yes, Andrew, thanks for the question. I would say we're very consistent with what you're hearing from others. So -- and we talked a bit about this before, but we implemented CoPilot last year and are continuing to see a significant amount of productivity lifts in our engineering organization. We're really using that to continue to fuel new product development. We have been spending a bunch of time internally as well in our own client contact center? And how do we think about, first and foremost, creating and delivering a better client experience, but also getting after productivity and workflow that are our own internal process workflows and how to drive operational improvements out of that.

I would say we -- in terms of the inside of the firm are pretty consistent with what you're hearing from others, we are planning the -- for deployed engineers that we're getting from Anthropic, where we learn shoulder to shoulder, not only will we be using those learnings for new agents and new product development, we'll also be using those learnings and putting them into our back office.

So I'm very excited to see how we can take a trained FDE group now leaning into what Anthropic is going to teach us and not only accelerate agents, but also how do we accelerate internally, making sure that we're focused on not just productivity and cost, but how do we create better outcomes for our clients, either in technology or in our client organizations.

That's super helpful, a good point about the Anthropic relationship benefiting the FIS org as well. If I could ask about just the bank M&A environment. Obviously, you saw some elevated activity last year into this year. What are you seeing this year? Is it consistent? Has it slowed at all, given everything is going on? Just curious about implications for conversions later this year and into next.

Yes, I would say it's consistent. It has not slowed. We're continuing to see elevated M&A. We're seeing bigger deal sizes in M&A. We're seeing a lot of our customers sort into, I want to be bought and I want to be -- I want to buy or I want to be bought, which is great, and that's becoming very clear. I would expect to see more just like everybody. I don't have any inside information. But M&A continues to be a tailwind for this industry, and it will continue to be a tailwind for us.

Next question comes from Bryan Bergin with TD Cowen.

I wanted to ask on banking here. So strong demand is clear. Can you comment on whether -- this is giving you incremental pricing power across your solution set. It sounds like competition is consistent. But just curious if the solid backdrop in kind of your commercial excellence programs, are enabling any added uplift in pricing and any ability to kind of unpack that within the ACV growth.

Yes. I would say pricing is stable. So I wouldn't say it's up or down. I would say our pricing power continues to be stable. I think our strategy is really around adding products. So as we think about the total value of a customer and if there does need to be any pricing up or pricing down, we really focus on trying to add digital or payments or Money Movement Hub or lending or we'll now be adding agents. So I would say overall pricing is stable.

Okay. And on the guidance. So can you help just from like a 1Q to 2Q pro forma bridge and just the key puts and takes that flow through in each segment as far as recurring growth expectations for next quarter? And really just the confidence of that second half uptick as you go through the balance of the year. It sounds like you're being conservative in the capital markets, but I just want to test on that.

Yes, we typically don't guide to recurring. But I would say that the 3% to 4% we've guided to in Capital Markets in the second quarter. That does include, again, it's a license shift into the first quarter, plus some -- a headwind of about 50 basis points coming from the slowdown in lending. So we think the business is generally on track. I would say that the recurring will be growing faster than that. So call it -- it's a mid-single-digit kind of number on recurring. So kind of getting back to what it was doing prior to the first quarter.

And then on banking, I would just say the recurring is more of the same. So we did a solid 5% recurring in the first quarter. I think it's going to be in that kind of region. So I think you'll see both businesses in the second quarter on a 5-ish kind of number.

And our final question comes from Timothy Chiodo with UBS.

Stephanie, you mentioned earlier on this call that switching costs that that's one of the hallmarks of this industry, right? The customers are very sticky. So I was wondering if we could talk a little bit about more of an industry topic that's coming up, which is the potential for AI to reduce that stickiness. And I was wondering if that's something you might view as either a risk or an opportunity in terms of if AI was able to make the transition from one core to another either quicker or less effort or less risk for any of the banks that would be considering such a move?

Yes, it's a great question, Tim. I mean, I think a couple of things. One, we've already used AI to make the conversion from one core to another go faster? So I would say that's one place, the actual -- once you've decided to change your core, I do think the ability to move cores, we can go faster, which is fantastic. That's very exciting for a lot of our banks that are acquiring other banks.

I haven't yet seen an actual AI-enabled full core that a bank could use? So do I think that ultimately around the edges, are there places that I'm seeing right now where core switching costs could be less. I think it could go faster right now, that's what I'm seeing. But I think the cost of switching to core is the level of complexity inside a bank. And remember, when you talk about a core, so we're primarily talking -- let's talk about regional community bank. You have to switch your core, your debit card processing, your card production, your print and mail, your money movement capabilities, if you're down market, you're changing your ledger. So it's a pretty fully integrated suite.

So I think the question becomes, and we should all be on the lookout is, what does an completely AI-enabled core look like. And again, remember, some of the biggest challenge and the biggest moat in core, specifically in particular in the U.S., is the level of regulation you have to have to operate a core end-to-end inside, not just the federal regulations, but also on the state regulations. And that's what's kind of kept the competitive moat to the cores and made it painful for switching. I'm not going to sit on the call and tell you that I don't think there's places where AI could make the switching costs less. Like I said, I think we can implement faster. I don't see a full takedown though of like, oh, AI has come and all of a sudden, the cost is gone. I just -- I don't see how that actually plays out, but we're always on the lookout.

I think it's a really helpful answer, especially the points around the debit and the print and sort of all the other downstream impacts.

If you don't mind, a quick last one here, just a little -- a couple of little modeling numbers related items. So last year, in Q3, you guys called out in your slide deck that there were some pricing benefits that kicked in, and that's not something that you typically call out as a discrete driver of growth. We talked about pricing on these calls, but it was called out in Q3 of last year. So it's fair to say whatever that pricing was, will benefit for 4 quarters. Would you expect to see some more pricing to kind of offset the lapping of that come in, in the second half?

No, I don't. I don't. I actually don't even remember what pricing we called out, but it's -- pricing is stable, as I've talked about. I wouldn't expect to see any dips or anything like that. We're feeling really good about the consistency and like James said, especially of the recurring.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Okay. We are back from lunch. I think more people are making their way back into the room. But in the meantime, we're going to kick off the afternoon here, and we're very happy to have the management team of FIS. We have James Kehoe, CFO. We have Georgios Mihalos, who runs Investor Relations. And thank you guys both for being here. We appreciate it.

A lot of ground to cover. Some pretty interesting stuff happening at the company right now. I actually wanted to start on the banking segment. Obviously, it's 75% of your revenue and where most of the focus tends to be. The past 2 quarters, I mean, the performance there has unequivocally been better than you guided to, better than the Street expected and pretty strong in a historical context. And I'm really talking on an underlying organic basis. So what, I guess, would you call out have been like the sources of upside?

Yes. I think it's two things we're really excited about. One is the state of the industry, so the end market, it's really buoyant. Banks are doing well. They're spending and the regulatory environment is much more beneficial to their investment profile. So we're seeing -- they're spending more on M&A and spending a lot more on technology, especially on AI. And they're embracing AI at a pace that was unheard of in the past. So we're very excited by the position of the industry.

Then our position because, as you said, last year, especially in the second half of the year, the banking business, you can see over the last number of years, the fundamentals have dramatically improved. So you're looking at a solid -- the organic, you mentioned organic, it's 4.5% last year with the total results about 5.5%. That's well ahead of Investor Day guide, like well ahead. So well, we're above the high end of the guide. And the question is why? It's the biggest #1 is commercial focus. I think there's 2 pieces.

Actually, I think the building blocks put in place before was on improving the product and improving the interface with the client. And at the beginning of last year, we transformed the model to a functional model. So we have, for the first time in history, Chief Client Officer, who's held accountable for building the relationship with clients, not selling, building the relationship, what products do they want.

When did that start?

Beginning of 2025. And so that was one key step. So it is, are we serving our clients better and do they feel like we're serving them better. The other one is commercial excellence. Again, new leadership was put in end of the first quarter of 2025, the previous leader of the Capital Markets business took over as Chief Commercial Officer. And it's not -- the change don't underestimate it. There's been a big shift away from selling to building quality pipeline, and that has been the big change in banking. So last year, we actually changed the commissions to focus the sales away from professional services and to pivot to recurring.

And during the course of the year, salespeople do exactly what you pay them to do. PS went down in terms of ACV and recurring went up significantly. You saw that in our prepared materials on the last call. Our recurring revenue ACV growth in Q4 was 20%. The full year is pretty similar to that number. And the standout was the quality of the recurring ACV. So we're selling way more payments. So the payments business in the entire year grew ACV 70%. Digital was up 60%. And in the capital markets business, the lending business, I think, was up 70%.

Why is that important? Those 3 categories have margins well in excess of the company average. They're our most profitable segments. So think of this as the commercial excellence. One is a shift to recurring. And the secondary shift is away for, call it, away from commercial and BPaaS and to the payment sector to the digital sector. And these ACV numbers that have been delivered last year, they flow into the P&L into 2026 and especially in 2027. And the strategy, we even fine-tuned the commercial commission rates at the beginning of this year as well. So we're continually to fine-tune the focus, the sales on what's strategically important for the company.

Previously, they could sell PS and recurring and get compensated the same way. Now the compensation is completely different. They got far less for selling professional services and far more for a new recurring sale. And they follow the dollars. That's how it works. So it will be more of the same. This is why we're incredibly confident on the banking guide for 2026. So we went out and said 5% to 5.5%. If you take the midpoint, the organic is -- I think it's a 4.7%. So even the organic is accelerating.

And within that, the TSYS business is like we're expecting more of what they did last year, like a 4.5% growth rate. So there's -- the standout in terms of ACV will continue to be quite similar. It's not that we're deemphasizing core, it's that we're super emphasizing the payments business. And that is the jewel of the crown in terms of potential that wasn't tapped.

Back at Investor Day, we talked about hundreds of millions of cross-sell opportunity. Most of that cross-sell was debit that we didn't have the debit, but we had the core or we had the debit, but we didn't have something else. So this cross-selling is now where we're massively focused. It's on building our position with the growing banks. And I really want to go back to that for a minute, is we are only focused on financial institutions. And this is what banks like. We're not focused on merchant acquiring. We're focused on making banks successful.

We're not focused on numerical banks. I think Fiserv serves far more banks than we do. Why? Because they go down market and we stay up market. Our share, we're we are the #1 share in banks above $10 billion of assets. And that's where we play, and that's what we're very good at. So why? Because our products are generally best in breed. They do facilitate commercial banks. That's much more complex than serving a retail bank.

And then finally is everything we do, we can do at scale. There's many people who can process a core ledger for a small bank. The more you go up and the complexities increase, the more you get into commercial banking, the more you get into large credit card portfolios, running a client with 100 million credit cards is far different than running a client with 2 million credit cards. So our advantage is scale and consistency, and that's why we have a #1 position with large financial institutions.

So it sounds like -- I mean, these changes that you've made are -- they're durable. They're structural, right? It wasn't like, oh, we got a onetime bump from this or that. I mean this commercial excellence is permeating the organization. You've changed the sales force incentive comp model. So it sounds like this trend of kind of outperforming calling at your medium-term guide where we're kind of coming to the end of that period already, right? Like that sounds like it's.

No, no, it's very deliberate, and I'll give you an example again on the sales commissions. The stereo for sales commissions is led by the Chief Commercial Officer, but I sit on it and so does Stephanie. The final decision doesn't get approved without her coming to the final meetings. And I'm in all of the [indiscernible] meetings on deciding the changes. Finance is there and the BP, the business presidents, the product presidents are there, but it's predominantly a company decision on the commissions. So it's completely linked to strategy. It's not linked to selling. It's linked to strategy.

Yes. So that's the big change.

That's the big change.

Okay. We're asking all the companies that have come today, just any comments about how the quarter is going? Obviously, we've had the war broke out a couple of weeks ago. I mean I don't think you have much direct exposure or operations on the ground in the Middle East, but if you can just address that and any other color.

We do have some locations, but I think we're in the numerics of 30 people. Our primary concern was protecting individuals. Our business exposure is minimal. In general as well, oil prices are going up. In a recession, we are inclined to do slightly better because our debit business, that's a little different now. We have a credit and debit processing scale. Debit is inclined to grow faster in a recession. So I'm not saying we're recession-proof in any way, but we're seeing no impacts.

We have no business exposure. And in general, our revenue is not exposed to customer -- consumer dynamics, just in general. On the quarter, we can't say anything about the quarter. It's literally full speed ahead. We've seen nothing in the first 2 months that would change any perspective on the full year. We gave out a guide, and it's an eminently achievable guide.

Okay. Okay. Good to hear. And just -- I guess, you're not seeing any slowdown in bank decision-making or anything like that just as the macro has arguably become a little bit more uncertain?

No, we would see -- I would say, in general, the one thing I would comment on the build of pipeline is as strong as we would need it. That's the best way to put it. Banking is incredibly strong in pipeline generation. We've kind of moved into a different era now on building pipeline. A lot of our pipeline mining is much stronger than it was 12 months ago. It's AI generated.

So much of the lead generation and the identification is being facilitated by AI. The pipelines are substantially higher than they were entering the prior year, which is always a good sign, because then you have to convert that pipeline into ACV and then the ACV gets converted into recurring. So we're intensely focused on building quality pipeline and then converting the pipeline to ACV this year.

Right. Right. Okay. Okay. Yes, we're definitely going to come back to AI because here, it's going to be big. That's what everyone says. We'll get your perspective on that in a little bit. But let's -- just one more kind of on -- well, now kind of the true kind of core banking part of the banking segment. Just talk to us about -- you touched on this a little bit in terms of like how you're differentiated in terms of your positioning. But as you look at what's happened with some other players in the space, like do you see opportunity to move further down market to take more share? What are some of those dynamics that we should be monitoring?

Dynamics, there's -- everyone knows decisions on consolidation of platforms do open up opportunities for the competitors. We are inclined to look at -- one is -- I don't think we obviously will try and take advantage of it, but that's not the biggest driver in our business. We're not counting on significant wins from competitors. Why? I kind of said it earlier, we're focused on maximizing our growth, which means the number of products we sell to the biggest banks. We're not going down market to sub $10 million banks. Will we still compete in that area? Yes. Is it strategic? It's not as strategic, right?

So then we want to sell our debit and credit into banks where we have the core. We do want to get big core wins. And if you look at our most recent quarter, we had an impressive set of banner wins, including takeaways from some of the key competitors. Synovus was a large win, which adds a really large number of accounts. So our focus is on the number of accounts in core, number of accounts in debit, number of accounts in credit. And at some stage, we will think about should we give KPIs on these. But we're driving the number of accounts.

And why is that important? The number of banks with assets more than $10 billion over the last 10 years increased by 50%. So it's a pretty elite group. It's not a large number. It's not thousands of banks. It's like 150 banks. That's where we're focused. Why? They are growing their accounts because they are the net acquirers. And when a bank is acquired, we're typically -- if we're 1 of the 2 banks, we typically win the business, especially if 1 of the 2 banks is a commercial bank. And this has not been argument. It's just factual. It is we are the #1 in large banks. And typically, we will win more when there's merger activity.

Yes. I would just add there, just very quickly, again, to Jim's point, we don't focus on stick count. We focus on the account growth. And if you kind of think about, in many instances, one of these deals alone is 10, 15 bank deals rolled up in one. That's kind of the focus for us. So just the other point I'd just make is, have we seen success sub-$10 billion? Yes, we have. And we talked about that at length in 2024. That's not a market where we're treating from in any capacity. We've done a lot better there with the Horizon product. But obviously, we see a lot more opportunity as these banks get bigger and bigger given the M&A that we're seeing in the space.

Okay. So it's just a matter of relative focus, right, because you see that opportunity up.

Yes. And we've got products oriented for each of the groupings. We do have a product that works in credit unions. But as I said, our strategic focus is on the larger banks and midsized banks.

So I wanted to come back to TSYS and now you have massive credit processing capabilities and basically 2 primary players, you're one of them now. What does the kind of cross-sell motion look like? I mean on paper, that seems like a great opportunity because presumably a lot of these $10 billion-plus asset sized banks, they have credit card programs, right? And so how often are they in-sourcing? Do you have to get competitive takeaways? Is that something that you could start seeing some cross-sell traction with this year? Or does it take longer?

Yes. So the guide we had for revenue synergies, which is a good proxy for if you like, was in the P&L, $45 million by 2028. But we did say the goal was $125 million midterm. And this was just to express the fact that contracts don't come up for renewal. Some of them can be locked for 5 years. So there is clear potential on the $125 million, and you should presume we have a list of ideas that add up to a number that is higher than $125 million.

But within that, there are big blocks of opportunity. One is loyalty, so cross-sell of loyalty between the two. Two is obviously where we have a core and we don't have credit processing, we now have incredibly stronger assets to win in processing. One of the biggest opportunities is international. They added about $1 billion of sales to our international business. And now I think international is about a $4 billion business for us. And it's given us a stronger right to win in Europe and Latin America. Why? They have this platform called Prime, which is their international credit processing platform. It's $200 million business growing at 15%. They have a massive pipeline.

So the interesting thing we found out is that they were underinvesting in international because global was a little bit using them as a cash cow. So they couldn't invest in sales, implementation teams in international. So some of this is -- I'm not saying it's super easy, it's easier to unlock. We're probably going to add sales resources and add implementation resources to their international business, and that will drive considerable opportunity in international.

And we've already taken an action here. We took our -- we've taken their sales quotas for 2026 and added them to our sales quotas. So our sales force internationally isn't far, far bigger than TSYS's was, far, far bigger because of our capital markets footprint. So they're carrying a dual quota already, including the credit issuing business. So they've -- our sales force has already started selling their products using -- leveraging the existing pipeline, which is incredibly strong. So we're very bullish on the cross-sell.

Just coming back to the synergies. I mean, you laid them out on the revenue and the cost side over the next 3 years. But just as you draw on your experience like when FIS bought Worldpay, are there certain kind of risk mitigation strategies to make sure that you do achieve or perhaps even can overachieve both the revenue and the cost synergies?

That's a good question. Yes, we got that when we did announce the deal, and there's 2 fundamental differences. One is the Worldpay acquisition was quite different than this one for -- 2 reasons. One is Worldpay was not the sweet spot of FIS. It was merchant acquiring, and it wasn't core financial core financials. So the management team was extended. They didn't have as much experience.

Second thing they did was they exited most of the Worldpay team. What are we doing differently this time? The credit issuing acquisition is a business we already operate in, right? And it's very close to core banking. It's all LFI business, which is what we are very focused on. So it's a sweet spot we already operate in, and we're retaining the entire management team. And you can assume they're all on incentives for an extended duration to retain them in the business. So it's a double risk protection, if you like.

I wanted to go back to that 20% growth in the recurring ACV because I almost feel like that got a little overlooked in the print, but that was a pretty strong number. I mean, is that sustainable in 2026? And I guess beyond what you've already talked about, is there -- are there any other drivers that really supported that number for 2025?

I'm not going to start guiding to ACV recurring because put us in another cycle guide. But I think what -- we mentioned it before, will the vectors be the same vectors? The answer is yes, right? So you're going to see probably high growth rates on digital payments business. And bear in mind, they grew by this -- digital grew 100% last year. And the number of accounts on file on digital, they grew massively.

So the vectors are the same, and we're selling into our existing base into the [ TSYS ] base, and we're -- we've made our -- why is it sustainable? We're continually making our products core agnostic, which means that our digital products, we can sell it to not just our core but also into a Fiserv core. More and more on payments, we're displacing competition even when we don't have the core. So we are getting more, call it, agnostic, and we don't want to have to sell also the core. We're going in and targeting specifically our competition on the payments business. Bear in mind that the payments business is now our biggest business.

If you look at the financials we filed, the banking business is about $4 billion. Payments is $5.5 billion and capital markets $3-ish billion, right? So payments is the biggest, and I'll touch on that for a minute, why it's important and why we're focusing the sales force on it. The recurring growth rate in the payments business by the virtue of the products itself is a faster growth rate than core banking, right? So it's going to grow recurring faster with a higher margin profile because businesses like network are incredibly profitable.

Adding on an incremental transaction is at a very high gross margin. So the margins in our payments business are higher and the recurring growth rate is higher. It doesn't mean that banking is a bad business. It still has really attractive margins, and it's growing mid-single digit. The difference is it does have a processing business in there. So this commercial and BPaaS business, card -- it can be debit card production, it can be statement printing, that kind of thing. That has got a lower overall margin. But generally, our core banking business has high margins as well and digital has high margin.

Okay. Understood. So let's come back to AI. I mean I think on the earnings call, you guys did an excellent job of kind of framing why AI should actually be a tailwind to your business, not a headwind. But maybe just take a minute and talk to us about that through the lens of both the banking segment as well as the Capital Markets segment and then also just from like a revenue and a cost perspective in the P&L of FIS.

Yes. We could go on for days.

Yes, I know. I know.

So we had a couple of statements. One is why do we think we have a competitive moat? And then we've said because of that moat and our investments, we believe that AI is a strategic accelerant, not an issue for the company. And I think that was the essential communication. So why do we have a moat? We have systems of record and systems of record are deterministic. They're not probabilistic. So you can't use AI to do a guess at what the interest could be at a probabilistic calculation. It's actually deterministic.

The systems are highly, highly regulated and the reporting is extremely detailed. So one is it's a system of record. Two is the data we've accumulated over decades is essentially the secret sauce of the company. So we've got core accounts, debit. Now we've credit. So over 1 billion accounts, 73 billion transactions a year. This data has intense value for anybody who wants to apply AI to it. That includes our banks. It can include third parties who want to partner with us. So we have systems of record, which are the structure of the data that everybody needs to use, decades of data. But I would also go and say decades of operating bank infrastructure and software at enterprise grade levels of security, cyber, resiliency.

A small company coming in can't do this. really can't. So it's -- and there is a bit of an analog to this. And the analog is an interesting one. Go back 5 years when Temenos and all of the modern banking platforms were coming in, and you were probably writing reports saying that this is a big threat for FIS. We're now 5 to 7 years later, and we never see them in the U.S. in a competitive bidding and nor have they won considerable business. Why? Because they can't scale. They have great products, but they can't scale, and they can't scale the same way we can. And the complexity of the products when you go up to a bigger bank is much, much more complex.

Stickiness is...

And the stickiness is high. And why is it high? Commercial banking is not the same as retail. People generalize. But the proof point is it's an entirely defendable against, call it, innovative players who come in, AI-enabled or not. And then two is we're not standing still. We have -- I think it's like 17,000 people in technology. And you can assume that a large proportion of those people know how to use AI. We've rolled out Copilot across all 45,000 people in the company at cost. Everybody -- we're actually tracking our people using AI every day. And we're actually ensuring that people are forced to use AI to drive -- this is in finance, everybody.

We're tracking everybody in the company. So we've invested heavily, and we want to see a return. Personal productivity, back-office productivity. But more importantly, our AI -- our engineering teams are using GitHub. Not only are they making -- Stage 1 is make your process and coding simpler. And then Stage 2 is now we're embedding AI within our products. So you will see over the course of the coming months, an increasing drumbeat of, call it, agentic AI enablement in our core banking platforms over the course of the coming months, probably culminating in some announcements around our Emerald conference. Why? Because we are -- you asked what's the upside on AI.

We have clear revenue opportunity. One is you got to do defensive measures. We have TreasuryGPT because Kyriba will compete with us, and they have AI enablement. Some of it is to defend your turf in treasury. The next step is build AI and agents into your software to make banks more efficient, right? The big banks like JPMorgan, they do it themselves. The medium banks and maybe regionals, they're more than happy to take -- if we can develop agents that reduce their back office sizing, it's a benefit for them. And then the other piece is we are using -- we're now working with some banks on pilots on the -- our data sets. So we're building...

You plan to size that or...

Yes, that's what we're actually actively doing now. So the first step has been we're investing about $100 million of capital in the current year. And probably there's another $20 million or $30 million of OpEx on top of that. So what are we doing? We're enabling AI within our, call it, systems of record. We're building out a huge, what we call EDAI. It's basically an enterprise data and AI engine. So what -- think of it as that all of the data we have on every client and every consumer within that client, whether it be the core banking, debit, credit, wealth. We have wealth data because we have retirement data, capital markets data. All that data is in one data set.

So there's a pilot ongoing at the moment with a large regional, and they were doing their credit assessments using just credit card data. We've put all the data in one bucket, and they have a 360 view. So the bank can now take a decision. They can see the paycheck coming into the bank account. They can see their debit credit movements. They can see if they have a wealth position. So they've actually raised the credit limits to many of their customers generating higher transaction fees and income for the bank. So there's -- what I mean is -- now the revenue models are all being developed, right? Some of it is defensive. Some is helping the bank be more efficient in the back office and a lot of it -- the future of this is a data and AI enablement business, call it a platform business that drives revenue value for the banks. That's the job. And it is an immense amount of data, and we're one of the few companies in the U.S. who has that amount of data.

So I wanted to talk about your EPS guidance for this year...

We better let George talk at some stage because he gets upside if we don't...

Yes. Well, exactly. So like I said, I'm going to save the hard ones for him. 8% to 10% growth in EPS this year is the guide. I mean, just as you think on a normalized basis beyond this year, I mean, is that a decent proxy for ongoing EPS growth? Or can it actually be a little higher once the buybacks resume? Or how should we look at that?

Yes. I think -- I kind of confirm what you say. Once you get back to significant buybacks in '28 and '29, there is -- obviously, there's going to be more contribution from buybacks than there is in the current year. We're not buying back any shares. But I'm not confirming any long-term guidance here. All I would say is look at our 2026 guide and the components of it. And many of those are better than what we said at Investor Day. Revenue -- high confidence in revenue being at the high end of the total company guide led by banking.

Two, margins -- it's 100 bps on a pro forma basis. We kind of insinuated long-term 60 to 80 bps. We're already saying 100. There's no reason for a slowdown in that 100 momentum. So call it revenue tick, margins tick. And I think where we've made a much different pivot is on cash flow. So on cash flow, we're saying -- actually, it's not 8% to 10%, it's 30% in 2026. And over the 3 years, it's going to be 25%. So we're saying we will grow cash flow per share, even though you're not allowed to quote that. What I mean is it's not an SEC measure. But we would have liked to have emphasized cash flow per share because it's going to grow at 2x the amount of the adjusted earnings. And that's an all-in GAAP measure.

So I wanted -- yes, I wanted to spend a second on cash flow because you're talking about a little bit over $2 billion this year, right? And I think the only item that excludes is the tax bill, right, cash taxes on the Worldpay sale. How big is that piece?

That's $700 million. And when we did the deal originally, we thought it would be $900 million, yes.

Okay. Okay. So it will be $700 million versus the $2 billion that excludes that. Okay. And then if we look at the 2028 guide for real GAAP free cash flow, you're talking about, I think, $3 billion plus, correct?

Yes.

And obviously, a lot of like the integration and acquisition costs related to TSYS will be leading off. So I guess is that -- you kind of hinted at this a little bit, but that's the year when buybacks in theory, kick back in and size? Is that...

Well, I think what you're going to be we got to add -- I'm trying to simplify these things. We're going to add $1 billion of cash flow in '27 and '28. And where is it going to come from? We've got plenty of opportunity on working capital, but that's not one of the biggest drivers. The biggest one is you're going to grow your EBITDA, right? And you just tax affect EBITDA and you'll get to a very sizable number.

The other one is onetime transformation and integration expenses. In the current year, they're estimated at $800 million. The number will decrease by at least 50% by 2028. And we're not waiting all the way until 2028. There will be a step down, $800 million down to a smaller number in '27 and probably below $400 million when you get to 2028. So -- and then you'll say, well, how do you reduce it so much? Well, the current spend in the current year estimated to integrate the credit issuer business is roughly $250 million. By the time you get to 2028, it's probably below $50 million, right? So $200 million alone comes from life cycle through the M&A.

And then right now and somewhat into 2027, we're at a very high level of onetime transformation on the base business. A lot of it is severance costs and a lot of it is coming from AI. Like the -- this is one thing we hadn't contemplated at Investor Day, the level of opportunity coming from really embracing AI and driving it across the company in terms of headcount efficiency. And you can see it play out in 2 ways. We do have fairly high onetime expense because it's severance driven. But then again, the margins are higher than the expectations we set at Investor Day. The game has changed a bit in terms of the composition of how we get the margins.

So are you seeing material headcount reductions because of AI? Or is it just enabling you to kind of flatline your employee base while you continue to grow revenue?

Yes. The 10-K is out there. We had 51,000 people at the end of '24. At the end of '25, we had 44,000, 7,000 reduction up 12%, 13%.

Right. And obviously that's before you closed TSYS...

I'm not saying that -- it's not a projection. What I'm saying is there are multiple actions we took in that. You should assume a large piece came out of AI. We were very advanced in engineering on driving GitHub in the engineering group. Did headcount come down? Yes. Is our engineering function smaller than it was 12 months ago? Yes. And will there continue to be productivity and efficiency going forward? The answer is yes. But across every function. We have 20,000 people in the client office. That's a lot of people managing the interface with our customers. It doesn't need to be that large.

All right. Well, we are out of time. This was great. Always appreciate the discussion. Thank you for being here.

Thank you, Jason. Thanks a lot.

Thank you.

All right. Guys, thank you again for being with us this afternoon at day 1 of the Wolfe Fintech Forum. Really happy to have everyone here. FIS is a name we've been spending quite a lot of time on over the last few years and recommending the name as we see quite a bit of opportunity for a pretty low valuation, but opportunity across the banking technology area that we think is very resilient. And when you couple that now with the deal they've done and the opportunities there, we're pretty constructive and excited to have them here with us.

So Stephanie and James, thank you both. We have the CEO and CFO with us. So guys, thank you so much for joining us.

Thanks for having us.

Just maybe, Stephanie, starting with you. I mean, looking back at the year, it was an incredibly transformative year for the company. If we think about the accomplishments over the last 12 years, what do you see as the most material changes and accomplishments in terms of positioning for the company and where you want it to be for the future?

Yes. I think there's 2 things that are fundamental. One is bringing operational and commercial excellence back into the company. I think we ended 2025 proving that very clearly that our ability to sell the right products to the right clients at the right time, which brought back banking revenue above our expectations from an investor growth standpoint, and you saw -- you're seeing us guide that in 2026. I think we surprised the market on that. That was through pure operational focus, muscle and hustle in terms of new sales as well as client retention.

I think also operational excellence, if you look at the cost programs that we drove in 2025 and continue to drive in 2026, which is now part of the culture and the DNA of FIS, both of those together have accreted higher revenue, accreted higher margins and driven operational and commercial excellence. So that was within our kind of control and what we plan to do as we set out at Investor Day, and I'm really pleased with where we are.

I think at the same time, we drove a very strategic set of transformative acquisitions and divestitures. So selling the Worldpay stake and ultimately being singularly focused on financial services at a generational moment, we should come back on that. Separating and being focused on financial institutions, financial services, everything with respect to products, innovation, commercial, et cetera. We're not confused on who we are. We don't serve a diverse set of end customers, and we're singularly focused. And at the same time, after the separation, trading it out for the best-in-class credit card processing business in the world, especially given that we serve the largest of financial institutions, both here in North America and around the world.

And the thing, if you remember, when I started out at Investor Day, I said it's going to be critical for us to drive commercial and operational excellence, and we have to drive it in the places where banks are growing and have tech spend desires, digital payments and lending. And so everything we've been doing, including this big transformative deal by buying the total issuing business has been trying to lay product and innovation and in that space specifically in payments. Really tough to grow in payments in large financial institutions if you're not in the credit card business.

So you think about that strategic transaction at the same time, James will somewhat cover the cash flow generation of those transformation -- transformative initiatives. And I just feel like we are better positioned today coming into 2026 than we've ever been positioned in terms of just being able to better execute as well as strategically where we sit. And then we have this generational moment in front of us.

When I think about the generational moment in front of you, I mean, you have a pretty real vision for change and opportunity ahead of you. I mean just expand on that a little more and what you see the company looking like even in a couple of years into mix and profile.

Yes. So financial services is in a generational moment around the globe. So yes, you will hear on TV that there's bubbles here and bubbles there, of course, and there's geopolitical conflict. Banks are in a growth on agenda. If you're a small bank to a large bank, you are now allowed to grow again. Your regulatory oversight, cost, et cetera, has been rolled back. Your ability to grow organically or inorganically is back. You can buy somebody. You can sell something, you can sell yourself. This is very, very important because this is a growth on agenda and is going -- is helping banking grow and also economies grow.

At the same time, banks are being allowed and in fact, encouraged to take on very innovative financial technologies inside their ecosystem. They can allow and enable crypto. They can allow and enable tokenized deposits. They are able to financially innovate. Now that is good and bad for all of us, and they're doing that inside the regulatory regime of each of the countries we operate in. That is a growth on agenda for financial services. I have not seen that since pre-global financial crisis.

At the same time, there is a tectonic shift in technology with AI. I have never seen banks adopt a technology as fast as they are adopting AI. For the most part, they are slow followers, and they will be very clear to tell you we will slow follow, not this time. They are using AI inside of their companies to drive down costs. It is a technology that they are actively using to take down operational costs inside the banks to either permanently change their ROE, ROI, et cetera, and their ultimate profitability metrics or to enable them to drive the growth on agenda I just talked about. That is happening right now. And so I couldn't be more excited because we are sitting exactly at the right time at the right place, serving the right end market that is generational growth with the right set of products and with AI, in my opinion, as a strategic accelerant.

So how do I think about the next couple of years? The growth on agenda is ours to take. And so now how do we -- you've seen us guide into 2026. I think people were pretty surprised at how good we feel about the momentum. I'm not -- that was operational commercial excellence. What is going to really fill our sales and think about how do we go from here is how do we lean into this generational moment in this strategic accelerant. It's not just about core, right? So people aren't talking -- they're not taking down AI costs and say, "Hey, let's go change our core. That's not what they're doing." I know everyone is kind of obsessed in this world about cores. We can talk about cores all the way like how has come home.

But when I'm talking to you, I'm talking about -- banks are talking about how do I grow my payments franchise? How do I get more deposits? I need more digital capabilities. How do I do commercial lending? I need money movement capabilities. I need sophisticated money movement capabilities. If I'm going to do money movement, I need fraud capabilities. I need digital account opening. Those are the conversations we're having with banks. Those are the conversations. So that's why I'm so excited because if you think about what we've been doing in addition to those things is really our buy-build partner strategy is around do we have the right digital capabilities? We bought Amount. Since we bought Amount, we've sold -- remind me.

25.

25 new bank -- 25 new bank customers. By the way, banks buy things very slowly since we closed it in July. We bought a credit card processing business very material. We've strategically partnered with several companies that help us follow out the core new product and pricing. It's been very deliberate. What we've been doing is very deliberate. It is game on. It is focused where banks are trying to grow. Sorry, I'm very passionate about that.

No, that was great. I mean when we think about banks taking on so much tech and growth and especially AI, it does bring a question to investors, right? I mean, are you sure that you guys are positioned to actually be a help for them? Are they going to do more on their own or take others? I mean how do you think about that?

So it's a great question. And I'm not going to stand in front of you and say there's nothing that could ever be disrupted in the FIS ecosystem. That would be crazy. But the way to think about it right now is -- majority of what FIS does is core systems of record. These are not predictive things. These are actual things. They are transaction ledgers. They hold how many deposits you have. They hold how many trades you did. Every single system has deep regulatory requirements, regulatory reporting, integrated into payment ecosystems. They by themselves individually, could you pick off and make AI-enabled? You might. But source systems of record fundamentally hold all of the data that make AI so valuable.

So when you talk to banks about how they're using AI, they're talking about Stephanie, how do we take the data out of your systems and it's not just a deposit system, a deposit system, a payment system, check system, fraud system, how do we pull that together and then start building AI capabilities or you help us build AI capabilities to get after all the people that we have around know your customer, know your KYC, KYB, CDD, SARs reporting. The amount of cost that banks have around compliance and how to comply as a bank with all the regulation is significant. The majority of that comes off of our core systems.

And so it ranges in terms of why we think it's a strategic accelerant. If you're a really large financial institution, and I'm starting to talk to you about, okay, could we build an agent together around suspicious activity reporting, very large banks start to get very excited about that. If you -- and I talked about this in our earnings call, if you're a regional bank and you have already entered into a POC with me where I have your core banking data and I have your credit card data, we're putting that together and building a model for you to help you identify the best customer you can offer an increased credit line to for your commercial and consumer card, that's revenue generating. If you're down in my smaller banks and you're saying to me, "Hey, look, I really need you to help me figure out, I use your core system. I open an account 5 times, and then I ultimately route it around the bank for either workflow or for regulatory purposes, I need to take those costs out. Can you help me figure out inside your ecosystem and enable your core systems to help me take those costs out?"

So it depends -- I view it as a strategic accelerant. Now if we don't get after it, do I think there's other people that will come in and do it? Absolutely. Do I think there's plenty of room to play? I do. You're always going to need fundamentally, though, a multiple sources of data, and it's not just one system. And so that's why I think it's such a big opportunity for us.

Yes. I think the underappreciation in the market is pretty notable when it comes to the KYC, when it comes to the compliance and the regulatory that your software, your work is actually requires. Relative to other stocks we cover, I think the AI as a risk theme should be -- you guys should be looking as a safe moment. In fact, it could be an opportunity more than a risk.

On that note, I mean, when we think about the business now putting up even more barriers to entry and buying an issuer, you really have a full stack now for the large banks, right? And so help us understand what you look like now when you're talking to a customer pro forma for this issuing business combined. Is the conversation changed? Is it helping with more cross-sell? Just talk about the differentiation of the market now.

Yes. We've had a -- we generally serve larger financial institutions. We have great customers that are small as well. But if you think about $20 billion in up banks, this is where we've historically had a very big strength. We've served them from a core standpoint. We've served them from a debit card processing standpoint and a network standpoint. We do their trading and asset processing. We do their commercial lending. This is all running their systems and software.

The place that we haven't historically played is in credit card processing. So now we -- it is a very specific complementary product that's inside the suite of products. So we were already very important and valuable partners to these large financial institutions with a broad suite of products and credit card kind of comes in, lays in. So it's a perfect complementary product for us. And then each customer is a little bit different. So if you think about the total issuing customers, they generally serve the largest credit card issuers in North America. And then they have a very active set of credit card customers they're selling outside the U.S. And I would take those 2 separately.

The large financial institution, the top 30, you can think of them as -- you could roll them off your -- probably off the top of your head right now. Each one of them we're talking to very specifically, what are they trying to accomplish? Are they focused on growth? Are they focused on driving a digital economy? Where are they thinking about driving their credit card? Are they trying to put a front end on commercial card capabilities? Are you trying to be an M&A bank? How do you want to grow your M&A? Is credit card a priority? So each one is different.

The great news about this business is it's large, it's scaled. It's revenue generating for the bank, which is different for us than typically core banking or trading and processing where we're talking to the back office parts of the bank, which is fantastic. I will tell you, every single one of the banks, and we know them well, has been very happy to see us ultimately -- they view us as the rightful owner versus a global payments, merchant acquiring focused, and we have great relationships. So we'll continue to work with them and figure out how we can help them grow.

And I guess while we're on the topic, I mean, the cross-sell opportunity, it should be very real just based on you already providing debit issuer processing and core. And so just remind us of that potential on the horizon as well.

Yes. I'm going to have James remember what we laid out in our Investor Day in terms of what the white space looks like in cross-sell. But we really didn't play in credit card processing at all. And so we have a very strong debit card processing business in the large financial institution space and historically had a merchant acquiring business. So when TSYS would go, for example, to a large bank and try to sell credit card processing by itself or we showed up and we had the core and the debit, there was always competitors that could be more competitive with us with the bundle. And so we think we're more valuable there. And we also remember, have not just the credit and debit in the core, but also the trading and processing. So we think there's a lot of cross-sell opportunity.

The reason why we took the revenue synergies and said we think it will take a couple of years is these are really large financial institutions. I will tell you the low-hanging fruit on revenue synergies, I think, for us is total issuing has a product called Prime, that is very significantly growing in revenue in their book, and it's sold internationally. It's been underpenetrated because they didn't have the amount of salespeople they needed. So we're, in fact, putting -- we've added Prime to our international sales team's books, and then we're adding sales specialists. And we think there's a huge international opportunity because we have -- just have a distribution focused on financial services.

I don't know if there's anything you want to add around how to think about the size and scale.

Yes. And I think we're sitting pretty comfortably when you talk about cross-sell, a lot of it will also be cross-sell into TSYS customers of our basic Payments business. And Payments was the highlight of last year when it came to ACV growth on recurring. It went up by the guts of 50%. So we got massive momentum across our Payments business. And just to get back to Prime, it's growing at 15%. The sky is the limit on this. The actual pipeline...

What's the Prime, just explain that.

It's the international credit card processing system. It's the one that's used outside the States, and we're concentrating our entire business on that asset outside the U.S. and us competing strongly in the market.

That's great. That's great. Stephanie, now that Worldpay is no longer part of the company, I mean, does it change your ability to focus on the end market differently? Does it change anything else about the business in terms of investment?

It just -- absolutely. First of all, the -- as we've talked about, the total issuance transaction drives a ton of cash flow. We're able to trade out the Worldpay asset that didn't have cash flow. And we were very focused on driving significant amount of cash flow. But from a strategic standpoint, it makes it so much easier because we are focused on financial services. We know who our client base is. When we're talking about driving product and innovation, it's for financial services.

We don't have to split across a combination of corporate customers with merchants and SMBs, and we are focused on financial services. And it just makes it easier. And the dollar that we put into an investment can get pushed -- the product can be pushed across an entire distribution. It's just -- it's a much more simplified and easier portfolio to run than having the multi capabilities.

Okay. James, maybe we talk about guidance for a moment. I mean you came out with pretty strong guidance for the year ahead, both on the top line and margins and free cash for that matter. So maybe just touch on the building blocks there for a moment. If you could remind everybody here what your guide is and your confidence level around it.

Yes, I'll run through them. The total revenue FIS is -- the midpoint is about 5.4%. If you go 2 years back to Investor Day, midpoint was 5 points. So the total ship is performing ahead. And it's led by banking. We guided to 5%, 5.5%, which is well ahead of the Investor Day guide. And the organic growth on the Banking business is accelerating in '26 compared to 2025. So all systems go. Capital Markets, we guided 5.5% to 6.5%. I think the standout in Capital Markets will be faster growth on recurring, and we are deemphasizing nonrecurring because you asked what's the negative in there? The only negative in revenue is a deemphasizing of nonrecurring, and that's a deliberate strategic move to pivot the business even quicker to recurring.

You get down to margins. The expectation in the market was 60 bps. At Investor Day, I think we said 60 to 80 midterm. This is a solid 100 bps. Including them the only negative is TSA is a drag of 40 bps. So the core margins are actually up 140 bps. Cost programs, 80 bps, 70% identified going into the year. And then you've got the big change for us and the hyper focus in all of '25, and you'll see the results is improved leverage in operating mix and product mix, that's 60 bps. That's coming out of last year where we sold -- we were exiting with 20% recurring growth. It's not just the 20% recurring growth in ACV. It's the quality of the products we sold, a high concentration in digital payments and lending. And they, on average, have a margin probably 10 basis points -- sorry, 1,000 basis points higher than the company average. So that's driving favorable mix, all coming from the strength in commercial excellence in 2025.

And then finally, on cash flow, we're just going to throw off cash flow. It's a 30% increase at the midpoint from $1.6 billion to $2.1 billion. And we were quite explicit that the game doesn't stop there. We will add another $1 billion of cash flow over the following 2 years to get north of $3 billion. So we're really -- we -- I get really excited about the cash one because she gets excited about the customer and product. But like really, we are driving all levers on cash, and we're not -- it's an ambitious goal for 2026 to grow 30%. And it does demonstrate it's growing 3x the level of EPS growth. It's quality growth.

And sitting where we are year-to-date, March, it's almost -- most of the way through the first quarter, you still feel pretty good about everything you laid out?

Yes. We're feeling even more positive, all systems go, no surprises in the first 2 months of the year.

And when we think about the drivers, and Stephanie, maybe just thinking about what's underneath the surface for Banking being the sound and accelerating organically, what are the key aspects of that? What are the key drivers?

Payments, digital, core, -- we drove -- I mean, it's literally straight in line with the strategy. You need to sell and retain high levels of payments inside your existing customer base and new customer base. That's been gone exceptionally well with our existing core business, sell digital to our existing customer base, don't let any other digital come off of our base, have done really well there. Lending as well. Think about account origination, which we just acquired, cross-selling that into the base. So really, really important to think about the size and scale we serve customers up and down the market. It's interesting. I just saw a note that we don't sell -- we don't care about customers below $10 billion. That's completely false. That's not true at all. We've not receded from that marketplace at all. In fact, we had more core wins there in '25 than we had in '24, totally false.

But what I would say is if you really think about what -- where we are in the marketplace, the reason why we're so excited, and we highlighted this in our last quarter call, the amount of M&A consolidation that's coming our way, and we put that on the piece of paper, Synovus, Pinnacle, who are picking us because we are the bigger -- we are with the acquirer of the bigger bank and need to come to our platforms, in particular, core and payments because they serve larger financial institutions. If you are a bank that's organically growing, whether you're small or getting medium-sized or large, you ultimately will need to serve commercial banking customers. If you need to serve commercial banking customers, we, by far and away, are the best in the industry. That's where we win. If you're a growing bank organically and inorganically.

And so our core is the workhorse of the industry. That's where we win every single time. And you have to also have very sophisticated payments and money movement capabilities and a digital capability, which is Draganfly that we bought in there. So we are serving up and down the stack. We win in the place where you ultimately are growing into a place organically, organic and inorganically. And that is what's driving ultimately our sales wins as well as well as our success into 2026. It's not just about how many cores can we flip.

Right. That makes sense. James, just on margins, I just want to ask, I mean, last year, overall financials were strong, but fourth quarter margins were a little below what we had expected. And so -- despite that, you guided to, like you said, a better-than-expected year on margins when you came into this -- when you reported last quarter. Help us understand the confidence around that margin expansion, 100 basis points now.

It's super high. We got 70% of the cost savings in the income statement in 2026 were programs announced or contracts signed prior to the end of last year. So that's high levels of visibility. And then secondly, on the mix was the second biggest driver, 60 basis points. Most of the ACV, new sales ACV that gets converted comes from '25 or 2024. So it's stuff already done. The conversion of ACV sold in '26 is minor, 10% of the total number. So again, it's the magnitude of the visibility. And then it's a little bit the absence of headwinds as well.

So we struggled during the course of 2025. We didn't -- we should have, with the benefit of hindsight, told the market, our guide on margins doesn't include dilutive M&A that we haven't yet done. And we did a bunch of M&A in 2025 that were dilutive to the margins. And at the same time, we were hit by currencies. What happens in '26? There's no new acquisitions. They're all in the guide. So that -- call it, that call it, slippage that we got in '25 won't repeat.

The other thing is I've made sure this year, we planned conservatively on currency rates. We will not be coming out quarter-on-quarter saying, oh, we have a problem on currency. We have a plan that's laid out almost every quarter is increasing by a similar amount on margins. All both of the segments will increase margins each quarter. So there's going to be no outliers here. This is a firm with high levels of visibility.

That's great. Stephanie, usually, you guys have been acquisitive for a number of years. You've obviously now done a very large transformative acquisition and divestiture. But when we think about going forward, you're probably going to partner more or organically build more. So just help us understand what areas you want to do that in? Is it more of a partner or organic build mode? And what do you see out there that's on the horizon for the year end?

Yes. So we are absolutely focused on paying down our debt. We've made that commitment, which we should have paid down by the end of 2027. So we have a very clear buy-build partner strategy. So build what is fundamentally we are best-in-class in, for example, core and integrations ultimately, partner where we think there's opportunities where we see people in the ecosystem doing things that we ultimately can't do or have gotten to market faster than we have, potentially buy them. And then buy where we think we can't build it fast enough to be in market. We're in a lot of markets, and we're in big spaces, and we need to make sure that we stay competitive.

It's -- since we restarted the strategy post the Worldpay separation, it is very important and strategic for us to be able to do that, and it is working very significantly. When you think about set TSYS aside, which was big and transformative, our success around buying Dragonfly and how many digital sales we've had into our existing base as well as into people's other cores with that has been significant. We bought a commercial lending capability that has gone extremely well for us inside the Capital Markets business and really enhance their ability. Again, all of these go into our global distribution that's already in place. We put them in their bags, and we put them on our platform, drive cost synergies and accrete more revenue and then ultimately bring them up to company margins. It's a little bit of bringing the old school playbook back from kind of fintech of yesteryear. But this is exactly how we think about it.

You'll see us continue to place out. It's working very, very well and then come out with our digital account open capabilities. We're also getting some pretty significant talent as we do this and those leaders are kind of taking over leadership roles for us of these very significant products. So it's not just a strategy of buying the product consolidating and then getting rid of the teams. We have the CEOs of these still in the organizations taking on lead roles for us in being product leaders and being strategic leaders for us. So it's not just a buy the product. We're also getting a very significant leadership team for us.

That's helpful. I'm going to ask a couple of more quick ones, and then we'll take 1 or 2 from the audience. But just, James, quickly on free cash flow just because it's been a hot topic for you guys and a big focus also. You're targeting over $3 billion of free cash by '28, a pretty notable move from where we are today. And so just thinking about the step function of getting there, and also the adjustments and making sure, I mean, you guys were -- I thought we appreciated you going more towards a GAAP free cash. I think the market also appreciates that, but help us understand the bridge.

Yes. And it's not a long-term story. So we're going -- our free cash flow last year, GAAP was $1.6 billion, projected this year at $2.1 billion, 30% increase. And then we're going to add another $1 billion over the following 2 years. It's really simple math. There's ongoing capital efficiency. So we'll reduce our capital ratio from maybe 9.3% last year, closer to 8%. These are the minor numbers. The 2 big numbers are EBITDA growth, and you can work these out. And the other one is a significant reduction in transformation costs and integration costs.

So currently, in 2026, our estimate is $800 million of onetime transformation and integration, of which thesis integration is $250 million. That $250 million, we won't be spending in '28. The core onetime costs are about $550 million. They will go down a significant amount as well. So if you think about adding $1 billion of cash, roughly half will come from EBITDA net of taxes and the other half will come from a significant reduction in onetime expense. I don't want to say it's in the bag, but it's [indiscernible].

At least there's building block there. Stephanie, end of the year 2026, what would you want to see to call the year a success?

Hit every number every time, deliver everything. I would say really, at the end of 2026, we should have a really good feel for 2 things. One is, again, feeling really good about our revenue synergies around total issuing and seeing some of those really come into the P&L in '26, but most importantly, looking at that run rate in '27. We're focused on that every day, all day.

I think the second thing is really getting after data and AI and leaning into what does it look like for us because it's not in any of our models, and we're getting a lot of demand out of our client base for it. So figuring out what those products look like and how they get consumed and can they provide upside as we think about '27 and '28.

Great. Guys, I think we have time for maybe one question if anyone has.

First of all, congratulations on everything. How is your partnership with Circle going? And do you expect that as tokenization starts to evolve for doing experiment to real? Do you expect to add that to your stack?

Circle is -- so we have a product called Money Movement Hub. And Money Movement Hub is actually one of the things we've developed organically that is also selling significantly quickly throughout our entire -- the banking base. Circle is integrated to Money Movement Hub. So whether you want to do real-time payments via ACH or go across, we view Circle as another payment platform effectively. So we've integrated that into the Money Movement Hub, so it's there. TBD on the use cases as people -- so what most banks tell us is we need to have all of these capabilities for our commercial customers. We don't yet see huge amounts of use cases for them. But it's a little bit we have to have it in order to compete, especially if you're a growing bank into the commercial banking customer set, you have to have the full suite. The partnership is going great. We haven't seen a huge amount of demand, like I said. But for us, it's about making sure we have the enablement capabilities.

I think the digital tokenized deposits and all of that stuff is a huge amount of topics within financial institutions. And for us, it's about we need to make sure that we have the software and are in place at the time that they want to put it in place. That's why I'm so bullish around what's happening in financial services. I've never had banks talking about so many different things at the same time that all need to be enabled with technology. And so I know, like I said, I started, everyone is worried about AI disruption. I see it as an accelerant. This isn't where banks are really looking to disrupt themselves or bring technology in-house. And then also everyone is obsessed in core land here. Banks are really focused on how to grow their franchise, not about flipping their core.

Guys, I think we're out of time. I want to thank the team from FIS. Stephanie, James, thank you very much for being with us.

Thank you. Thank you.

Good day, and thank you for standing by. Welcome to the FIS Fourth Quarter 2025 Earnings Call.

[Operator Instructions]

Please be advised that today's conference is being recorded.

[Operator Instructions]

I would now like to hand the conference over to your speaker today, George Mihalos, Head of Investor Relations

Good morning, everyone. Thank you for joining us today for the FIS Fourth Quarter 2025 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. Joining me on the call this morning are CEO and President, Stephanie Ferris; and James Kehoe, our CFO. Stephanie will begin the call with a strategic and operational update, followed by James, who will review our financial results.

Turning to Slide 3. 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. Also throughout this conference 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 presented in our earnings release. And with that, I'll turn it over to Stephanie.

Good morning, and thank you, George. I'm excited to share our results today. But before I do, let me start off by saying how thankful and incredibly proud I am of the teams at FIS. The last 12 months has been full of change and complexity. But through it all, our team has stayed focused on our customers, on executing against our strategy and delivering on our expected outcomes. We didn't let the noise become a distraction and that's exactly what you'll see here today.

As we move into 2026, market transformation persists and the technology changes continue to accelerate. But when I look at how the businesses are positioned, the innovation that we're bringing to market and the strength of our client relationships alongside their growing demand for technology. I've never been more confident in the growth prospect of the financial services industry or of FIS' ability to grow with it. I'm extremely excited by the opportunities that lie ahead of us. Now let me walk you through why. We delivered very strong results in 2025. First, we met or exceeded our key financial commitments for the year, positioning us for an even stronger 2026. Second, we are executing on our strategy to transform and simplify our portfolio by fully divesting our merchant focused business, and acquiring the market leader in credit issuing strengthening our position in the large financial institution space. And third, we are positioning our business to double our cash flow in 3 years to over $3 billion.

Now let's move to Slide 4. We delivered on the key strategic pillars we set out to achieve. Adjusted revenue grew 5.8%, exceeding our outlook. EBITDA came in at the high end of expectations. Adjusted EPS grew over 10% to $5.75, and we generated robust free cash flow, enabling us to return $1.3 billion to shareholders through buybacks. These results reflect a business delivering on the commitments we made when we began our transformation journey. But the story isn't just about strong execution. It's about what these results enable us to do at this moment when financial services is positioned to grow. Turning to Slide 5. We are witnessing a generational moment reshaping financial services, and FIS is in the best position to capitalize on it. Three powerful forces are converging simultaneously.

First, the banking industry is experiencing exceptional strength. Banks have excess capital, stable credit and strong operating performance, emboldening them to pursue aggressive growth agendas. Second, banks are executing on those agendas now. We've seen approximately $50 billion in announced M&A in 2025, and analysts project financial services tech spending will increase roughly 30% by 2029. Third, emerging technology, particularly AI is moving from experimental to mainstream at unprecedented speed. AI adoption is accelerating to 8x 2023 levels and banks recognize AI isn't a future opportunity. It's a competitive imperative today. Here's what makes this moment so compelling for FIS. No technology provider is better positioned to capitalize on this convergence. We have 3 important advantages: proprietary data sets spanning the entire money life cycle, long-standing, deeply embedded relationships with institutions built on trust and a highly specialized regulatory and compliance infrastructure that took decades to build and cannot be replicated quickly.

We believe these advantages translate to a significant opportunity for FIS to deliver differentiated AI solutions, which challengers without comparable data, scale, operational integration, trust or relationship cannot replicate. I'm going to discuss more around our AI moat in a few slides. Moving to Slide 6. Unlike some peers, our focus isn't about serving the most banks. Our strategy is partnering with banks that are growing faster than the market, both organically and through consolidation. Our strategy is to grow side-by-side with them in areas where they're spending, payments, digital and lending. These LFIs represent a particularly attractive segment, accounting for a disproportionate percentage of industry revenue, account and payment transaction growth. Over the past 10 years, the number of LFI has grown by 56% and those banks continue to increase their spend on technology with tech spending increasing 11% of their revenue today.

As a reminder, this is exactly where FIS shines, working with growing banks, looking to take advantage of technology to continue to grow their franchises. In 2025, bank M&A increased approximately 30% compared to the prior year. With over 170 deals announced, including a number of mega deals, creating super regional banks with expanded geographic footprints. FIS was on the winning side of most transactions, including the ones listed on this slide. In fact, one large bank CEO called out FIS as the most scalable platform to help them consolidate acquisitions and grow their business. This is why our strategy is focused on helping these banks modernize and grow, and why our investments and innovations are focused on the places where these banks are spending money. Now turning to Slide 7. Our Issuer Solutions acquisition positions FIS to lead across every major industry theme shaping banking and payments today. Demonstrating the value of our combined data assets, we've already established a modern product road map announcing a new product on the first day after the close of our acquisition. This includes the industry's first AI transaction platform supporting Agentic Commerce, enabling AI agents to make, negotiate and pay for purchases using preapproved payment methods, keeping banks central to those flows.

Additionally, total issuing solutions rolled out 12 new modernized offerings in 2025 and including enhanced loyalty solutions and originations preapproval and decisioning capabilities. Client validation is equally compelling. With this acquisition, we have expanded our relationship with 14 of the top 25 U.S. LFI across our banking and capital markets businesses. Over the last 12 months, we have renewed or extended relationships accounting for approximately 30% of total issuing revenue and have no large renewals pending in 2026. That renewal momentum tells you something important. The largest, most sophisticated banks in the country are choosing to deepen their commitment to FIS. We're confident in achieving our revenue and expense synergy targets of $45 million and $125 million in 3 years, respectively as we laid out in April of 2025. The integration is tracking well, and the combined platform positions us to meet evolving market needs from real-time payments and digital currency to AI-powered fraud and risk management. All of this gives us confidence in the value creation ahead.

Turning to Slide 8. Now let's talk a bit more about the value I just discussed. With the completion of this transaction, we exclusively serve the financial services industry and operate the most comprehensive data platform and financial technology. With over 1 billion accounts on file, driving approximately 73 billion transactions annually. We can now see money at rest in core banking deposits, money and motion across all payment rails and money at work in lending and investing. In a world where data is essential for AI-enabled insights, this integrated visibility is highly differentiating. Demonstrating the power of this combined data even before the transaction closed, we started working with a large regional bank to grow their credit card portfolio, combining core data from FIS and credit transaction data from total issuing solutions, together into a model, enabling the bank to increase their consumers' credit limit, ultimately resulting in higher consumer spend and transaction income to the bank.

Our product set is wide and deep, creating valuable systems of record. And here's why that matters. A recent Forbes article explained that AI agents make systems a record more valuable because these core systems provide the accurate authoritative data AI needs to function effectively. FIS operates mission-critical systems of record, defined by deep integration into regulated workflows, decades of accumulated proprietary data and enterprise-grade governance, security and auditability. These characteristics cannot be easily replicated by stand-alone AI tools or horizontal platforms and financial institutions continue to prioritize reliability, accountability and compliance, areas where incumbency and trust matters most. That scale, that trust, that operational integration are durable differentiating advantages.

Turning to Slide 9. Our commercial muscle is flexing across the entire enterprise. In Q4, we grew recurring ACV sales 20% year-over-year, clearly demonstrating enterprise-wide commercial excellence. I will detail these on the next slide. Another example of our strategy in action, our build by partner approach. It's driving innovation and accelerating new product development. Beyond our agenetic commerce solution I discussed earlier. We built and rolled out next-gen cloud-based solutions like Money Movement Hub with over 100 customers signed up since our launch in 2025. Other recent launches include smart basket, a real-time AI-powered solution that analyzes shopping behavior to automatically apply optimal payment methods, personalized rewards and targeted promotions at checkout. And our acquisition of Amount is offering clients a modern digital account opening solution that helps banks grow across deposits and lending.

We've won 22 new deals since acquiring this capability late last year. More recently, our acquisition of Da and Capital Markets puts us at the forefront of computational law and regulation. Leveraging DWA's AI capabilities, the acquisition strengthens our competitive position across the buy and sell-side compliance space, empowering our clients to make millions of accurate regulatory decisions across global jurisdictions. The common thread, modern, cloud-based and AI enabled. No one else sees money across its entire life cycle, and that data advantage is now our strategic engine. We faced our investment in data and AI transformation, unifying our data stack, deploying agents that drive real client outcomes and building domain-specific AI capabilities. The result is differentiated value for clients on the things that matter most: fraud prevention, deposit lending growth and operational efficiency.

Our data mode gets stronger every day given our infrastructure powers critical and complex workflows for our clients at scale. AI is a strategic accelerant for FIS with adoption unfolding inside existing platforms. Augmenting software to improve automation, decisioning and productivity rather than replacing core systems. This dynamic favors data-rich platform owners like FIS. Moving to Slide 10. We saw strong recurring ACV growth across all segments in Q4, with banking solutions up 13% and Capital Market Solutions up 34% year-over-year. Our high-growth solutions delivered very strong full year results. Digital Solutions grew recurring sales ACV 123%, payments grew 70% and lending grew 62%. These are leading indicators of where the enterprise is heading as we drive improved product and revenue mix. This is our strategy in action, what we highlighted at Investor Day, driving significant increases in highly recurring revenue. And all of this is driving significantly improved and higher quality revenue and margin mix as we head into 2026.

Turning to Slide 11. So let me bring this together. We are executing our differentiated strategy from a position of strength. We delivered strong results in 2025, and our commercial and operational excellence momentum gives us confidence heading into 2026. Our innovation strategy is working. Our focus and targeted investments in high-growth vectors such as payments, digital and lending are resonating in the market with strong recurring ACV growth. And we continue to drive innovation across the enterprise, leveraging emerging technology, including AI to accelerate new product development.

We are uniquely positioned for this moment in a fast-growing financial services sector, we are in the right markets at the right time with the right solutions. We are at the center of an important inflection point in our industry, and we're uniquely positioned to capitalize on it. With that, let me turn it over to James to discuss our financial results and outlook in more detail.

Thank you, Stephanie, and good morning. As you just heard, we are entering 2026 with positive momentum both operationally and strategically. We are seeing clear results across commercial excellence, operating efficiency and cash generation. Strategically, the acquisition of the total issuing solutions enhances our financial profile by reinforcing our durable recurring revenue growth and delivering strong free cash flow. All of this positions us to deliver strong growth across revenue, margins and free cash flow.

Moving to our financial results on Slide 13. The Fourth quarter revenue growth accelerated to 7.4%, led by strong recurring revenue growth and another quarter of outperformance from banking. EBITDA grew 7.3% in the quarter. As expected, we delivered good margin expansion across both operating segments. But the segment gains were offset by corporate expenses where we were lapping an exceptionally low prior year period. Adjusted EPS increased 20% in the quarter, led by both EBITDA growth and below-the-line favorability. Full year revenue grew 5.8% to $10.7 billion, and EBITDA grew 4.7% with margins contracting 28 basis points. A rising contribution from cost saving programs almost entirely offset a 45 basis point dilutive impact from acquisitions, and a 70 basis point headwind from declining TSA income. Absent these 2 factors, underlying margins would have increased by approximately 90 basis points. EPS increased 10.2% for the year well within our midterm guide.

Free cash flow was a strength for us, outpacing EPS growth and growing 19% to $1.6 billion. Capital expenditures came in at 9.3% of revenue, in line with our expectations, and cash conversion finished strongly and ahead of expectations at 88%. We returned $2.1 billion to shareholders, exceeding our capital allocation commitments and our Board of Directors recently increased the annual dividend by 10%, underscoring their confidence in the durability of our business. Turning now to our fourth quarter segment results on Slide 14. Adjusted revenue growth was 7.4% with recurring revenue growing faster at 7.8%. Once again, banking exceeded our expectations revenue growth was 8.3%, well above the high end of our implied outlook led by recurring revenue growth of 8.8% with strength in digital and payments and higher output solutions than we anticipated. M&A contributed 130 basis points. And as a reminder, Revenue growth also benefited from an easier year-on-year comparison of around 190 basis points.

Nonrecurring revenue increased 28%, including a 16-point benefit from an easier prior year comp and professional services declined 16% and as we continue to prioritize recurring revenue sales activity. Banking EBITDA margin expanded 132 basis points, including a rising contribution from cost management, favorable product mix and an easier comparison. Turning now to capital markets. Adjusted revenue growth of 5.6% came in largely in line with our expectations, with recurring revenue growth of 5.3%. Nonrecurring revenue increased 13.7%, reflecting strength in license sales, whereas professional services declined 6.9% as we continue to focus on recurring sales. Capital Markets EBITDA margin expanded by more than 200 basis points, reflecting continued cost optimization, operating leverage and favorable revenue mix.

Moving now to Slide 15 for a quick overview of our full year results. Full year revenue was consistent and resilient across both banking and capital markets. Banking adjusted revenue grew 5.6%, led by strong 6% growth in recurring revenue. Capital Markets posted adjusted revenue growth of 6.3% including recurring revenue growth of 5.8%. Turning now to Slide 16 to discuss our expectations for 2026. The recently acquired total issuing solutions business will be included in our Banking Solutions segment, and we have provided a full set of historical pro forma financials in the appendix Additionally, we will be reporting 2 divisions within banking solutions, payments and banking. And we have included a summary of the platforms that make up each division on Slide 26.

To further align our business with our strategic vision, we have also transitioned certain businesses across our operating segments or into the Corporate and Other segment. For example, we have moved our automated finance business from banking to capital markets to better align with our office of the CFO strategy. Overall, these changes had an immaterial impact on our historical segment growth rates. Our 2026 outlook will be presented on an adjusted basis which includes 8 days of oral pay EMI plus total issuing solutions from the date of acquisition. However, we are providing growth metrics on both an adjusted and pro forma basis. Please note, post the close of the acquisition, we have reclassified certain non-GAAP expenses to operational expenses, and refined our revenue and EBITDA expectations to account for some minor perimeter changes. As compared to our original assumptions at the time of announcement, this will reduce pretax earnings by $40 million and adjusted EPS by $0.07, and this is accounted for in our 2026 outlook.

We have provided a full reconciliation on Page 29. For the first time, we will be providing an outlook for free cash flow, reflecting cash flow from operations less capital expenditures and adjusted only for cash taxes on the Worldpay sale which will be payable in 2026 and won't repeat in 2027 and beyond. With that, let's review our full year outlook on Slide 17. On an adjusted basis, Revenue is projected to grow 30% to 31% with EBITDA growing 34% to 35%. EBITDA margins are projected to increase 155 to 175 basis points with 62 basis points coming from the addition of total issuing solutions to the pro forma base. On a pro forma basis, revenue is anticipated to grow 5.1% to 5.7%, compared to 4.5% to 5.5% at Investor Day. Pro forma EBITDA will grow faster than revenue with anticipated growth of 7.2% to 8.4%. As a result, we expect pro forma margins to expand by 95 to 110 basis points as we ramp our cost efficiency programs, drive favorable revenue mix and deliver year 1 synergies. Adjusted EPS is projected to grow 8% to 10% to a range of $6.22 to $6.32, consistent with our prior commentary, the issuer transaction is slightly accretive in the first year.

As a reminder, our outlook does not include share repurchases as we temporarily paused buybacks to prioritize deleveraging post [indiscernible] A key thesis for the acquisition was generating significant and sustainable free cash flow growth, and we are confident in delivering on this commitment. For 2026, we anticipate free cash flow of over $2 billion, growing 27% to 33% year-on-year. and growing more than 3x faster than EPS. As I mentioned earlier, this is an all-in number. The only item that is excluded is only cash taxes paid on the recent sale of [indiscernible] . On an adjusted basis, we continue to target cash conversion of 90% for the year. I'll now talk through our revenue growth projections on Slide 18. Banking adjusted revenue is projected to grow more than 40% with pro forma growth of 5% to 5.5%. This is the second year in a row that banking will exceed our Investor Day growth targets, demonstrating the successful pivot to accelerated growth. These projections include approximately 60 basis points of M&A contribution with pro forma organic growth of 4.4% to 4.9%, compared to 4.5% in 2025. For capital markets, we project revenue growth of 5.5% to 6.5% and including an M&A contribution of approximately 95 basis points. This outlook is slightly below our Investor Day target reflecting a lower level of M&A activity and a decision to pivot our focus to higher-quality recurring revenue. As a reminder, our long-term capital market strategy

is to gradually shift license sales to more predictable recurring revenue. In 2020, our recurring revenue was 68% of total revenue. expanding to over 71% in 2025, with a further increase expected this year. Specifically, in 2026, accelerating mid- to high single-digit recurring revenue growth will be partly offset by slower growth in nonrecurring revenue as we execute on this strategy.

Turning now to EBITDA margins on Slide 19. The actions we took last year give us good line of sight into delivering significant margin expansion of 155 to 175 basis points or 95 to 110 basis points on a pro forma basis. These include accelerating cost actions, rising leverage from AI and our commercial focus on more profitable ACV and improving product mix and the strong margin profile of total issuing solutions and the related cost synergies. Let's go through the building blocks of our margin outlook. First, a strong margin profile of total issuing solutions add 62 basis points to our pro forma base. Next, there will be a reduction in TSA income from Worldpay, resulting in a margin headwind of approximately 40 basis points. And this is lower than the 70 basis points of headwind we encountered in 2025. The net cost reduction column includes inflation, investments and other cost increases.

However, our cost-saving initiatives and synergies are offsetting these increases and driving 80 to 85 basis points of margin improvement on top. We have high conviction here. AI is a significant lever going forward, and we will capture integration synergies over the coming months and years. Importantly, we took a series of cost actions in 2025 exiting the year that drive sizable savings in 2026. Overall, these projections include synergies of $30 million to $40 million or 20 to 30 basis points of margin enhancement. And finally, leverage and mix will add 55 to 65 basis points. Here, you can see the inherent operating leverage of the business and the flow-through of favorable product mix. Altogether, we have a high degree of visibility, 70% of the cost savings have already been actioned and a majority of the improved product mix was already sold in 2025.

Now let's turn to Slide 20 for an overview of free cash flow. In 2025, we drove a broad series of cash optimization initiatives and successfully accelerated growth to 19% almost double the rate of earnings growth. Looking ahead, we are anticipating a further acceleration in cash flow for 2026 we expect to drive free cash flow growth of 27% to 33%. Beyond 2026, we expect to continue growing cash flow well ahead of earnings as we steadily improve capital efficiency and working capital ratios and reduce onetime integration and transformation costs. We are well positioned to double our free cash flow to over $3 billion by 2028, and this implies a compound annual growth rate of approximately 25%. This will allow us to meaningfully increase future capital returns to shareholders once we have reduced our debt leverage to our long-term target.

Let's now discuss our first quarter outlook on Slide 21. Adjusted revenue will grow 29% to 30%, with pro forma growth of 5.5% to 6.2%, largely consistent with the full year outlook. We expect a strong start to the year across our banking business with revenue growth of 7% to 7.5% compared to full year growth of 5% to 5.5% growth. Capital Markets full year revenue is projected at 5.5% to 6.5%, and or as expected, the first quarter will be a bit softer, entirely due to the tough comparison in the year ago quarter on nonrecurring license revenue. You will recall that Capital Markets other nonrecurring revenue posted very strong growth of 47% and the exceptionally strong license renewals in the year ago quarter is negatively impacting capital markets by approximately 5 points. Excluding this, Capital markets revenue growth would be in the 6% to 7% range. Adjusted EBITDA is projected to increase 33% to 35% margins will expand by 115 to 135 basis points, including a favorable mix impact from the total issuing transaction.

Pro forma EBITDA will increase 7.1% to 8.4% ahead of the pro forma revenue growth with pro forma margin expansion of 35 to 55 basis points. Core margin expansion is much stronger, expanding by more than 100 basis points if you adjust for the timing of the capital market of renewables. This is a solid start to the year. positioning us to deliver consistent margin expansion over the course of the year, in line with our full year outlook. Adjusted EPS is expected they will increase 4% to 7% to $1.26 to $1.30. In summary, we had a good finish to the year with particular strength in our banking segment. We recently closed 2 transformative transactions, acquiring the total issuing solutions business and monetizing our noncash-generating Worldpay stake meaningfully improving the company's cash flow profile. We are projecting durable revenue growth combined with significant margin expansion. And lastly, we are targeting free cash flow of over $2 billion and are well on track to generating more than $3 billion of free cash flow in 2028. With that, Operator, could you please open the line for questions?

[Operator Instructions]

Our first question comes from Tien-Tsin Huang with JPMorgan.

I appreciate the question here. Just maybe for Stephanie. I appreciate your comments upfront. -- forgive me for asking the first question on AI. But just I like what you said about the systems of record businesses, but can you give us a little bit more on how you think about the risk that AI could automate or replace some of the key functions that FIS currently provides to banks, just thinking about the surrounding products, core banking itself. I know that it's weathered the storm of past tech waves in the past, but just trying to understand if AI will be different in any way in your mind?

Yes. Thanks, Tien-tsin. No problem with the AI question. It wouldn't be earning season this year, I think, without an AI question. So a couple of things. I would highlight 3 things. One, we do believe we have a durable advantage here, and I'll walk through why. We actually view AI as a strategic accelerant for our business and we'll talk about where we're focused to use it as a strategic accelerant which is in the places where we think AI can add a lot of value inside and around our system.

So first, talking about FIS. We -- as you know, we operate mission-critical systems of record. These are -- these provide accurate authoritative data sources they're not predictive in nature. They have to be audited. They have to be regulated. We think in this scenario, and this is broadly across FIS. Those are the systems of record we operate if you think about all of our systems. And so we believe we have a durable advantage here because there's really 3 important advantages if you think about FIS. We have proprietary data sets with decades of accumulated data across the entire money life cycle. So you think about core banking, payments, lending, investing, these proprietary data sets are massive, and you need them to do -- to have AI capabilities built on top of them.

Second, our core systems are deeply integrated into regulated workflows. These regulated workflows have to be auditable, and you have to create a significant amount of compliance and regulatory reports out of them. And then finally, enterprise-grade governance, security and auditability. So if you think about durable advantages around systems of record, those are how we see the biggest 3 important advantages. And I referenced in my prepared remarks, the Forbes article that effectively said that AI agents make systems a record more valuable. So we really believe and see our technology and our data as a strategic advantage. Now how do we think about AI as a strategic accelerant? And where do we think AI can enhance and/or disrupt our systems of record. So as we think about AI really being a strategic accelerant, our data moat is now our strategic advantage.

And we talked about how big that is now across the entire money life cycle, bringing the credit issuing business inside FIS. We now have and see over 1 billion accounts on file, 73 billion transactions. We go across core banking, every single payment rail now with credit issuing. And so you think about the data that banks need or anybody needs to create AI capabilities, we have more than ever. And so we talked about we're forcing our investment in data and AI, focusing on unifying our data stack. So we're spending a lot of money now as you think about enhancing those data capabilities, deploying agents inside our existing systems and on top and building domain-specific AI capabilities. So where do -- where are we focused? And where do I think there's potential for enhancement or disruption? It's really where the predictive part of our systems are needed. So think about fraud prevention, how to predict the next best deposit and lending account.

So we're focused on enhancing our capabilities using our data set and putting AI in those. That's where the predictive piece is where we think the opportunity is. Being able to onboard clients more efficiently because you can get through KYC, KYB regulatory risk much more quickly with AI predictive capability. And then broadly in the banks, helping them with productivity initiatives taking down costs where they have people that use our core systems of record and workflows and help use AI to automate those processes. So that's where we see AI being enhancing and we really think it's a strategic accelerant for us versus risk, but we have our eye on the whole market.

Our next question comes from Ramsey El-Assal with Cantor Fitzgerald.

I wanted to ask about the pace of the shift in capital markets to higher-quality recurring revenue within the segment. how long do you expect this shift to have an impact on segment revenue growth? And how should we think about the steady state segment kind of growth profile after the shift is complete?

Yes. Maybe I'll start in terms of how to think about that strategically and James can add on in terms of if you think I missed anything. If you look back, and I think we talked about this to 2020, the recurring revenue was 69% of Capital Markets revenue. We ended 2025 at 71%. The market is moving away from licenses, which is a good thing. And we are, at the same time, while the market is moving away from licenses really focused on driving recurring highly profitable product revenue. So we are leaning into that as we think about continuing that journey and I would expect to see a similar like an accelerating recurring increase as you think about the total.

I think we also said in our prepared remarks that we would expect recurring revenue in capital markets to be mid- to high single digits in 2026. So you would expect us to continue to lean into recurring. It's a market condition. It's also a better outcome for FIS. It's how our customers want to buy, and it's a higher recurring revenue, higher margin business over time. I don't know, James, if there's anything you want to add that?

No, nothing to add. It's just -- I think you'll see a similar trend over the coming years. So accelerating recurring growth and call it moderate to moderate growth on nonrecurring. Bear in mind, the nonrecurring is still growing in 2026. It's just growing at a much lower rate and then we're highly optimistic about the business and the accelerating trend on the recurring revenue.

Our next question comes from Darrin Peller with Wolfe Research.

Nice job on the quarter and the year. I just want to revisit a higher level question again and maybe a little bit away from AI and focusing on the issuer business. I guess there's been more conversations over competitive dynamics with some of the bigger networks getting into issuer processing and some of the -- just some ankle biters coming in, in terms of trying to disrupt the space. So maybe similar to the question on high level like AI, but maybe focused on issuer. What do you see in terms of the barriers there again to maintain your position, especially now that you've really just acquired into a big part of the credit side?

And then on a side note, just financially, what are you incorporating for the year in terms of issue? Is it too early to expect any in terms of embedded in the financial outlook or to already see cross-sell opportunities embedded in the later part of this year?

Thanks, Darren. So yes. So great question. pulling back. So if you think about our acquisition of the total issuing business, we have now added to our product suite the marquee large-scale credit processing business globally. I think when you think about that, there's 2 things in terms of how we compete there. One is the product capabilities that it brings into FIS, but also how we will be able to leverage our relationships that are very large with the existing FIS' around the world.

So if you think about the product capabilities, and there's always new entrants that make us all better I think we would say we have in North America, by far, the biggest product credit business, it's large, it's scaled -- it has expertise that is decades long. I think we talked about as a proof point, how valuable that is to our existing base considering that we renewed approximately 30% of the revenue in that base in 2025 and have no renewals in 2026. Just trying to express our customers' belief in the existing business. That being said, we obviously have modernization going on, and we can talk about that a bit later.

When you think about the international business, and I think the global folks have probably talked about that. We have a product in Prime, which is the industry leader. It's driving about $200 million of revenue. It's been growing at a 15% CAGR from 2016 to 2025. It competes globally and it's very, very competitive against whatever new entrant is out there. So I think we think about product capabilities, whether it's in North America as being large and scaled and best-in-class. Internationally, the same thing. So we do believe we have a very, very competitive product set, if you think about credit issuing on its own.

Then when you think about how do we leverage the FIS relationship. So when you think about some of the competitors you're thinking about that are bigger, you are leveraging or would be leveraging their broader relationships. We now have that advantage with the issuing business inside FIS. Think about the size and scale we are now to the large financial institutions we provide debit processing. We provide credit processing. We provide core banking. We provide lending. We provide trading and processing. So we have an ability with the credit issuing business to also lean into relationship size and scale that I think will make the total issuing business continue to be very competitive.

And then I think finally, I'd say just the data advantage that I mentioned in the first question with respect to AI. Do not underestimate how important data is to all of these financial institutions to pursue their own AI agendas. And I talked about this, and might have got lost in the prepared comments, the value of having a bank's core processing system as well as doing their credit issuing off of total issuing was so -- we've already started to have conversations, and we're in a POC with a large regional bank to bring that data together inside our systems serve that up and help them build a model to make their credit card customers and enhance their credit line increases in a much more dynamic way than they've ever been able to do before.

This is an example of where bringing the data together makes us even more valuable to our end customers. And we don't see any other competitor having that kind of capability across core debit, credit, et cetera, in the landscape. So try to view that as -- or give that as an example. And that -- and we started doing that as soon as we announced, they reached out to us in terms of working together on that. So more to come on data products as we think about enhancing our data capabilities. But that's probably what I'd say around credit issue.

Our next question comes from Will Nance with Goldman Sachs.

I appreciate the disclosures on the makeup of the banking business. I wanted to maybe 0 in on just how you're thinking about the growth algorithm between these. I think with a lot of the payments-oriented assets going into this payments line. I think it's somewhat surprising to see that it seems like pieces is only 40% less than half of the payments business, so really kind of highlighting the diversity of the segment. Can you talk a little bit about how to think about growth drivers across of these? Obviously, thesis was something like a mid-single-digit growth business. Should we be thinking about banking as something in the kind of low-ish single digits with kind of like stronger sustained growth across payments over time?

Yes. Thanks, Will. I don't think we're ready to talk about subsegment growth rates. I think what we would say and what we've shared is I think you can think about the total issuing business growing consistent with what it grew in 2025, so about 4.5%. So think about that staying consistent in 2026 and legacy FIS business, obviously growing a bit faster than that to make the overall guide work.

And so we're really excited and proud of the work we've done broadly across the FIS organic business and banking and the acceleration you're seeing there in 2025 and it continuing into 2026. So I think as you think about the pieces, as we sit here today, that's the best we can probably provide to you. As we come into first quarter, we'll give you a little bit more color around subsegment growth rate.

Our next question comes from Dan Dolev with Mizuho

Stephanie, great results, really, really nice. Just maybe a strategic question here on the portfolio. Obviously, you've got like a really good portfolio right now, and your shares are definitely trading below what they're worth. As you think about sort of your portfolio today in terms of the assets that you have, is everything from now on considered core? Is there anything you're thinking of in terms of what could be done to enhance buybacks, just to get the sense of how you're thinking about the portfolio?

Yes. I think we're really happy with where the portfolio sits. Obviously, have done 2 very strategic transactions to simplify the portfolio meaningfully, really focused on a single client base and financial services. Our products make sense and go together. I think we will always be doing pruning of the portfolio. We've done that for years. And so you can see a bit of that as we move things into corporate and other. But I wouldn't expect you to hear from us around large sales or anything like that.

We feel -- we're really wrapped up, frankly, in integrating the [indiscernible] business and making sure that we really focus on executing well on that and executing on the base business. I think -- I'm sorry, James commented in his prepared remarks that we're also focused on repaying our debt. That's our primary focus. That will be our focus until we get that done, you wouldn't expect to hear from us on buybacks.

Our next question comes from Jason Kupferberg with Wells Fargo.

I wanted to go a bit deeper into the banking segment. Obviously, the organic outlook here, again, is outpacing your medium-term range from the Investor Day. I think maybe about 150 bps at the midpoint. So just wanted to get some more perspective on what's driving the above trend performance. You talked about it a little bit high level in the prepared remarks, but it seems like there's sustainability behind that. So if you can just unpack where you've seen particular success with some of your refreshed go-to-market motion over the last year or so, it seems like it's bearing fruit. So we'd love to just hear more on that.

Yes. Thanks, Jason. Yes, look, we're really, really happy with our commercial excellence. I think I'd start there. We have been focused and driving commercially selling on the products that we think makes sense for FIS. And where growth, frankly, is demanded from the end markets. So you saw us through 2025, continue to drive commercial excellence. We knew we had that in our back pockets with tailwinds as we came out of 2024. We talked about that. We talked about both reenergizing the sales engine as well as having higher rates of renewal.

So the combination of those has really been helpful in terms of driving and outperforming on the banking business. probably even faster than we expected. So it's fantastic. I would say with respect to where we're seeing demand, it is broad-based. We have demand across all of our products in particular, obviously, core and our core capabilities as we're -- we have left core modernization behind in terms of core consolidations. But probably more importantly, if you remember, when we talked at Investor Day, I talked about needing to be focused in selling in payments, digital and lending and we continue to see demand there, and our products continue to have huge uptake there in terms of what our customers are needing from us.

We've also been able to supplement our organic products like Money Movement Hub, frankly, which has had huge demand with some of the acquired products like amount, like I mentioned, that's really around digital capabilities. So we're seeing it's really broad-based. But what I think you should really take away is we have our commercial excellence back. We're operating with excellence there. Our products are really strong in the market with our buy-build partner strategy. And we're just really focused on continuing to drive that as we move into 2026 and feeling really good about where the banking business is performing.

Next question comes from Timothy Chiodo with UBS.

Great. First on the Worldpay revenue. So there's the Worldpay revenue that hits into the banking segment in 2023, I believe that was about $30 million. It was about $140 million in 2024, and it was expected originally to be sort of flat to down in 2025. I believe that it came in ahead of expectations for the full year for 2025. And I was hoping you could give us a little context on, one, what was that full year number for '25 and a little more context on what's in there. You've mentioned in the past that there's premium payback and maybe some other services that are being provided to Worldpay. And then lastly on this topic, just what revenue contribution is implied in 2026, meaning will it be a headwind, a tailwind or relatively neutral?

Yes. Thanks, Tim. So if you recall, when we separated Worldpay from FIS, we talked about commercial revenues because we serve each other. And so some of the things or the things that are in there and that are driving growth are World pays, use of our loyalty and premium payback product, use of our network routing capabilities on NICE. These are really, really strong products that they use in cross-sell. So the continued growth of them is natural growth just like they are now a completely separate customer. You continue to see strong demand, and you'll see strong demand because those are some of our best payment products.

So I think that's really what's been driving them strong payment growth, like I said, broadly across the market. And then it's -- they are obviously great products that we always have had as we work together and then as we've now separated become natural third-party agreements. So I'm not sure that we're going to give a 2026 guide. I don't think that makes any sense anymore given that it's global payments. But I do think this is -- this ends up showing and expressing the value of the commercial agreements and really excited for Global to continue to consume these products.

Our next question comes from Bryan Bergin with TD Cowen.

I want to dig in a bit on free cash flow and talk about the bridge to 28%. Can you give us a sense what the largest sources of that projected expansion from the $2.1 billion base here in 26 to the to the $3 billion target that you have? What are the building blocks? And kind of where do you have most confidence versus where it may be more fluid?

Yes. I would take a couple of blocks here. One is on capital intensity. So last year was [ 9.3%. ] We're projecting 8.5% of this year. We think longer term, the natural trend level is around 8%. So that's 0.5 point from capital. Two is we're not at the end yet of our working capital optimization. I think we made great inroads in 2025. We have significant carryover benefits into '26. And there's probably still some optimization in 2027. The biggest one, however, is going to be the reduction in transformation and integration. It's kind of intuitive because in the 2026 year, there's about $200 million of cash costs relating to the integration of the credit issuer business.

By the time we get to 2028, those costs will no longer be in the cash flow statement. Two is 2026 is a pretty high level for, call it, transformation expenses. And you've seen from our margins that we're driving core FIS margins substantially higher than what we said when we gave the midterm guide of 60 bps. It's closer to 80 bps on the base business. So we're getting good traction on cost reduction in '26. Those programs will decline as we get -- go closer to '28. So the biggest single driver, '28 versus '26 is actually lower onetime so a significant reduction on the credit issuer integration of a significant reduction on FIS transformation.

Our next question comes from Andrew Schmidt with KeyBanc Capital Markets.

Stephanie, I totally agree with you on the generational moment at Financial Services, certainly an exciting time. Just 2 questions, if you don't mind, if I could squeeze in. Just one bank M&A, just can you talk about to what extent bank M&A is included in the outlook and then opportunities in subsequent years as more product is taken and customers grow. And then the second one, just on the [indiscernible] or GI Solutions, maybe you can level set us. What are customers actually asking for? And maybe you could just talk about the opportunity for FIS to be a conduit versus other third parties coming providing different workflows, I think there's an opportunity to be a conduit versus the runaround that we currently hear out there as a narrative. But anything on those would be helpful.

Yes. Thank you. Happy to. So on bank M&A, it is a generational moment. lots seen in 2025, I would expect us to see more in 2026. Given where we sit in the market, we view ourselves to be share gainers there. We won't win them all, obviously, but we've been on the winning side of most -- in terms of the 2026 guide, we only guide the ones that we know. So to the extent there's another one in 2026. Typically, what happens is we'll update our forecast. But usually, although it's been going much quicker usually, if we hear of something in 2026, it will close in 2027. But so we don't have anything baked in. So any of it would be upside or downside depending on where it goes.

We do expect though to see more bank M&A broadly, and so we'll stay tuned on that. In terms of Agentic, it's really interesting. So there's been a lot of talk about Agentic commerce. And when you hear about it, most is focused on how to make sure that merchants and acquirers and Visa, Mastercard can facilitate the Agentic capabilities. Where we're focused because we're focused solely on financial institutions, has been ensuring that when the bank -- when we receive the genic transaction on behalf of a bank, that we can identify it as an agent working on your behalf because there's 2 things. One, bank models are -- I want to make sure that we can authorize that Agentic commerce transaction for you and that we don't decline it because it's coming in at a weird time at night that you don't normally shop at, but maybe your agent does.

So we're helping banks think about and making sure that we can provide the flag to say this is an agenetic commerce transaction, and you want to make sure that you authorize it. So that's point one for financial solutions -- for financial institutions. And then the second is really starting to work with financial institutions to help them think through agentic fraud. And this is very new in cutting edge but at the same time, you want your car to be processed for your genic transaction. There are a lot of bad guys out there thinking about how to use agents to also transact on your card. And as you know, financial institutions have very sophisticated fraud models built that we either provide them data or we run the fraud models for them.

And so we're spending a bunch of time working with our FIs to figure out how do we update those models for new ways of fraud using Agentic commerce. So for us, and this is where it's really good for us to be singularly focused on financial institutions, we're spending less time thinking about how to make sure a merchant can facilitate an a genetic transaction. We're leaving that to Visa, Mastercard and acquirers. We're working with Visa and Mastercard and other FIs to make sure that we can authorize the transaction. It doesn't get declined and that we can make sure that our FIs can protect themselves against what is probably going to be more fraud used against them. So that's how we're thinking about agentic.

Our next question comes from Vasu Govil with KBW.

Maybe Stephanie, another AI question for you. Just how much engagement are you seeing from bank clients today on deploying AI solutions? And if you could give us a sense of whether it's coming from the largest banks, the midsized banks? And how quickly do you think we will start to actually see traction and sort of flowing into the P&L. And if I could ask a quick one, James, as well. Just on the margin variability we saw in the quarter, I got the dilutive impacts from M&A and PSA headwinds. I'm just guessing like what surprised you in the quarter relative to expectations on that front, I guess.

So what I would say, Vasu, is that I've never seen banks want to or start to adopt technology faster than they're adopting AI. They all see the potential advantage of using it. If you think about their cost structures, they have significant cost structures, whether you're big or small, decked against operational flows, in particular, like making sure that they stay compliant with regulatory KYC, KYB et cetera [indiscernible] or deposit loan ops or places where they have a lot of people is where I see banks wanting to -- wanting to use AI to tackle taking out those costs and redeploying those cost savings into ways they can grow, think deposits, loans, et cetera.

And so whether you're a small bank or you're a big bank, you're thinking a lot about it. Now how you're deploying it is a little bit different depending on if you're small, medium or big. If you're large, then you are likely deploying AI yourself, but what you're coming to FIS to talk about is needing to get data from us in a real-time passion as well as talking to us about, okay, you can now serve me up my core data, my credit data, my debit data in real-time capabilities. And we have a lot of banks that are very interested in consuming capabilities from us like that. So we're building those out. You would expect them to be building their own agents on top of that.

We then also have regional or midsized banks where they're saying to us, look, we love -- we need all that data. We want you to help us build out our models and our modeling capabilities. Then you have small banks who are saying, look, I really need you to help me and we are working with them to build out agents that are embedded inside the core and the transaction platforms. so that they can reduce their operational costs in the back office. For the most part, banks are really using AI to take down their back office costs. And if you think about banks broadly, no matter how big or small you are, that's in compliance and regulatory areas, that's in where they have large amounts of people. And so that's where we're working with banks to really focus in terms of how to take down costs.

The other place that they're spending a bunch of time on is in fraud because AI does help models become more predictive. Again, we provide a lot of data there and capabilities. And so with all the data we have now have with total issuing, our fraud models become even more valuable to them. So lots of conversations, varying levels of implementation levels. But I would say there's not a bank that I talk to that isn't talking about and exploring what AI can do for them.

And then Vasu, you had a question on margins in the fourth quarter. I think you asked what surprised us. I guess, as we went into the quarter, we were pretty happy with the consumer demand. What we saw later in the quarter, we saw much higher levels of actually customer demand for output services and equipment. And then the second thing is currency rates went slightly negative at 35 bps. And this customer demand were on generally lower-margin products and that pulled down margins a little bit.

That being said, I will go back to what you alluded to. We're exiting the year on a few -- on a full year basis, take out TSA and M&A, the core margins were up about 90 basis points. And then you look into 2026 and the pro forma margin growth is at 95, call it, 100 bps. And as I said earlier is, if you take out the benefit from synergies on credit issuer, the actual FIS margins for next year are projected at around 80 bps expansion, which is above what we were thinking on back at Investor Day of about 60 bps. So we're actually very, very bullish on the margin side.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

All right. Great. Welcome, everyone. We're getting through the day here. This is our third presentation of the day. We're very fortunate to have with us today the management team from FIS. So joining us here in Arizona, we have Stephanie Ferris, President and CEO; James Kehoe is -- who is CFO. And of course, we want to say a special thanks to George Mihalos, the Head of Investor Relations, who also made the trip here to Arizona. So first, thank you to all three of you for being such a big part of our conference.

You bet. Thanks for having us.

All right. We've got a great agenda of topics to go through today. I'm just kind of run through what we're going to attempt to cover. We're going to start a little bit just looking at the various growth of the two segments and how things have been comparing to the '25 and '26 guide given at the Investor Day. We'll dig a little bit more into the banking segment. We'll dig a little bit more into the Capital Markets segment. We'll spend a little bit of time on margins, the TSYS deal, free cash flow, tax rate, and more some of the financial topics a little bit later in the discussion.

So with that, we're going to start out with a question. I believe here for Stephanie and we'll talk about segment-level comparison. So to set the table, the midpoints of the 2-year guide that was said at the Investor Day suggested that the banking adjusted revenue growth on an organic basis would be just north of 3%. And for Capital Markets, just north of 6%. So it looks like banking is playing out a little bit better than expected. Capital markets may be a hair lower. Maybe you could just give a little bit of context around how things are tracking here about halfway into that period.

Yes. Thanks for the question. So exactly as you mentioned, we're feeling really good about both segments. Let's start with banking. So really pleased with the banking growth. A couple of years ago, we started focusing on, what we call, commercial excellence and really refocusing the company on our existing clients, new sales and cross-sells, both in terms of the quality of the products we were selling, focusing on digital, focusing on payments, focusing on lending, which are really higher-margin recurring revenue products.

And we've been the last couple of years, refocusing the company there, the sales efforts there, the commercial efforts there and you're seeing the benefits of that as you see overall banking revenue step up, but slightly better than our expectations. But what's even more important is the recurring revenue really start to step up and have great recurring organic growth as we finish out 2025 and feeling good about it into 2026.

On a capital markets basis, consistently also feeling really good there. We did take a little bit of an impact this year as tariffs came in second quarter and impacted the loan syndication market across our financial institutions. That has since recovered in third quarter, and it's going well in fourth quarter. So don't expect that to have any other kind of impact. But that did impact us about 1 point there as you think about between [ 5, 5.5 and 6 ]. So we won't recover for that loan syndication in terms of the lost revenue in the second quarter, but the volumes are back up in third and fourth quarter.

All right. Excellent. Way to kick it off, Stephanie. Let's go a little bit more into the banking segment. So we're going to first start with roughly 40% of that segment, which is cores, it's a big topic in the industry now. Maybe you can just give a little bit of context around how many of these are actually up for grabs each year? Often, this topic of market share changes within cores comes up? And the reality is there's not a ton of switching, right, across the banks, and that's one of the attractive parts of this business. But maybe just talk a little bit about core banking conversions, why they're so sticky and what that annual jump ball is?

Yes. I think when you think about that part of the segment, it's really around core and digital and all the value-added services around those, excluding payments. And so Tim, you're aware that we serve the larger side of the market. So think about $5 billion banks and above. And so there's really been some nice tailwinds happening in those markets. We tend to serve the larger banks. They tend to be on the acquiring side of the equation.

In fact, in the third quarter, I think we saw the largest amount of bank consolidation we've seen in a number of years. While we'll win some and lose some there, we tend to be in a favorable position there because we generally serve the bank that's bigger, which means the core typically has to have a lot of complexity around serving that larger financial institutions.

And we have an opportunity, and I think this is true probably across the industry when you think about core banking, you sell a core bank and then you would sell all of the ancillary surrounds typically between 30 and 35 products. So you're right, there's not a ton of switching costs over time. And the way you keep that revenue growing is really around continuing to add products and services to those existing core clients you actually grow more that way than you do in terms of new sales every year because as you mentioned, there's just not a lot of new banks up for grabs in the upper side of the market.

I think when you look across the industry, the majority of the core conversions are down market, which are a little bit less complex.

All right. Perfect. Well, on the recent call that we had, I thought that you did a really great job of running through the 3 main cores, and I thought it would be a good use of time to do that for the broader investment community: Horizon, IBS and MBP.

Yes. So happy to. So first of all, I'll start off by saying we aren't doing core migrations. So I know that's been a hot topic, and we get asked a lot of questions on that. We already modernized our cores and moved all of our clients to these 3 strategic cores. And no one needs to move from the existing core that they're on, we'll modernize in place with them. But in terms of thinking about how those core stratify across the market that we serve, starting from the smallest types of banks and credit unions that we serve, which is really $5 billion, say, $5 billion to $20 billion in asset size.

Typically, if you're a retail bank in that size, Horizon is going to be a great core for you because it's a fully integrated suite of solutions, everything is integrated all the way into the ledger. And that's going to be a very competitive core serving your consumer and retail bank and small business customers for a smaller bank.

When you start to get into a commercial bank, where they're serving commercial customers and have needs that are much more sophisticated thinking about money movement capabilities, thinking about commercial lending origination capabilities. Our IBS core will serve the $20 billion and above. We can serve the retail with the IBS and we can also serve those more sophisticated core IBS clients. And that is the industry workhorse. It is absolutely a hands-down winner in terms of commercial bank customer and is a hands down winner if you're consolidating a bank and you want to add things on to the core.

Same thing with Horizon, very easy for us to consolidate and convert banks, and we have a proven history of doing that because that's generally where our banks play and win. Now when you start to get above $100 billion, and those are banks that are very, very sophisticated, and they're doing their own modernization journey, and you're starting to talk to them about really how they want to run and modernize the bank. They will start talking to you about a thin ledger from a core standpoint.

They'll start talking to you about digital capabilities, account opening capabilities, payment capabilities, and they want all of these capabilities configurable and that they can pick and choose not just from our existing core but best-in-class. And that's where our modern banking platform serves the largest of the large, where they have very sophisticated technology people inside their bank, and they are running a best-of-breed and are modernizing their entire bank. That's what -- so that's where the MBP would serve there.

All right. I think it was really helpful. Thank you for doing that. We're going to move into payments a little bit. So at the Investor Day, you talked about a greater than $500 million additional opportunity that you had from switching some of your existing FIS core clients, switching some of their processing business over. I think you were mainly talking about debit processing at the time. We could talk a little bit about that opportunity, but then adding on to that, the credit issuer processing opportunity with TSYS coming into the fold in early next year?

Yes. So at Investor Day, we talked about really focusing on growing payments. It's highly recurring revenue. It's a very important critical capability for our end financial institutions. And when we talk about payments, there's a couple of different things. There's the debit card, which is tightly linked to the core. There's the credit card, which has a different sophistication level if you're a very large issuer versus if you're a small issuer.

And then there's money movement capabilities. And so we've been focused on the debit side and the money movement capabilities and have been very excited about how those sales have been going for us and the products that we've delivered into market.

I think in the last earnings call, we talked about how many money market capabilities we have been selling. But I think you were talking about the credit capability. Our existing credit capability prior to the potential close of TSYS is really a credit card processing capability for small financial institutions. It doesn't have the level of sophistication that serves the largest of financial institutions. And I think as you all probably know, 80% of U.S. credit cards largest financial institutions in the U.S., and it's just not been a place we've been able to play at all in terms of credit.

However, almost all of those are our customers on the banking and the capital markets side. So it's been a product -- significant product gap for us for quite a while. So we are really excited about the TSYS transaction. I think James is probably going to get into the ultimate cash flow it generates from us and ultimately, how we flip the Worldpay asset, but from a product standpoint, it's been really -- it will be really strategic because those clients exist for us today. We serve them in terms of money movement and debit, and we'd really like the opportunity to bring a best-in-class credit card processing capability into those banks where they don't exist today.

And same thing, vice versa, when TSYS has been selling to their existing banks, they go up against competitors who can bundle debit, credit and core. So not all said, it's a very competitive market. Those are very sophisticated financial institutions, typically, but we're really excited about the capabilities. It also allows us to bring to life our loyalty capabilities, which is very unique. And we brought -- just brought smart basket to the market. And so we think the loyalty plus the prepaid and the credit card altogether really expand out that product suite for us.

All right. Covered well. There's one slight additional item I want to add here before we move, which is -- and this is something we get questions on often, which is the partnership with the firm. So maybe you could just give us a little bit of an update on that? And also just the mechanics of it.

Yes. Huge shout-out to [ Max ]. It's a great product, just kind of revisiting how our partnership is working. So this is enabling the affirmed capabilities out to our smaller financial institutions to provide BNPL hanging off the core that we provide for them in the digital capabilities. So partnership is good.

We are doing joint development work in 2026 and hope to bring that to market in the mid- to end to 2026 and let our smaller financial institutions provide capability out against the larger credit card and debit card capabilities that already exist in market today. So it's a great example where we're trying to make sure that our smaller financial institutions can compete against not just the large financial institutions, but also next-gen fintech who are in markets providing these capabilities.

All right. Stephanie. We're going to move on to capital markets. So you mentioned earlier, you kind of hit on this. There were some headwinds earlier in the loan syndication business that impacted growth earlier in the year and that won't come back, you mentioned for this year. But as we look into next year, right, it will be an easier comp comping over that. And the question from investors really is, should we be expecting the capital markets segment revenue growth to get back into that sort of 6% to 7% organic range as we move into next year?

Yes. It's a great business, and we continue to focus like we are in banking in terms of quality, really focusing on selling that recurring mix and you're seeing us continue to rely less on license and more in recurring as our products take and we sell them into the market that way. So I think we're feeling really good about capital markets. Like I mentioned before, the loan syndication issue is completely gone now as we head into the fourth quarter, so feel very good about it.

All right. Great. We might circle back with a few more, but in the interest of time, I just want to put one out there. I think it's a quick one, but it kind of cuts across both segments in various ways. But just to clear up any investor questions around any impacts from the recent government shutdown.

Yes, great question. The short answer is no. So either on our banking business and our capital markets business, we haven't seen any impact of any government shutdown. I think even in retail spend for us, debit card transactions tend to be resilient. Our EBT business, we get paid based on accounts. So the accounts are still there. We haven't seen anything go through our capital markets business, so no impact.

All right. Clears that up, very clear. All right. James, we're going to move over to some of the numbers. All right. So when we think about this company, we think about 2 numbers for next year, 60 and 90, 60 on the margin expansion and 90 on the free cash flow conversion. Let's hit the margin part first. So I'll give a little bit of backdrop. So you talked about the 60 basis points margin expansion for next year. And you pointed to this year having about a 50 basis point headwind from M&A activity, and that will reverse to actually a slight tailwind next year.

You also talked about thinking about a similar drag of 50 basis points from the TSA, you talked about some favorable revenue mix heading into next year?

And then also, of course, the cost-cutting program this year was a little bit second half weighted. So that's a lot of stuff. And when investors add that all up, they think that maybe there's some degree of conservatism baked into that margin expansion guide. And I was hoping you could expand upon that.

Well, you'd really love to get an answer on this one.

Sure would.

No. I think joking aside, we're still firmly believe we will exceed the 60 basis points. You can take all the drivers you want and maybe you come out with a bit of conservatism. I'd be careful on the M&A. In fact, the M&A was the reason why our margins were dragged down this year, and it was about 45, 50 bps. All we're saying is we're super confident on next year's target because we don't have a drag next year, but it doesn't actually contribute to the 60 bps. So the 60 bps will come from improved mix, and we're already seeing that in the ACV we've already sold. So what's been happening this year is we're selling much more recurring and less professional services and the relative margin on recurring is double the amount it is on professional services.

So these contracts will play into revenue next year. So we're really -- we've got great visibility for the mix of the revenue that will hit the P&L starting Q1. And this is not something we have to do in Q4 or do in Q1. It's stuff that was sold in the first 3 quarters of the year. And the fourth quarter is turning out pretty good as well.

The second big driver cost programs. We put in place and announced a series of initiatives already this year. That will give us large visibility, especially in the first half of next year. So I don't think we can be any clear. We're ultra-confident on the 60-plus.

We can't guide it now, that would be like giving a new guide. You could say it's somewhat conservative, but there's a lot of stuff. We haven't seen the TSYS plan yet, right? And when we go out and guide, we haven't seen a plan. We've got to get our arms around that. So we got a lot of moving pieces.

What we expect -- I think you've seen it in the second half of this year, Q3, our margins up 50 bps, driven by the 2 segments, both of them up more than 60 bps. You're going to see the same in the fourth quarter in the 2 segments. Both segments will grow margins.

And this is a disappointing thing. We thought we signaled that when we gave the guide at the beginning of the year that we were back-end loaded in the current year. We're now with the 2 businesses firing on both -- on 8 cylinders, getting more favorable mix already in the second half and the cost program is kicking in. It's more of the same next year. So the good news for us is we don't have to do a lot of new stuff to hit the goals for next year.

All right. Excellent. I think we covered margins well. So I heard ultra confidence. So sounds good. Let's move on to free cash flow conversion. So you're now expecting greater than 85% free cash flow conversion this year. And for next year, again, that key number of greater than 90% conversion. And one of the questions -- not one -- I guess two parts. One is just talk about what's driving that improvement, part of it's CapEx. And then the second piece we get asked is you've talked many times in public forums around the potential to extend some of your payables and have sort of a working capital benefit. And the question is, to what extent is that included or not included in that 90% number for next year?

Maybe I'll hit the current year first, the third quarter, and we are repivoting the company to GAAP cash flow. So unfortunately, the conversion number is an adjusted number. Our GAAP cash flow in the third quarter doubled and it was driven primarily by working capital and about $200 million was receivables and $100 million was payable. So these are large initiatives that some of it is a recapture of year-to-date. And we still have a large amount of opportunity going forward. So we're running at a 91 conversion. We called up the goal for the full year to about 85, good visibility for that. Next year, the hit at 90, it's lower capital intensity, as you said, plus it's the phasing of cash taxes.

So in theory, additional working capital benefits could present an opportunity next year. But I go back again and say we're still in the finalizing of the budget. And I go back to payables, the opportunity in general was roughly, I think we said before, around $115 million, of which there's about $100 million this year and $15 million next year. but that's all part and parcel of the company moving from -- let's just put this in perspective. 2024 was 77%; 2025, 85%; and 2026, the target is 90%. There's a steady progression that requires us pulling all levers here.

So we're very comfortable on the 90%. We have the drivers, and you can expect that we will come out with a guide of 90% plus in the -- when we guided in February. I think that we're going to start moving away from cash conversion a little bit and focusing on -- are we actually delivering cash, U.S. GAAP cash in the bank that you can return to shareholders through dividends or through share repurchases. And to put it in perspective, we're doing roughly $1.5 billion, $1.6 billion of GAAP cash flow in the current year, roughly, if you work out all than that.

And we estimate that in 2028, our GAAP cash flow will more than double. And in fact, even exiting 2027, there is -- there are scenarios which suggest we could already be approaching $3 billion of GAAP cash flow. Now again, there's a lot of levers behind this. It's core conversion on the core business, it's the addition of the TSYS business, it's working down onetime expenses.

So we have to pull a lot of levers. But I think the market is missing a little bit that this is a business poised for -- if you double your free cash flow over 3 years, that implies that your GAAP cash flow will be growing by 25% to 30% every year. And I think that's my suggestion is do the reverse math on, like what exactly is TSYS bringing, what have we said in terms of cash conversion.

Our desire to significantly reduce onetime costs and it adds up to a doubling of cash flow. And then you get back into well at a minimum, our -- and this is not a guide, I got to be careful. It sounds like a guide. But our cash flow per -- per share next year will significantly outpace our EPS per share, significantly. I don't think we can be any more clearer than this. We've listened to the participants in the market, where both of us are intensely focused on GAAP cash flow.

And that's the trap of these conversion measures, they are adjusted measures. Ours is, what are we delivering in the bank next year? And we haven't decided yet. We need to spend time on this. We're likely to give an absolute cash flow guide, just absolute dollars. None of this conversion stuff, we're actually targeting this number, and it's increasing by this amount versus prior year. And that's our commitment to shareholders. And then we'll be -- as we have been in the past, we'll be ultra clear on the allocation of that capital and how much gets returned to shareholders.

Excellent. Really appreciate that, James. And the time we have remaining, we're going to talk a little bit about TSYS. We're going to hit on interest expense. We're going to do a quick one on tax rate. There's an outside chance we might have time for a question from the audience. So please just be ready if you'd like to ask a question, just raise your hand.

So let's move to TSYS. So now expected to close in Q1. You talked about it being slightly accretive to EPS in year 1. At the time, the Street number was [ $6.26 ] and you sort of blessed that number on the earnings call, I said that, that was a reasonable number to think about. I think it would just be helpful to the investment community if you could reiterate or maybe give us some more context on what that number, if that still holds? And then just in the interest of time, maybe we could work in the interest expense question and how we should be thinking about modeling that for next year?

Well, I don't think we can really answer your $6.26, you're asking us to guide. I think what we said on the earnings call is all we can really say there. We can't give a guide. We have to be very careful here. I don't -- you can obviously talk about interest expense. We're not changing any of our commentary, but we definitely don't want to get ourselves into trouble here.

Yes. But as I said, we've given you enough insights on the variables. We're comfortable on the margin. We're comfortable on the performance on revenue on the businesses. The TSYS acquisition, nothing we've seen is any different than our prior assumptions. So I think you're kind of getting the answer in a round about way, but we're not guiding to EPS every conference we go to.

You asked about interest expense. There's no real change. There's probably slight opportunity on interest expense, but rates have not come down as quickly as we would have anticipated when we originally guided. But nothing we've seen, as I said, we're heavily in looking at, we're going to issue the debt February-March period when we're in an open period, we have preliminary debt structure in place.

That's already a public document. We'll use that for -- from closing up until we plan on issuing debt. We just don't want to go to the market that have the carrying cost of debt for an extended period. So we're going to manage that quite tightly. So no surprise there won't be any opportunities on interest, but there's no risk, but we would have expected interest rates to be slightly lower right now.

That's really helpful. Let's go to another one here before we wrap up, which is the tax rate. And James, I think you've gotten a lot of credit from the investment community for what you've been able to do with the tax rate. So 13.5%, I gather that's the number that we should be thinking about for some time. And I was hoping you could just put a little more context on that.

Yes, we have excellent visibility. We did a 3-year plan a couple of months back. Again, we validated that kind of range. And the background to that is I think that's our estimate for the next. It's the average tax rate over the next 8 years. About 8 years is as long as we look out. So it's a sustainable rate for the long term. And you'll recall, we're currently down when we did Investor Day, I think it was a 12.5% or 12% to 13%. We're actually operating at the low end of that, right now we're at 12%. So we continue to squeeze opportunities out of this. But you'll recall the movement up to 13.5% is because of TSYS. We're losing some benefits from the Worldpay acquisition and adding less ones from TSYS. But the 13.5% is super sustainable for an extended period.

Excellent. Thank you, James. All right. It looks like we do have time to squeeze in one question. If anyone would like to raise their hand. We could work that question in. All right. Here we go.

Just why is the tax rate actually is so low. Is that because you're looking at the adjusted number? Or is the GAAP tax rate 21% or...?

Yes, the GAAP tax rate is higher. This is the adjusted number.

Just [ the tax ] rate actually?

Well, not really. Our GAAP tax rate is coming down as well because it depends on the mix of domestic international and tax choices you take as to where you place certain activities.

All right. Great. Does anyone else want to ask a question of the FIS team. Okay. Well, I think we've come to the end of our time. And I just want to again say a special thanks to Stephanie, to James and also to George for making the trip here to Arizona. Thank you for being such a big part of our conference.

Thank you.

Thank you, everyone, for being here. We save the best for last.

Thank you. That's very kind.

To close out KBW's 2025 FinTech Conference, we welcome Stephanie Ferris. She's the CEO and President of FIS. Stephanie has over 25 years of experience in financial services. She was the CFO at Worldpay. We're excited to introduce her to as our final keynote speaker.

Stephanie, it's been nearly three years since you took over as CEO of FIS, and you've accomplished a lot, including the Worldpay separation, the future forward realignment. What are your current priorities? And how do you feel about the current state of the business?

Yes. Well, first of all, thank you for having me. Happy to be the closing keynote, and thank you for all of you coming to the very last one. I appreciate that.

It's been a fascinating time in fintech. I would -- let me start by saying I couldn't be more excited about where we sit here today. And that's because of the work that we've been doing over the last three years, which is what I'll talk about, which has really been the infrastructure and the kind of the launch pad for where we are as we move into 2026 and beyond and really start to think about scaled technologies like AI and tokenized deposits and things like that, but I'll come back to that.

I came into the role in 2022, at the very end of 2022, and we really focused what we call our Future Forward strategy around three things. So, one was putting clients at the center of everything that we do. Then the second was innovation. And innovation was everything from delivering new products, but also delivering our existing set of products on time and with great quality and then simplicity. We were a very large fintech that had grown through a lot of M&A and really focusing on being easier to do business with.

We put all that in motion and focused on what I think are our three core strategic strengths. We have scaled global technology, which matters a lot in terms of fintech and in terms of a financial algorithm. We have a global distribution and a marquee client set and product set. And so when we put those together and we look at the opportunity in terms of serving clients, better and making sure that we have a best-in-class client service platform. We look at being able to deliver our existing organic, build organic products, deliver them into our existing client base, partner for new products and then buy new products, put them on the platform, scale them and accrete more revenue and more margin, we think that's pretty powerful.

And so we kind of came into this -- came into the CEO really focused on durable revenue growth, profitable margins and reestablishing what I thought the algorithm of the company should be around return on invested capital and really focusing on customers, shareholders and our colleagues.

So that's been what it's about. It's been quite a journey, as you've mentioned, and I remain very optimistic after our what I think is pretty good third quarter print, kind of starting to show the fruits of all that labor.

Great. So what are you seeing competitively across the banking segment? How do you think about industry trends, Pricing dynamics have been something that's been in talks among the investment community. Just your thoughts.

Yes. So just rewinding the tape a little bit. As you mentioned, we repositioned FIS to serve the financial services industry. We kind of got out of our payments business and separated our Worldpay business, and we'll complete that as we sell the remaining 45% and then buy the TSYS transaction in the first quarter. So, for us, it's been about serving banks and serving financial institutions and serving financial services clients.

So when you think about the industry that we're in, things couldn't actually be any better from a banking standpoint. Regulatory pressures are coming down. M&A and banking is increasing. You're continuing to see banks invest significantly. And the focus is they're investing in terms of how do they grow their banks. So whether it's increasing how much they're spending on their digital products and services so they can all sell and service us more, whether it's making sure that they have the best-in-class products around money movement and payments capabilities, debit credit, tokenized deposits, et cetera. They're focused there. They're focused also on serving their clients and they're focused on fraud. Fraud is a big cost for them. And so when you look at where they're spending money, they continue to spend very robustly. And so from an FIS standpoint, we've been very focused on making sure we're making our investments both inorganically and organically in those growth areas.

So I think from a banking standpoint, and this is across the world, I think things are feeling really pretty good. Credit is good. Consumer spend is good. The regulatory environment is good. Consolidation is up. So I would say that from an overall FI standpoint.

In terms of the fintech industry, it always is -- what I would say, first and foremost, is it is a very rational industry. We serve a lot of financial institutions. They're quite savvy. And so -- and it's very competitive. It's always been competitive.

So I think that continues. I think for us, where we've seen a lot of success is making sure that we now sell those products that have high margin, high recurring revenue into our existing client base, again, accreting the right level of revenue and margin so we can create that low double-digit EPS growth. So that's where we've been focusing and taking advantage of where the trends are really going in the industry.

And anything on pricing environment?

I knew you were going to ask that. It seems to be the favorite topic of the day. So, in terms of pricing, we spent some time in our third quarter call talking about pricing being a net positive for FIS. Both -- and the way we think about pricing is twofold. First, we're out in the market pricing new business, obviously, and then we're selling existing products into our customer base. And it is both, right? We have to sell new business, but then we bring a client on and on average, our banking clients have 26 products. And so it is about continuing to cross-sell into those -- into that base. And once you've brought the client on, the pricing is a little bit less competitive, and it's more about adding the product and the return on that. So, I would say, overall, the pricing competitive market for new business continues to be competitive. And -- but it's been competitive. So I don't know that's anything new.

I think that now when you think about FIS in particular, and we talk about our algorithm, which is net new sales. So think about new sales revenue outperforming attrition. It's a net number. And then we think about net pricing for us, it's about are we retaining more customers than we're compressing from a revenue standpoint. And net pricing for us has been a tailwind, and we provided some of that detail in our third quarter call.

So, I think for both, the industry continues to remain competitive but rational. And then for us, because of the work we've been doing, it has flipped into a tailwind for us this year, and we're quite pleased with that.

That's great. I think the Banking segment was pretty strong in the third quarter. Maybe you could talk a little bit about what drove that outperformance and how sustainable that outperformance or that level of growth is going forward?

Yes, we were really pleased. I think we maybe took some people by surprise in terms of how strong the banking business growth has been this year. We weren't surprised. We came into 2025 talking about the tailwinds coming out of 2024, which was net new sales. So, again, 150 basis points of new sales coming into 2025. That was both how much new business we had sold and then how much more retention that we were taking into the year. So we knew we were coming into 2025 with a really strong tailwind.

In addition to that, it's been really nice to see our accounts on file grow nicely. I mean those typically grow in the 2% to 4% range on an annual basis. They had a nice uptick in the third quarter and continue to be strong. Consumer spend, which is really for us about debit cards, continues to be strong. Digital account growth, which is where we've been focused, continues to be strong. So for us, the third quarter had a nice organic tailwind to it. We expect to see that in the fourth quarter.

I think it really connects back to just overall strength in Banking broadly. And so for us, we're pretty excited as we go into 2026 that we've really been able to re-rate that banking business back from, I think, a low of 2 in 2022 up to where we are today. And we're feeling really good about as we step into even the organic number into 2026 that we're putting it back on the right trajectory.

I think digital has been an area of strength. You highlighted about a TAM of $10 billion in the U.S. alone. What are the key differentiators for FIS that are enabling share gains in the market digital side?

Well, I think it's twofold. Again, we are seeing -- so as FIS, we tend to serve the larger financial institutions. And the larger you are as a financial institution, you typically serve both consumers and commercial banking customers. And so serving you digitally, if you're a consumer or a small business, is very different than serving you as if you're a commercial banking customer. And so we've had digital capabilities across that.

We've invested in our D1 Flex capabilities, which serve the consumer and the small business. We have been investing in our commercial banking digital capabilities, but felt like they weren't moving at the pace we needed to. So we bought a company in the beginning of this year called Dragonfly, which really helped us secure that D1C is what we call a Digital One Commercial bank capability. Because when you're a commercial banking customer and you're using our digital capabilities, you need a lot more sophisticated money movement capabilities. You need -- there's a different type of fraud capabilities you need embedded in that type of digital work.

So, all of those investments, whether we've built them or bought them, is enabling us to take advantage of a lot of that organic growth where banks -- our banks are really looking to be in terms of selling and servicing their customers.

And you just spoke about Dragonfly. Maybe you could also give us a little color on the amount acquisition and how that's enabling widening moat.

Yes. Very, very excited about this. So, again, along the digital journey. So when you start to think about how we interact with a financial institution, you typically need to be able to get on your mobile phone, you need to be able to get on online, teller, et cetera, ATM. However, you also want to be able to open up an account online. You want to be able to open up your deposit account. You want to be able to open up your credit card account, secured lending, et cetera.

Historically, in financial institutions, we didn't really allow you to do that because the fraud associated with online account opening is very significant. Also because you need an underwriting capability flow that is digitized. So we're very excited about the Amount acquisition that we just completed in the third quarter of this year. It brings all of those capabilities to us.

Now we've had those not in a digital way. They exist in our existing cores. So now we're taking this digital account opening capability, and we can put it on top of all of our cores and banks can provide out digital account opening, whether you're opening your deposit account, your consumer account, your credit card account, and it's an all-in-one type of product for us.

Good stuff. You've highlighted the office of the CFO as a major growth vector, leveraging your unique end-to-end capabilities. Can you talk about your go-to-market strategy there and how it's resonating in the marketplace?

Yes. I think, again, another great market for us. The TAM there is significant and growing, very competitive as well. And what we're seeing in this market, we serve corporate CFOs, whether you're a bank CFO or you're a corporate CFO. And typically, you're looking about -- you have a treasury management solution that we've potentially sold to you.

Then you're looking at how do you optimize your cash flow payments. And how do you make -- get customers to make payments to you more quickly. So whether it's accounts receivable, accounts payable, integrating all that together in a cash flow -- one of our cash flow solutions capabilities and into your treasury management solution is really what the office of the CFO is all about.

And so we've had these capabilities, quite frankly, spread across the firm, and we've sold them individually. And what we're seeing is if we bring them together and package them and we really put some integration together in them as well as some AI because this is where we've really enabled some treasury ChatGPT capabilities, some AI-enabled cash flow capabilities for our CFOs. We're seeing a very big uptake in the sales of those as CFOs are continuing to really want to automate and speed up their receivables or slow down their payables or be better cash flow forecasters.

So, all of those assets together, we're bringing together, and it's hitting the market at a time where that market is quite dynamic in terms of its growth and the competitors in it.

Great. So maybe a few minutes ago, you alluded to the bank consolidation activity and how that's sort of a tailwind for you. And while that can be a tailwind, I think that's also sometimes an opportunity for clients to reevaluate their tech stack. Can you talk about your positioning on that front and why you feel positive about that being a tailwind for FIS?

Yes. So I think that every time a bank consolidates and whether FIS is the buyer or the seller, it creates an opportunity, to your point, Vasu.

I will say typically, if the acquiring bank is with FIS and is the much larger bank, the sole bank will consolidate into the acquiring bank. Because when you think about the CEO of the bank and the Boards of the bank, typically, they're doing those transactions and they're assuming there's going to be a ton of synergies. And they want to get to day 1 and have a seamless consumer experience. So typically, they'll take the smaller banks platform and put it on the big bank platform. We tend to serve larger financial institutions. So we tend to be on the winning side of that. So we believe that to be a tailwind.

That said, we also lose on that side as well because some of our banks are the smaller ones that get sold to the bigger ones. But broadly, we think it's a tailwind for us because we tend on average to be in the bigger bank. We have seen a lot more transactions this year. And I'm happy to report that when we are typically on the bigger bank side, almost 100% of the time, they will choose us.

Now where it tends to be the flip is or where it can go either way is when it's a merger of equals. And that's when we really have to show up and do our best, we try to do our best all the time, but that's when it can get very competitive. So if two banks merge of equal size, then we have to make sure that we're showing up and presenting the products and the solutions to the new management team, and that can go either way.

What we typically -- where we typically win again is we have really best-in-class commercial banking capabilities, whether it's our commercial banking core, our money movement capabilities, our digital capabilities. And typically, if you're a commercial bank, you end up being bigger, and so that is one of our biggest value props when we're selling to a bank and they're merging of equals.

So as we think about the bank M&A that's happened in the market where you might have some tailwinds, is that still on the come in terms of the revenue trajectory that we'll see from that?

No, I think we have that all generally baked in.

Got it. The Issuer acquisition, that's now expected to close a little bit sooner in the first quarter. Can you remind us of the strategic and financial benefits you're expecting that will bring to FIS? And then what should investors expect in terms of timing of some of the synergies and when they will start to become apparent in the numbers?

Yes. We couldn't be more excited about the TSYS Issuer transaction. As you said, we do expect it to close in the first quarter. I'll start with the strategic benefits, and then we can kind of go into the financial benefits, which is cash flow, cash flow, cash flow, but we'll come back to that in a second.

So, strategically, I'm happy to tell you that FIS and TSYS have had a long history of trying to do this transaction. I think both management teams over the last 10 years would tell you that they thought these assets should come together. TSYS has a fantastic best-in-class credit card processing platform. FIS does not have a large bank credit card processing platform. We've always just served smaller community banks in the U.S. TSYS also has a very big global credit card processing capability, and we don't have anything outside the U.S. from an FIS standpoint.

So, for us, it is a perfect product add because the majority of our clients, we know and serve each other's clients. Today, we go to market and we serve them. We just go without a large bank credit card capability, and they go and they sell without any kind of debit or core or merchant acquiring capability.

So we think bringing this all together makes it a much more valuable proposition because, quite frankly, we have other folks in the market that sell that bundle together, and it's quite a valuable bundle. So we're very excited about that for our customers.

I think also something more exciting is the amount of accounts -- accounts, clients, data transactions that we will have going across our platform after we close this transaction is absolutely amazing. And when you think about that, what clients are really excited about talking to us about is, great, I want you to give me my credit card data, my core data, my debit card data and all my money movement data real time and give it back to me. These are large financial institutions and/or help me build a small language model on top of it. So there really hasn't been a vendor that has had this level of data of their data to enable for them. So they're really, really excited about talking to us about that. I think that's something we'll be exploring with them as we think about adding to the product capabilities.

Now coming back to the strategic value of the issuer processing acquisition, it really is around -- we had 45% stake left over in Worldpay. It was a noncash generating earnings stake. And so we were able to sell that 45% of that and trade it for the issuer business. which is 4% revenue, accretive margins to FIS and creates a significant amount of cash flow once we get that debt paid down. So it is a humongous cash flow generator for us at FIS. So strategic product value, strategic client value and then creating a significant amount of cash flow for the firm has been really a home run for us.

And in terms of the timing of when these synergies start to show up in the numbers?

You sound like James. Okay. So synergies, the great news for us is we feel like the synergies that we put out are fairly modest, both in terms of revenue synergies, which I think we talked about $50 million of revenue synergies by year three with $150 million annually. I always get nervous about revenue synergies transparently because they're the hardest things to get. I feel really good about them, though.

More importantly, the cost synergies are more around facilities consolidations, capabilities that both sides of the business have. It's less about duplicative technology organizations. We don't have them. It's less about duplicative sales organizations. We don't have those. So the synergies are much easier. And in terms of the totality of the deal are pretty modest. That being said, we're really focused on getting after them very hard, very fast in the first year.

Great. Just one I have to ask, large-scale M&A can be challenging to integrate. So what are some key KPIs that you will be tracking to ensure the success of the deal over the first 24 months?

So this is an interesting question for me because I've been on both sides of this. I've been the acquirer in a large-scale transaction where Vantiv bought Worldpay. And then I've been the acquiree when FIS bought Worldpay. And I think that transparently, the revenue and expense synergies are the easier part of big transactions. They really are. The harder part about big transactions is can you capture the hearts and minds of the collective new company. And so KPIs that I use, revenue and expense synergies is easy.

So sales pipeline, how many products we sold, how many customers we sold, put it in people's bags, that kind of stuff, very easy. tracking cost synergies, very easy. Figuring out and making sure that we actually have put together and that the new acquired company has bought into the ultimate culture, that's transparently much harder.

We just had the issuer processing senior leadership team with us in Jacksonville yesterday. And the thing -- and both of us have talked a lot about how similar our cultures are. So that's one thing as I've come into transactions. First of all, you have to understand that being acquired is -- you go through a life cycle and it's hard. And I'm very empathetic to that because I've been through that. And then secondly, you have to make sure that culturally, you are a close fit. You can't be perfect. Everybody is different.

The nice thing about the Issuer Solutions business and the FIS business is that we serve the same client base. We serve financial institutions. The way we serve them is similar. We care about our clients deeply. They have a fantastic client service model. Resiliency is absolutely critical. So they're also very client-centric. So what they care about is the same things that we care about.

Now we're going to nitpick around your model, our model, my model, who's ever model. That will be hard. But the culture piece transparently is one of the harder things, I think, from a KPI standpoint to measure. And so for me, personally, I get involved in the people side of all of it to make sure that I'm actually talking to the 2 and 3 downs and the new company to make sure that we aren't getting organ rejection.

Great. That's good color. Maybe switching gears to capital markets. That business saw a bit of a slowdown earlier this year, but that has since rebounded. How are you feeling about the forward growth trajectory there and the key growth drivers in that business?

Yes. So, capital markets, great business. Again, another fantastic TAM. The team there has done a great job growing their organic business and really thinking about taking their monolithic pieces of software, componentizing it, offering it in an as-a-service way and then figuring out how to -- if you want to do sophisticated commercial lending and you want to do that in a bank or if you want to do that in private credit and moving and taking those products and making them available across the financial services spectrum as we're seeing everybody kind of merges around the products and solutions they want to sell.

So they've done a fantastic job at that. We did, you're right, get caught up a little bit this year post Liberation Day on loan syndication falling off in the second quarter that impacted capital markets. We were happy to report in the third quarter, it's back. For the full year, we just won't make up that quarter of loan syndication activity.

Great. Maybe we can talk about your M&A strategy a little bit, how the tuck-in acquisitions fit into your strategy and long-term vision for growth.

Yes, happy to. So, I would say, again, the growth algorithm is really about how do we continue to serve our existing set of clients, which is quite large and vast, selling our existing capabilities. I mentioned like in banking, 23 products, how do we get it to 24 to 25 to 26. Well, in order to do that, you continue to invest in your existing products and sell them something new that they need. Let's talk about continuing to expand the digital capabilities or -- and we also look at acquisitions that could also enable more revenue growth, higher-margin revenue growth, putting it in that distribution channel, getting the revenue booked on the transaction and accreting more margin. So it is very important to part of the thesis.

That being said, it is an opportunistic strategy. All to say, we don't use it as we have to use every dollar of it every year. It is more focused on what do we think the customer -- what do we think -- how does the customer -- what products and services do they need where we can serve them organically first. And then if we think there's a market and there's a really a big market need there for our customer, and we can't deliver it fast enough because remember, we're in a pretty dynamic, then we will go out and buy it.

Now when we look at M&A, and again, I would really push that it is opportunistic, and we do look at it from a return standpoint, we get immediately first back to culture. So does this company that we're buying, are we -- do they want to be bought? Are they comfortable working in a big company? Are they excited about global distribution? They're all excited about global distribution by every small company wants us to sell their stuff. But you have to really look at that.

I think the other thing that we really pressure test is, is the product scalable? Because when we put it on our platform, we're going to sell it to 15,000 clients. And so can it scale? And we can make it pretty scalable.

So our M&A strategy is really focused on that. But again, it's focused on returns first and making sure the fit works, and we're obviously focused on organic before we would do any M&A.

And then if you think -- we were thinking about any specific areas within banking or capital markets where you feel like there's an opportunity to buy a product and scale it? Like are there any specific areas you're seeking out?

I continue -- I'll sound like I'm repeating the same thing over and over. I apologize. Digital payments, continuing to anything around hauling out the core digital payments, digital payments, digital payments.

That makes sense.

I think -- so on the capital markets side, lending. So really trying to build out that lending capability, we think is very valuable.

You talked a lot about AI on your last earnings call. Can you give us some examples of what you are doing and what the benefits are? And do you view AI as more of an opportunity or a threat?

Well, that's a great question. I'm always optimistic, so I always think of it as an opportunity, but there are places that can be threatening. For us, we are doing with AI just like every other company -- I might say this, I've never seen banks adopt technology faster in my entire -- however long you said I've been 25 years. sounds better than what it really is. They typically don't adopt technology quickly. They've adopted this technology faster than I've ever seen.

Where they're adopting it in financial institutions is more around places where they just have a ton of cost. So underwriting, deposit operations, KYC, KYB, et cetera. And so there continues to be an opportunity for us because those capabilities surround our core banking applications. So we're really interested in leaning into that.

But I would say where we've spent a ton of time today or over the last 18 months is in our own back office, doing what they're doing, which is how do we deploy copilot, et cetera, make our developers more productive, yes, continue to focus on that. Very, very helpful as you think about investing in yourself organically. We've really focused it with my Chief Client Officer in the client experience. So if you think about, again, productivity, but more importantly, how do you serve a client faster, which makes them want to sell -- buy more things. So we've deployed a ton of work in our AI agents, and that's been more around how do we help our human agents serve our clients better. That's been really successful, and we'll continue to lever that.

I think on the product side, we've spent a bunch of time really thinking about which ones of our products we can enable with AI immediately. So when you think about just adding an agent to your product, no one really wants to spend more money on an agent. Where you really see value is when you can make a model or prediction or have some kind of better outcome for your client.

So think about things like where we do cash flow forecasting as a product. We've put in AI capabilities to make those cash flow forecasting products better. Treasury, ChatGPT. So lots of things in the treasury and risk model capabilities within our fraud business where we already had a lot of AI and how do we make our large language models there more sophisticated and block more fraud on the card transactions. So done a lot in the existing product space.

And then to your question on a threat, I think we spend a lot of time trying to think about our end customers and where we think things could be a threat or an opportunity. Agentic Commerce, so think about our payments business and the TSYS acquisition. We will all -- well, maybe we won't all, but my kids will eventually let an agent buy anything for them. And at some point, they will -- the agent will buy something that they will claim they never authorize the agent to buy, b*******.

So at that point, we, as a credit card processor and the debit card processor for our financial institutions need to create some sort of capabilities for them because just because someone tells the banks that they should authorize a transaction today does not mean that they automatically do that.

So I think agentic commerce is potentially an opportunity and a threat. Now I actually view it as an opportunity as we think about bringing TSYS into the fold for us because I think we're uniquely positioned with a pretty significant amount of data there and end clients.

Great. So no conversation in the financial services industry is complete these days without talking about stablecoins. So we have to talk about that. How is FIS navigating the developments on that front? Are you seeing any real appetite from banks -- and are you confident that the partnerships you've announced like the ones with Circle are sufficient? Or could this be an area for M&A down the road?

It's a great question. So we think stablecoin is really interesting, and it is scalable technology. From an FIS standpoint, we are not going to issue a stablecoin. We're never going to compete with our customers. Where we view our value is enabling whatever type of next digital currency a financial institution may want to provide. So we have what we call a money movement hub, which is a piece of technology that is sold into financial institutions that enables them to deliver money movement capability to their end customers.

So think about this money movement hub enables real-time payments, ACH, wire, FedNow, and that's where our Circle partnership is integrated. So think about the Circle, the digital currency capability is yet another capability alongside the existing capabilities today.

We view our role in the digital currency as an enablement factor. And so as we -- as more digital currency capabilities get bought up and more capabilities, banks want to continue to bring them, we view our role in the ecosystem as the infrastructure player, not necessarily a digital currency issuer.

Great. So in the last few minutes, I do want to open it up to the audience if anyone has questions. Any questions from the audience?

Great. I'll keep going. So maybe just one last one for me. It sounds like a lot of good stuff is happening. Momentum is building in both sides of the business, but the stock doesn't seem to reflect that. What do you think investors are missing?

That's a great question. I think they're missing that the algorithm around the FIS fintech and in fintech in general. It really is about a scaled distribution, selling to an existing client base more and more products that you build by your partner, you accrete more revenue at the top. It should naturally drop an EBITDA margin and into a low double-digit EPS. In addition to that, the free cash flow is very significant. I say they're missing that, but everybody in this room is really pretty smart. So there's no way they could be missing that.

I think from an industry standpoint, we're in a tough spot. But I think for FIS, in particular, what I would say is we have some real momentum. We couldn't be more excited about where we are. We feel really good about our pillars, client centricity, innovation and simplicity. We think we've done some pretty transformative things in the firm, both in terms of separating Worldpay and then being excited about bringing TSYS on. And we'll continue to be transformative in the way in terms of positioning this company so that it can continue to be a very big powerhouse in the industry, serve our clients and be a double-digit earnings provider.

Great. With that, we'll just end it right here. Thank you so much, Stephanie, for

Good day, and thank you for standing by. Welcome to the Fidelity National Information Services Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, George Mihalos, Head of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today for the FIS third quarter 2025 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.

Joining me on the call this morning are Stephanie Ferris, our CEO and President; and James Kehoe, our CFO. Stephanie will lead the call with a strategic and operational update, followed by James, who will review our financial results.

Turning to Slide 3. 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. Also, throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, adjusted net earnings per share and adjusted free cash flow. These are important financial performance measures for the company but are not financial measures as defined by GAAP. Reconciliation of our non-GAAP information to the GAAP financial information presented in our earnings release.

And with that, I'll turn the call over to Stephanie.

Thank you, George, and good morning, everyone.

I'm very pleased to report we delivered strong third quarter results that exceeded expectations across our key operating metrics. Our performance demonstrates real momentum across the business, with adjusted revenue growth of 6.3%, adjusted EBITDA margins of 41.8% and adjusted EPS of $1.51, up 8% year-over-year. These are great proof points that our future forward strategy is working. By leveraging our strong foundation, executing to deliver profitable growth, and allocating capital with discipline.

Let me walk you through what's driving our strong performance. This quarter's 6.4% recurring growth demonstrates the success of our commercial excellence initiatives. We achieved sequential margin improvement of approximately 200 basis points, driven by strong segment profitability across both banking and capital markets. Adjusted free cash flow conversion was 142%, enabling us to increase our share repurchase target to $1.3 billion for the year. These results demonstrate the strength of our execution and validate the strategic investments we've been making to position FIS as a technology company at the forefront of financial services innovation.

During the quarter, we returned $509 million to shareholders across share repurchases and dividends. Most importantly, we're entering the fourth quarter well positioned to achieve our full year 2025 financial goals and move into 2026 with real momentum. Based on our performance and visibility, we're raising our full year outlook for revenue, EBITDA and cash conversion.

Turning to Slide 6. Now let me talk about what we're seeing in the marketplace. Bank technology spending remains strong, and our clients are prioritized to spend across our high-growth verticals. We digital solutions, payments innovation and lending modernization. We anticipated that AI would transform financial services, but the pace and depth of adoption have exceeded our expectations. In fact, industry surveys indicate that more than 3 out of 4 banks have actively launched our piloting Gen AI and agentic solutions, a market increase from just a year ago. Our clients are leaning in and asking us to help shape their AI journeys, viewing us as a strategic partner. Data powers the algorithms that underpin AI, and for this reason, FIS holds a foundational advantage with over 200 petabytes of data, powering on average 20-plus products per client across the money life cycle. This advantage will grow significantly post acquisition of the credit issuer solutions business, adding almost 1 billion additional accounts to our platform. As the operating environment for banks continues to improve, they are investing with confidence. Consumer spending patterns support this optimism. Debit and credit card spending remains resilient year-to-date, and we're seeing strong account growth across our bank clients. Year-to-date, FIS core accounts are up mid-single digits as our clients continue to grow. We are also seeing an acceleration in bank M&A across the market. The third quarter had the highest level of quarterly bank consolidation in 4 years, driven by a more favorable regulatory backdrop. We expect industry consolidation to continue to be a long-term tailwind for FIS. We're the vendor of choice for financial institutions positioning us to benefit as the industry consolidates and acquirer seek scalable, enterprise-grade technology partners. The acquisition of Credit Issuer Solutions, which we now expect close in the first quarter of 2026, will further strengthen our offerings, providing us with scaled credit processing capabilities.

Finally, let me address pricing directly. The pricing environment remains stable. Net pricing has been a tailwind for us year-to-date across both banking and capital markets, supported by a continuous product, feature and functionality enhancements that strengthen our value proposition with clients. We operate in a rational market, and we're confident in our ability to continue to price for value.

Let's turn to Slide 7. Our strong execution and laser focus on helping our bank clients is translating into high-quality sales performance across our business. Our sales pipeline, annual contract value, or ACV, has expanded 13% annually since 2023. And we're deploying AI early in the marketing to sales cycle for lead generation, making our go-to-market motion smarter and more efficient. Renewal retention has also shown steady improvement of approximately 3% in 2024 and 2025. This is a key driver of the accelerating banking growth we are delivering. Net pricing has contributed 60 basis points of growth on average over the last 2 years as we continue to price for value. And in 2025, both segments will have a positive pricing contribution for the year. Recurring ACV, the fuel for future revenue growth has compounded annually at 11%, with particular strength in verticals such as payments, where our network solutions and Money Movement Hub are driving outsized sales growth. Our strategic investments are paying off. Taken together, all these improvements across our sales engine are fueling the durable recurring revenue growth acceleration we're seeing across our business.

Now turning to Slide 8. We are translating this market momentum into sustained growth in our banking segment, which remains the cornerstone of our business. At Investor Day, we outlined 3 strategic priorities to drive sustainable, accelerating growth, operational excellence, core and digital and payments. On operational excellence, we're maintaining our relentless focus on client experience and sales execution. Happy clients renew, expand and advocate and the numbers I just shared on retention prove we're getting this right. We're achieving this through our investments in AI, which are fundamentally transforming how we operate and improve everything from client support to risk management to product development, modernizing our solutions to help our clients run, grow and protect their businesses more effectively. We're helping clients run their business through intelligent automation, predictive insights and operational efficiencies of the back office that reduce costs and improve service delivery. We're helping them grow through AI-powered personalization and intelligent decisioning that drives revenue and deepen customer relationships. And we're helping clients protect their business through advanced broad detection, real-time risk scoring and behavioral analytics that stop threats before they impact customers.

Let me next update you on the progress we're making in 2 of our key high-growth vectors. Digital and payments. Beginning with digital on Slide 9. Our Digital business is performing very well with growing traction across both our retail and commercial offerings. The U.S. TAM for digital solutions is $10 billion, growing at approximately 12% annually through 2028. Banks are spending aggressively on digital capabilities and open banking adoption is accelerating. We're capitalizing on this by embedding AI-powered capabilities such as predictive insights and hyper-personalized recommendations into our Digital One platform to deliver a more seamless intelligent digital banking experience. Clients are also prioritizing solutions with seamless integration and robust API connectivity, which are core strengths of our platforms. We've seen over 30% growth in users across our digital platforms, and we see this as a growth engine for our banking segment for years to come. We also had significant competitive takeaways this quarter.

SMBC MANUBANK, a U.S. subsidiary of Sumitomo Mitsui Bank Corporation, selected our commercial online banking offering, Dragonfly, to help the bank better service enterprise customers. This win displaces a monoline digital competitor and underscores the rationale behind our targeted M&A strategy. As year-to-date, our sales in commercial digital solutions have nearly tripled, with our win rates improving by 13 points with Dragonfly. During the quarter, we completed the acquisition of amount, an AI-powered preform providing seamless unified digital account opening capabilities. This acquisition is a perfect example of how we are using AI to help clients grow their business. Amounts Platform fundamentally changes how banks acquire and onboard customers while helping to grow revenue and reduce friction and risk. And we've hit the ground running, signing 7 new deals since closing the acquisition and expanding our relationship with a top 10 U.S. bank.

Now let's turn to Slide 10. Payments is the other major growth driver and the momentum here is equally compelling. We're operating in a $53 billion U.S. TAM that is growing 5% annually. Card issuing debit transactions remain robust at 6%, providing a steady foundation. But the real market acceleration is in instant payments and digital currencies, which represent the future of money movement and areas where FIS is strategically invested. The complexity of this growing market is creating new opportunities for FIS as banks increasingly rely on us to help them navigate the changing landscape. And we're seeing this in our sales performance. Our payment sales have been outstanding. 53% recurring sales growth year-to-date and a 5% improvement in win rates, in addition to traditional debit and credit offerings, we are leading the way in alternative payments with modernized cloud-native solutions like our Money Movement Hub, which is our core agnostic real-time payment gateway for our clients.

Launched just a quarter ago, we're already seeing strong traction with over 40 new clients signed. Additionally, the NYCE network has been a particularly bright spot, with sales more than doubling in a pipeline growth of 3x versus last year. Here again, AI is a critical differentiator. Fraud is one of the biggest threat facing financial institutions today. We're using machine learning and behavioral analytics to detect and met fraud in real time across billions of payment transactions daily. We also continue to expand our capabilities and geographic presence. We recently acquired Everlink to strengthen our payments offering in Canada. And the credit issuer acquisition will add scale in both U.S. and international credit processing and significantly higher cash flow when we closed that deal in the first quarter.

In closing, let me bring this all together. FIS delivered a very strong quarter that exceeded expectations. We're seeing favorable market conditions, and we're executing on our strategy as a technology company at the forefront of financial services innovation. This isn't a one-quarter story. We're building sustainable, profitable growth on a foundation of operational excellence, product leadership and client partnership. We're confident in our trajectory and are raising our full year outlook.

With that, I'll turn it over to James to walk through the financial details.

Thank you, Stephanie, and good morning.

I'll begin on Slide 12 with a summary of our financial results. We had a great quarter, exceeding our outlook on revenue, EBITDA and EPS. Revenue grew 6.3% to $2.7 billion, driven by outperformance from our banking business and strong recurring revenue growth across both segments. Adjusted EBITDA grew 7.1% with margins expanding by more than 50 basis points. Margins were up nicely in both segments, led by strong execution across our cost-saving programs. Adjusted EPS increased 7.9% to $1.51, led by strong operating growth.

Turning now to free cash flow. Moving forward, we will report on both adjusted and unadjusted cash flow measures, and I'm happy to report that both are performing well. As we've messaged on prior calls, we are running extensive cash optimization programs, and we drove significant improvements in the third quarter. Free cash flow was $800 million in the quarter and more than doubled year-over-year. Adjusted free cash flow was approximately $930 million with cash conversion coming in at more than 140%. While we anticipated a cash conversion of over 100%, the outperformance was driven by accelerated working capital actions, particularly strong results from our accounts receivable initiatives. Capital expenditures were 7.9% of revenue in line with our expectations. On a year-to-date basis, cash conversion was 91%, and we now expect full year cash conversion of more than 85%. And we are well positioned to deliver on our 2026 Investor Day goal of 90%.

Leverage remains steady at 3x or 2.9x excluding the impact of currency fluctuations. We returned over $500 million to shareholders, including $300 million of share repurchases, and we recently increased our annual target for share repurchases from $1.2 billion to $1.3 billion.

In summary, we outperformed across all key metrics. Strong execution is driving high-quality growth, and this gives us great confidence as we look forward to 2020.

Turning now to our segment performance on Slide 13. Adjusted revenue and recurring revenue both grew 6% with strong recurring revenue growth from both segments [Audio Gap] exceeded our expectations in the quarter. Revenue growth of 6.2% was well above the high end of our range, reflecting strong core growth and an MAA contribution of 150 basis points. The performance was led by recurring revenue growth of 6% with strong transaction growth across our payments business in addition to strength in digital banking.

Nonrecurring revenue increased 8%, mostly due to card personalization and deconversion fee timing. Professional services accelerated to 6% growth and net pricing was positive in the quarter and on a year-to-date basis. Banking EBITDA margin expanded by 68 basis points, primarily due to a rising contribution from cost saving programs. We expect these positive trends to continue into the fourth quarter and drive even stronger margin expansion.

Turning now to capital markets. Adjusted revenue growth of 6.4% came in close to the high end of our expectations. M&A contributed 130 basis points, consistent with prior quarters. Recurring revenue grew 7.6% as we saw a rebound of lending activity and stronger momentum in our treasury and risk businesses. Nonrecurring revenue increased 12.6%, reflecting strength in license sales.

Lastly, professional services declined 5.6% due to the timing of some engagements. Capital Markets EBITDA margin expanded 60 basis points, reflecting higher cost savings, accelerating growth in high-margin recurring revenue and higher in sales. As with banking, we expect segment margins to expand in the fourth quarter.

Moving now to Slide 14. Year-to-date results are strong with both adjusted revenue and recurring revenue growing over 5%. Banking growth of 4.8% is in line with our increased outlook, and we are confident in delivering a strong fourth quarter. It's a similar story in Capital Markets with year-to-date growth of 6.6% aligned to our full year outlook. Overall, we delivered good results across both segments, and we are executing well on the second half revenue acceleration and margin expansion that we guided to earlier in the year.

Turning now to our increased full year outlook on Slide 15. We are raising our ranges for revenue and adjusted EBITDA to reflect the stronger operating results and the recently closed amount acquisition. We are raising our revenue range by $65 million at the midpoint, resulting in an adjusted revenue growth of 5.4% to 5.7%, well ahead of our Investor Day outlook.

For banking, we are increasing our revenue growth range from 4% to 4.5% to 4.9% to 5.3%, an increase of almost 1%. The recently closed amount acquisition is expected to contribute around 20 basis points of additional growth with stronger operating performance driving the remaining 65 basis point increase. For capital markets, we are updating our outlook to approximately 6.5% to better align with the performance we have seen year-to-date and reflecting a tough comparison in the fourth quarter. We are raising our full year EBITDA outlook to reflect our third quarter performance, and we are updating our margin outlook to include the impact of M&A. Importantly, we are confident in delivering margin expansion across both segments in the fourth quarter.

Lastly, we are tightening our EPS range by $0.02 and reiterating double-digit growth of 10% to 11%. Consistent with prior quarters, we have provided updated modeling assumptions in the appendix.

Before closing, I wanted to reiterate some points related to the coming year. While tuck-in M&A tends to weigh on margins in the short term. The M&A deals signed in 2024 and 2025 will be accretive to FIS margins in 2026 with further margin benefits in the out years. Because of this and combined with the underlying margin profile of the business, we are confident in delivering margin expansion of greater than 60 basis points in 2026. As you can see, we are driving improved cash conversion, going from 77% in 2024 to over 85% in 2025, and we are on track to deliver 90% conversion in 2026, as our cash optimization initiatives continue to bear fruit. Overall, we are seeing positive revenue trends across the business, and we have good momentum as we exit the year.

Lastly, we're excited the credit issuing acquisition is expected to close in the first quarter of 2026 and continue to expect the transaction to be accretive in the first year and add $500 million of free cash flow in 2026, rising to $700 million post integration.

I'll conclude on Slide 16. In summary, our third quarter results were ahead of expectations, driven by strong recurring revenue and margin expansion from both segments, and we are increasing our revenue and EBITDA outlook for the year for the second time. Free cash flow was exceptional in the quarter, and we are increasing our 2025 cash conversion target to over 85%. We returned over $500 million to our shareholders, and we've increased our full year target to $2.1 billion.

With that, operator, could you please open the line for questions.

[Operator Instructions] And our first question will come from the line of Jason Kupferberg with Wells Fargo.

Nice to see these numbers. Your commentary, clearly on the health of the end markets for banking sounds quite positive across the subsegments, both from a demand and pricing perspective, definitely reassuring. So I'm wondering if that translates to a more bullish view on how fast you can grow the banking segment structurally over the next couple of years. I think at the Analyst Day, we talked about approximately, call it, 3% organic growth for banking is a medium-term target, but clearly, you're performing above that level currently.

Yes. Thanks, Jason. Yes, we are feeling very good about technology spend in banking. As I talked about, banks are spending money on technology in the places that are important to them, and we've been very focused on ensuring that our product sets and solutions are in those right places like digital, for example, like payments, like bank modernization. You're exactly right. We are exactly on or actually ahead in our banking business from an organic basis and with M&A in 2025. It gives us a lot of confidence as we go into 2026 around the banking business. Not sure I'm ready yet to call a higher midterm guidance on banking, but it certainly gives us a lot of confidence as we go into 2026 in terms of the step change we've seen in revenue and banking. And that's multiple things happening at the same time. The end markets are very strong, we're the beneficiaries of large-scale M&A, but most importantly, around commercial excellence, and we gave some of the stats here of how important and how successful that's been as we really have changed our sales force not in terms of -- not only in terms of the leader, but also how we're focusing and where we're focusing there in terms of recurring highly profitable revenue, which is driving both our banking revenue growth as well as helping us change the mix on our margins. So overall, feeling really good about 2026, but I'm not yet ready to call higher midterm guidance there.

Okay. Well, fair enough. But let me ask a follow-up on 2026, specifically. You touched on margins going up over 60 basis points. But from a revenue perspective, should we feel comfortable modeling the numbers consistent with the medium-term guide from the Investor Day? And just, James, any one-off headwinds or tailwinds on revenue we need to be mindful of either at the segment level or for total company for 2026?

No. I think as Stephanie said, our banking is sizably outperforming and capital markets. The only thing I think you should consider is our guide longer term included the impact of acquisitions. So effective once had a issue or close this, we won't be doing any [indiscernible] acquisitions. So that will kind of pull down a little bit the capital markets. But I think you hit the nail on the head. The banking business right now is clearly outperforming, and we've now had 3 quarters of -- we've now had 3 quarters of above. I would say on an organic basis, the recurring is around 4.5-plus percent. So that's a really positive one. And I think -- so I think overall, we're super comfortable on the revenue trajectory. I think capital markets probably a little lighter in banking just generally stronger. And I think the overall business, what I think you will see is our recurring revenue is much, much stronger. And Stephanie has covered it in prior occasions. There's a big shift in quality as we work through driving the ACV in the current year. So think about a business model now that is -- we're currently above 80% on recurring. The focus going forward is more and more recurring, less nonrecurring and professional services. And then within the recurring a much greater tilt to higher margin products such as the payments category, digital, the core business. So I think it's also a strong quality discussion for next year.

And that will come from the line of Darrin Peller with Wolfe Research.

It's good to see the organic banking trends in that mid-4s -- mid- to high 4s range we're seeing now this quarter. And I think embedded in your guide for next quarter, if I'm not mistaken. Maybe just Stephanie and James, if you could just give us a little more on the building blocks. You started touching on it in your slides around issuing and paying digital payments and then core. A little more color on what you're seeing in each of them, specifically in terms of growth that's driving that trajectory just to ensure we know that's somewhat sustainable going forward would be helpful.

Sure. You're exactly right. We're feeling really good about the organic banking revenue in the mid- to high 4s. We, in Q3, and then the guide expresses that in the fourth quarter and like we talked about, feel good about that going to 2026. I think the way to think about it is really around making sure that we are selling, so our net new sales is delivering 100 -- about 100 basis points every year of growth for us. As we think about where that growth comes from, we're really taking advantage of our investments that we've made both in terms of organic and inorganic in driving new sales into the higher quality. So I think bank modernization and continuing to drive growth out of our core business, really leaning into our digital business as banks continue to invest in their digital capabilities to drive both new business into the bank as well as service and then in payments. So if we focus there and we think about that on an annual basis on a net new sales perspective, driving about 100 bps in those categories, then it fully supports what we would typically see around organic, the organic overall base of the banking business, which, as you know, is a combination of transactions going across the platform from a games perspective, and then accounts on file to think about more accounts coming across on core and digital and that gives us a lot of confidence around what we've historically seen with organic in terms of 2 to 3 points of growth every year. So you start with your new sales and make sure you're selling in the categories that are higher quality, higher recurring with higher organic growth in them, and you get a net new sales number of about 100 basis points, you get organic growing for you on 2 to 3 points per year. And then you come down to a net pricing capability, which we've been talking about anywhere from 0 to 50 basis points per year, and we're really starting to see a tailwind in that. So overall, if you think about the basic building blocks of banking to support kind of a 3.5 to 4.5 range, that's how we think about it. And for us, it's really been about making sure we focus on the mix of what we're selling, so we can get that really strong organic growth, and we can deliver the profitable margins that go down at the segment level.

Okay. Stephanie, that's helpful. I guess one quick follow-up, James, on free cash. You're talking constructively about what we're seeing now and into next year, 90% plus. Obviously, that's adjusted when you consider the deal you're going to be closing soon in first quarter. And so just help us understand how you're going to think about segmenting out what, I guess, will be some restructuring charges and how close we can get to that, let's call it, 80% plus even with some of those restructuring. Just want to know the quality of free cash that we're hoping for next year.

Yes. I think it's a little bit early to give precise numbers on the acquisition we didn't give them before. But the way I think about it is we -- on the core business, we're going to exit this year. And I think if we hit the 85% guide, we're talking about free cash flow growing roughly 15% to 16% year-on-year, so outpacing EPS. And on a GAAP basis, it's the same number. So GAAP is trending in line with adjusted. So that's the first thing. And we'll exit with a healthy 85% conversion. And then I'll get into some building blocks on the base FIS, so I'll cover that first. One is a slightly lower capital intensity next year will drive incremental cash conversion. And then the other thing is this year, we've been hampered all here by higher cash taxes in the current year compared to last year, but pulled down conversion. That normalizes next year. So literally, by addressing capital intensity and the tax rate just naturally flows through, we're really comfortable about cash conversion. There is probably even slight upside to that because our working capital programs, you've see in the third quarter, we significantly outperformed. We pulled a little bit from prior quarters, and we executed strongly against the programs themselves. So we're feeling really, really comfortable on the deal on the base. During diligence, we went through their business. They're roughly at a 90% conversion as well. So we're going to add to 90s together. I think it's a little bit early on the onetime expense, but think about, you could take our cash flow today on an adjusted basis. You increase it probably at a faster pace increase and at a faster pace than the EPS growth. You add on $500 million of adjusted cash flow coming from the issuer business. And you're going to get a substantial step-up in cash flow we do need to absorb some incremental onetime expenses coming from the integration. It's too early to call that number. So -- but I think you will see a strong year on both adjusted and GAAP free cash flow next year.

And that one from the line of Tim Chiodo with UBS.

I think the 2 of the key numbers, at least for next year, the 60 bps plus on the margin expansion. And then the free cash flow conversion, both on the adjusted and the non adjusted. I think we just covered the free cash flow quite well. Maybe we could dig into the margin expansion a little bit in terms of moving parts. We know there's kind of a lower exit run rate of costs this year. There's the TSA headwind this year, which I believe is 70 bps margin that will be a lesser headwind next year. Maybe you could give an update on that and then the associated cost savings. And then you already mentioned, but maybe dig into a little more on the accretion from the past few years, smaller M&A deals and starting to contribute a little bit more to EPS -- or sorry, to EBITDA next year?

Yes. So thanks, Tim. I'll start and then I'll let James kind of get into the nitty-gritty of the numbers. You're exactly right. So in 2025, we have had some dilution overall on an EBITDA margin standpoint even though we've been able to care for it in the absolute dollar from M&A, which we've been very clear about, and we feel really good about that becoming accretive in 2026. So we will not have that headwind feeling really good about that. So that's number one. The second is, you are right, the TSA this year for us, and both of these were very well known as we went into the year, the impact of oil pay separation and the TSA revenue going down is impacting our margins because as those revenues go away from us and the costs go away from us, we have -- it takes us a little bit of time to get the cost out of the system. So we're in a benefit as we move into 2026 from no longer having those growovers we'll have moved the M&A into an accretive position we'll have taken the cost out from a TSA standpoint. And then you can see in the third and fourth quarter, we've moved significantly in terms of margin expansion in both the banking and the capital markets businesses in Q3, and what we're guiding for Q4, which is exactly what we had expected as we're executing against our future forward savings in terms of both making sure that we're selling high-margin recurring revenue we have quality of revenue and then also making sure that we are taking out cost as we reposition the company as we have separated on Worldpay. So those are very strong tailwinds for us as we move into 2026. James, any other comments you might make?

Yes. I think definitely kind of covered them. So principal one, it's easy to conceptual. I assume the M&A tack-ons this year, that cost that pulled us down by about 45 to 50 bps this year. Rough numbers, it will probably be slightly accretive next year, probably 10 bps. So a headwind disappears completely, and that gives you a lot of confidence in the next year because we're not doing tack-on M&A next year. The DSA is like a 50 bps negative mix this year. That's not going to change very much next year -- sorry, this year, was 50 bps. It's roughly the same number next year. So that doesn't change anything. Where the change is coming from is what Stephanie said, it's the quality of the mix of the ACV that sold already this year has substantially pivoted, and there is a stronger pivot to core digital and the payments business, and those margins are north of 50% compared to some of the categories that are growing slower. So we're going to see a natural favorability come from revenue mix I want to emphasize that the banking margins are -- you've seen it in Q3, the banking margins have recovered strongly. It will be even stronger in Q4. And then the final one, the biggest lever we actually have and the one that's been pulled quite strongly in the second half of this year. And what we said this at the beginning of the year would have been a first half, second half story. You're seeing it come true now. There's a reason why the margins are up in both segments in Q3, and we're projecting in Q4, that's the strength of the cost programs. So their second half loaded, which means we'll start next year very strongly out of the gate with the level of cost reduction. So 3 drivers, the M&A less dilutive, the natural product mix and the quality of the ACV sold this year. And then the third one is the cost programs will probably give you even more tailwind next year compared to this year.

Great. If you don't mind, just a brief comment on any of the debit work pricing environment just given it's been a little bit of an investor topic over the past week or so. If there's anything you could comment around pricing environment related to NYCE.

Well, I would say, on a pricing standpoint, broadly, you heard me say, and I do want to reiterate that we live in a rational pricing environment. I know there's been a lot of commentary around it. And I really -- we really tried to give some good stats from us. I think overall, we are in a rational pricing environment, whether it's new business and whatever product. We obviously -- we have some great competitors, and we obviously all compete with each other. But I don't see an irrational pricing environment, whether it's in any of the products and in particular, in NYCE. So we're happy with NYCE's performance. Generally, as we've talked about, the strong performance for us, it's been more around adding more account volume to the platform, which is about winning more merchants onto the NYCE Network. That's not a pricing per se issue. That's how do you deliver value out to those merchants and lease cost routing. So the pricing comment I can't really make in terms of what's going on in the competitor. But I can tell you, we're -- we feel really good with where we are with NYCE, the value prop it provides out to the merchant community and the issuer community in terms of delivering value there. And it's not something that you can just immediately drive price up or down and create a onetime benefit, but I'll leave it there.

That will come from the line of Trevor Williams with Jefferies.

I wanted to ask on some of the competitive dynamics in core processing. One of your major competitors is consolidating the number of cores, they're running down by about 2/3. With a process like that, is that potentially a catalyst for banks to open up to an RFP. I'm just wondering how much of a potential opportunity that's either presenting could present for you guys to win new business?

Yes. So I think overall, you've seen across the industry a bank modernization trend. And this is really being driven by the end markets who are really looking for banks to modernize, drive digital capabilities, account open capabilities, real-time transaction capabilities and these capabilities in order for them to deliver new products and services need to be able to be delivered in a componentized way. So that bank modernization trend is in market and continues to be really important and everybody in the industry is at different places and where they are delivering their products and solutions there. Yes, we have heard about the platform consolidation. As you guys know, we went through that several years ago. We have effectively 3 strategic platforms, and we're really happy with how those are performing, spent a bunch of money to make that modernization happen. You saw that in increased capital and we brought that down over time. Obviously, any time anyone does anything in the market, it becomes a competitive opportunity. But as you know, overall, there's not a lot of core transitioning every year. It's pretty small. There's a lot of stickiness in this business. So we're really happy with our renewal rates. I think we talked about those in the year and increasing how much we've been able to retain our existing clients. So do we think it's an opportunity. Of course, we do. Do we think it's a -- we expect to see a massive swing it's a competitive market, and I think it's a place where there is a lot of renewals and a lot of stickiness to it. So we're happy to compete and continue to focus for our own clients on our bank modernization journey. But we are at the tail end of that in terms of going from many to few and really investing now in terms of making sure that what we're doing is focused on helping our banks deliver products to their clients faster.

Okay. All right. Stephanie. And then just for my quick follow-up, I wanted to ask on the EBT exposure that you have within banking, if it's possible to give us a rough sense for how big that revenue pool is? And if the shutdowns having any impact on that in Q4? And then with the changes in eligibility requirements that are being made at the federal level, just how you guys are potentially thinking about the downstream impact in '26 and beyond to that revenue pool?

Yes. I don't think we've ever given the size of the EBT revenue. It's not overall material to FIS. It is a nice piece of business for us. We don't expect the shutdown to have an impact on the EBT business, and if it does, we would expect to care for it within the guide we provided. We generally get paid on number of cards and so it's not necessarily how much is funded on a card. And generally, thus far, we're seeing cards continue to be active. I think as we think about 2026 and the criterion, it's a wait and see in terms of how much that really impacts the overall business. Again, it's based on number of cards. So if there's fewer cards, we'd obviously earn less revenue. But at this point, we're sizing that out and don't expect it to be a material impact for 2026.

That will come from the line of Dan Dolev with Mizuho.

Stephanie, great results here, as always. Stephanie, you initiated your future forward strategy 3 years ago, and I want to know like how much confidence you have in your investing strategy and rationalizing the business appropriately. And maybe just as a follow-up to that is like how is AI shaping into the investment road map that you put together? And then I have a very quick follow-up.

Yes. Thanks, Dan. So we're very pleased with our future forward strategy. You've seen the benefit of it, both in terms of commercial excellence, and you're seeing worse strong pivoting there in terms of driving high-value recurring revenue, so been focused there, continue to focus on making the commercial excellence part of the company even better with AI. We spent a little bit of time in the prepared remarks talking about how Nasser and his team are using AI to not only increase top of funnel and the sales pipeline, but also to deliver higher productivity in terms of the sales team. So I feel really good about the commercial excellence pillar. And when you come to the client pillar around making sure that we're doing a better job serving our clients and making it easier to do business with us. We are using AI there. So our Chief Client Officer, is very focused on in the back half of this year. using AI to make a much better experience, not only internally for our folks who serve our clients, but also putting tools into the hands of our clients so they can self-serve. And with that, we're obviously getting not only cost savings, and we're feeling really good about those coming into '25, but also really levering up in 2026, but more importantly, much better outcomes for our clients and making happier clients. And we're seeing returns of that in higher levels of retention. And then finally, around innovation. We are really pivoting hard in terms of our overall investment strategy around where we see the opportunities in AI from a product standpoint. And just to spend a little bit of time thinking about that, the base level of AI, and what everybody is wanting to do with AI is you do need to have access to your underlying data. And as you know, given our base systems are primarily ledgers, we do -- and then with the payment systems that have tons and tons of data in them and then very excited about adding the credit issuing business. We're working with our bank customers who really want continued access to their data faster, cleaner and more secure. So we're spending a bunch of time there in terms of investing in our underlying data infrastructure and piloting out capabilities in terms of how we deliver that data infrastructure up and down the stack. I think when you go to regional community banks, we're working with them and really turning our focus on agent workflows to help them automate their back-office operations. We have a major product launch that we're planning at Emerald, which is incremental to our banking assist solution that we rolled out last year. So focused on our banks automate and really drive down back office costs. And then in the capital markets space, focus on our treasury business, we see a significant amount of clients adopting our neural treasury product with almost [ 100 ] clients live now, which is bringing AI to cash forecasting, risk management, payment optimization. So we're seeing through our future forward strategy, both or all around in terms of commercial excellence, client excellence and then really making sure that we can innovate and deliver best-in-class products, and we're seeing AI to were using AI through all of that. Admittedly, we're at the beginning stages of that. And so also makes us really confident in terms of how we end the year and where we're focusing in terms of our investment strategy, whether it's in making the back office more seamless, creating more capacity in technology for us to invest or to make some significant investments in continuing to make our products AI-enabled, we're feeling really good about where we are right now.

That's great amazing. And a quick follow-up, maybe just housekeeping, and sorry if this is redundant for James. Like we're getting a lot of questions about M&A contribution, like organic and organic towards the end of the year and then into '26. You maybe help just make some order there in terms of what to expect from stuff that's been acquired thus far, that would be great.

Yes. We added some disclosures to the current charts that I've laid out. What's the impact in the quarter and on the full year in both of the businesses. So just to reemphasize that the the banking contribution from M&A was 150 basis points in the quarter, and that's 110 basis points on the full year. And I believe we gave the Q4 guide as well for M&A contribution in banking. It's 120 basis points. So capital markets then full year 130 basis points and roughly the same in Q3 and Q4. So we've increased the disclosure going forward. And then as you look at on the -- our call up on the guide, so we called up 85 bps midpoint versus midpoint the impact of the amount acquisition, which wasn't in the previous guide was about 20 bps. So the majority of the increase on the full year guide in banking 65 bps, that's coming from operational execution and strong execution, particularly in the third quarter.

And that will come from the line of Tien-Tsin Huang with JPMorgan.

Good quarter here. Just wanted to ask about the bank consolidation stuff you mentioned it's going to be quite a bit there. You had pretty good visibility or line of sight into being on the side of the larger deals here? When do you expect to get more clarity on that? Could it be enough to impact growth next year, that kind of thing?

Yes. Great question. I mean, clearly, everyone's seeing bank consolidation has certainly picked up in 2025. And we tend to be, as you know, we serve the larger financial institutions. So when we are the -- with the bank that's being consolidated, we have a very high win rate where they pick us in terms of consolidating over to us. And then we have a really good win rate as well. when we're battling with the incumbent provider on the other side. I think you have a pretty good visibility in terms of the 2026 M&A. But to be fair, Tien-Tsin Huang, it feels like every Monday, we have a new announcement. So I say that, but I don't have a crystal ball into what's going to happen through the rest of the year with M&A. But I think we're feeling pretty good as we sit here today.

Yes. No, history says you guys are usually on the right side. I know you got a couple of questions on AI. So going to different conferences definitely. I just want to ask you on digital assets and deposit tokens, things like that. Any interested in investing more there or doing more of their buying infrastructure? Is that on the road map for FIS in your term? I know there's a lot on your plate with the deal coming soon.

Yes. So I'm glad you asked that. We're doing a lot in digital assets and stable point. So in just a couple of comments. One is in Money Motion -- Money in Motion, as you know, we announced last quarter a strategic partnership with Circle, which is enabling money to move across the Circle Platform, and it's connected into our money movement hub. Our money movement hub continues to have and take a lot of -- has a lot of demand in the market. We view ourselves to be agnostic there in terms of whether you want to move money across Circle or a Payment Network, ACH [Audio Gap] payments, et cetera. So that capability is driving a ton of demand, and we tend to be agnostic there in terms of we're not a part of a digital asset in per se. Our job is really to enable financial solutions and financial technology. we've done that Money in Motion. Money at Work in terms of tokenizing assets in the commercial loan and securitization space, we have a first pilot going on with a client to move close to about $0.5 billion on chain to create balance sheet capacity for them via some new technology. So around tokenizing assets, we're investing there and spending some time in terms of how to make that happen for our clients. Again, we're not looking to do something for us ourselves only. And then in terms of tokenized deposits, lots of activity there. We're spending a bunch of time there, and we're actively working through what our tokenized deposit solution needs to be in conjunction with the various of our clients. we are seeing a lot of demand here. And we see -- we're looking to figure out how to enable that capability again. So our strategy in digital, the digital space is really around enablement. You're not going to see us take a position in terms of issuing a stable coin, FIS issuing a stable coin. We're not going to compete with our banks in that way. we want to make sure that we're creating and providing the technology, whether we partner for it buy it or build it to make sure that we have the capabilities we can deliver out to our financial services clients to enable it, we're not going to take a competitive position there. But lots going on, and we have a lot of folks that are keeping a close eye on it.

And do have time for 1 final question, and that will come from the line of Bryan Bergin with TD Cowen.

So Cap Markets looks like it's back on track here. Can you comment on what you've seen in the loan syndication area and then the latest in some of the traditional vertical demand. I'm curious if you're seeing the underlying backdrop in those areas as healthy as banking or somewhat more mixed.

Yes. We are. We're pleased to see the capital markets loan [Audio Gap] is back on track as we had expected in the second quarter, so that's good. So I don't see significant trends negative there as we move into the end of the year. In terms of nontraditional demand, working the same thing that you're seeing private credit continues to be in high demand. The underlying markets, the nontraditional markets continue to be strong. Overall, we see strength in all of the nontraditionals. And as you know, it's been really important for us to make sure that we have our capabilities enabled there, whether you're a traditional or nontraditional. So nothing new, Brian, really to report there, how demand remains healthy.

Okay. Understood. And then in advance of the Issuer Solutions acquisition, you just comment on how prospective banking client conversations are trending? Just curious if there's any updated views on the potential pipeline opportunities just as you bring broader credit into the fold? And particularly, if you're seeing any incremental opportunities and that other challenges to move quickly on those opportunities post close?

Yes. We continue to remain very excited about the opportunities. I would say we're in particular excited about enabling a couple of products at the time that we closed the transaction that can really excite the existing base in terms of cross-sell. But as you know, we know each other's clients really well. We think there's a lot of opportunity to cross-sell, and we're getting a lot of positive feedback about issuer solutions. They like the team there. They think it's a great product. It served these financial services very well. And as you know, this has been a product for us that we have not had. So people are pretty excited about what we can do with it. And just to share a little bit, if you think about the number of accounts that come on file, thinking about bringing back to AI enablement and doing something with agentic commerce, et cetera, it's pretty exciting, the amount of accounts and transactions. We'll be able to see going across credit debit in all of our cores. So we're really bullish about that opportunity as well. And then on their modernization program, excited about getting our hands on that, and what that can deliver for clients, so all positive. Looking forward, to getting them on board with us and getting them in the team and getting going, but feeling really good about it.

That is all the time we have today for question and answers. This concludes today's program. Thank you all for participating. You may now disconnect.

All right. We are going to jump right in here. Next up, we are delighted to have FIS CEO, Stephanie Ferris; and CFO, James Kehoe, with us today. Stephanie took on the new role of CEO in 2022, following roles in senior leadership at FIS and Worldpay. And James has been CFO since 2023, following his position at Walgreens. Thank you both for being here.

Just a matter of quick housekeeping, like Goldman did advise in the unclosed transaction with TSYS and GPN and Worldpay. And so -- and whoever else I'm forgetting. And so we are not rated on all of those entities. And so we're not going to talk about the TSYS deal today. We're going to talk about everything else that's going on at FIS, and we're really excited to do that. So thanks for being here, guys.

Yes. Thanks, Will.

Okay. So I wanted to kick it off just a high-level strategy question. Stephanie, you've been in the role for a few years now. Just update us on what have you accomplished since then? Where do you see as the kind of the biggest change in the organization since taking over?

Yes. So it's been a great opportunity. I tell my team all the time, it's an honor and a privilege to run FIS because fundamentally, it serves financial services around the world. And I think we've all seen through whether it's the pandemic or even what's happening now, the strength of the system is working as we wanted to. So for FIS in particular, we came into -- or I came into this role and really wanted to refocus the company on what its core strength was and get back to focusing on capital allocation, return on invested capital and growing the business in what I would consider healthy ways.

So focusing on financial institutions and financial services, focusing on recurring revenue, focusing on making sure we're maximizing, delivering products in the places where growth is. So think about digital payments and lending. And so over the last couple of years, we've done a lot of transformative things.

The first thing we did was separate the Worldpay business, and we think that's a fantastic business and then did that in actually three steps. So first announced a spin, then a sale of 45% of it to GTCR and then most recently, the sale of the rest of rest -- the announcement of the rest of the sale to Global Payments. So I thought that was pretty important in terms of focusing our time, attention and capital.

And then most recently, doing the final trade of the 45% of Worldpay and really getting an asset that not only was cash generating and really gives us the opportunity once we close the transaction to flip a noncash earnings stake into a cash earning stake. It increases our capacity very significantly to return capital to shareholders as we close that transaction. But probably most importantly and strategically, gives us a credit processing capability that FIS has, frankly, never had.

So we've had credit card processing, but it's been in smaller financial institutions. We generally play in the larger financial institution market. So having that credit card capability and that product set has been very important to us, and we're very excited about that. And then I might say, finally, now thinking about what's happening broadly around the world with respect to Agentic commerce and AI, getting very excited about having debit card core banking and credit card information coming together and what we could possibly do with that for our clients.

Yes. Sounds exciting. And just if we can maybe touch on the macro environment. FIS is mostly a recurring revenue business, but you are exposed to kind of the general sentiment at financial institutions around IT spending as well as whatever the particular flavor of investment is at the time. Have you seen any meaningful shifts in sentiment or in the focus of your FIS clients over the last 6 to 12 months?

Yes. I think it's very positive. So for financial services firms, lots of good things happening. Obviously, the yield curve not being flat is always good for financial service firms. But more importantly, the regulatory environment, in particular, in the U.S. is coming down. Bank M&A is coming back. All of those things are viewed very positively. I think everybody's jury is out on the consumer. But everything that we're seeing from a payments perspective is consistent with what like the likes of Visa and Mastercard are showing you. There's still some consumer transaction and volume growth.

So TBD in terms of what happens with the consumer. But FIS isn't overly exposed to the consumer. And so I would say the broad economic environment for our end customers is actually very positive.

Great. Let's get James in here. You talked about a number of moving pieces in the banking revenue growth guidance in the second half of the year. So you had some moving pieces in the government benefits program, an acquisition, you have several positive grow overs in the fourth quarter of this year and then also FX. So hopefully, I'm not forgetting anything there. It's a lot of things driving some swing factors. Could you just help level set on what the underlying drivers are and just what you're expecting exiting the year?

Yes. I'd say upfront, I'd bring people back to Investor Day. We said 3.5% to 4.5%. And our current guide for the year is 4% to 4.5%. So we're kind of pretty happy about it because we're operating at the high end of the long-term guide. And both the Investor Day and the current had about 1 point of M&A in it. So it's like-for-like, we're doing what we said we would do. So I think that's a little bit lost as we get in the cycle in the individual quarters. We had the shift of the EBT business. So a large proportion was sold in the third quarter of last year, second quarter this year. This is just noise between the quarters.

We've guided now to 3%, 3.5% in banking in the third quarter. That's with the 1 point shift. So part of the 4% to 4.5%. Yes, there is some acquisition in it, but that 4% to 4.5% is remarkably consistent with the full year. So we feel good about the third quarter. What we're seeing so far in the third quarter is we got 2 months close. Banking is stronger than we anticipated. It is performing really well right now. So we're very happy and ultra confident about the 3% to 3.5%.

In fact, it's probably a little on the conservative side. We get into Q4, the implied growth was 5% to 6.5% growth. It did a 2-point roll over. So again, you get this out and all the time coming back to this, this is a business that this year is growing 4%. It's 4% to 4.5% in line with the business model. And on top, the recurring will always be outpacing the adjusted growth.

Let me take you back last year. We did a team last year, and this is going to a 4%. So the performance is clearly scaling up and it's accelerating. Most of this is commercial excellence. It is far higher retention, and we're in the 90s, and we weren't able to say that 18 months ago. So retention is really, really strong and the relationship of new sales contribution coming from a record year in '24 on core sales, we're seeing a higher contribution from new sales [indiscernible].

So I think we're going into next year with a position of strength. Our guide from next year will be solidly within the long-term guide that we set out for the business at Investor Day. So kind of full speed ahead on banking.

That's great. That's great. It sounds very constructive. Maybe if we can shift to some of the go-to-market initiatives that you've had. You recently talked about reengaging the lower end of the market where you've always been a player, but obviously, historically, a bigger player at the upper end of the market. Can you talk about how that journey is going and any updates you can share?

Yes. I think -- so we generally serve banks that are $20 billion and above, but we also have a set of financial institutions that are about $1 billion to $20 billion. And so prior to coming into this role, we had, again, lost a bit of focus on the banking business. And as James mentioned, we really focused on commercial excellence, but also making sure that our product set, which had always been best-in-class was continuing to be best-in-class. And so we have doubled down on our strategic cores in the smaller end of the market, you think about Horizon and have really seen Horizon and then as you move upmarket IBS, those continue to be market share gainers.

And James mentioned selling a record amount of new cores. That was a lot of our smaller cores. So really focusing again, we have a great product set and making sure that we were just reengaging on the commercial side of things, not letting people take our customers, but also selling more of them. And then as you know, it's a game of you sell the core and then you get all of the surrounds, including payments and digital. And so we're very excited about the traction we're making there. And then most recently, we acquired a couple of digital assets. So we're excited about selling those into those spaces as well.

Great. Now you touched on the strategy of going after the core to get all the surrounds. And I know that's been a big focus about kind of moving beyond big core sales and deepening the wallet share with your clients. Could you talk about just at a high level, how is FIS' approach to the core change in the selling process?

Yes. No, I don't think it's changed. I think it's a matter of the core continues to be important, but there's only so many core opportunities in the market. We've been really focused on making sure that anything that we buy that we sell, we add on to our distribution is core agnostic. So if you think about the Dragonfly acquisition that we did or the Everlink acquisition that expanded our opportunities in Canada, we have the opportunity to sell that through our global distribution channel, and it doesn't have to be attached to our core. It is attached to our core, which creates more value, but it opens up TAM as we look at being able to sell into our competitors' core.

So we think that's important for us, and you'll continue to see us strategically make sure that we have products that we built as well as bought and partnered around being core agnostic and that we're really using the competitive strength of FIS, which is scale, global distribution in a marquee client set to make sure that we're selling not only the products that we've built, but also that we bought and that we're strategically partnering with others to deliver into the base.

And then maybe a related question is just how you price deals. It's always a competitive market in the bank tech space. I think you've talked about consistently pricing on net being relatively neutral to the overall growth rate.

Yes.

Has there been any shifts in how you price individual products in the sales process in order to kind of incentivize the wallet share that you're seeking?

Not really. So I think from our standpoint, net price is how we price new business net of compression. And I think you've heard us talk about we think there's more opportunity there for us to be -- take a bit more share in price. And we've been more price aggressive there. I think capital markets does a better job at net pricing because of the way they deliver their SaaS solutions and banking has been a little bit slower. We're working on that. We've been putting pricing escalators and items back in contracts as inflation comes.

But we're really more focused around net pricing and making sure that on a net basis, we're retaining our customers and providing fair value, adding more product set for that as well as thinking about net new pricing. But we've been more disciplined, I would say. And obviously, we're winning more market share because the sales teams are -- have a great set of products, and we give them a lot of pricing opportunity. But we haven't changed it, I wouldn't say. And it hasn't -- I know there's been a lot of noise in the marketplace, but we're not seeing. From our standpoint, it's not impacting us.

Great. That's good to hear. Maybe let's talk a little bit about digital banking. I mean you've emphasized the need for a modern digital offering to really add value for financial institution clients. What are the core pillars of FIS' digital suite? And then where are you seeing the most success in selling these solutions?

Yes. So if you think about a financial institution, they all work with us, whether we're consumer, small business or commercial customer digitally. So their channels, they deliver to us, they sell to us and they service us through digital channels. So having robust capabilities for everybody from the small financial institution or credit union all the way up to large financial institutions is very important. And having that capability for us as consumers as well as small businesses and commercial customers is very important. They are very unique needs, though.

So us as a consumer is very different what we need and need out of our mobile app from a very sophisticated commercial customer who's looking for a much more sophisticated wire and treasury business. So because we serve the landscape there, we have a set of solutions that serve both consumers and small business as well as commercial customers and has that sophistication that is needed.

And digital is really becoming an ecosystem now as we think about what you need, how banks think about providers because it's not just a digital capability, but they need automated onboarding. So as we go on and we want to open up accounts, whether it's a credit card account, a debit deposit account, debit card account, et cetera, you're not going in the branch to do that as much as you were. We also -- they also need sophisticated types of fraud capabilities because there's a lot of fraud going through financial services. It starts online. And so it's an ecosystem that we are looking to build both in terms of investing and building out our own product, partnering and then ultimately buying different acquisitions as well. So it's a full suite of capabilities, it's a lot of where we see financial institutions spending a lot of their technology dollars because it's the way they ultimately get to their customers.

Yes. I know M&A has been a core part of the capital allocation policy. Could you talk about the deals you've done over the last 12 months, Dragonfly and Everlink? And maybe you could speak to your current M&A pipeline and where you think that could materialize?

Yes. So I think we said at Investor Day, we were going to be focused on about $1 billion worth of capital every year around M&A. And we would do that in concert with share repurchase and our dividends, really being focused on capital allocation. So we're staying very true and consistent to that. We also talked about keeping that M&A in places where we thought it delivered the most growth for us. So if you think about digital payments and lending. And so we have been very true to that in terms of where we've done our acquisition.

So as you mentioned, we bought Dragonfly, which gave us very clear commercial digital capabilities upmarket. That acquisition has been going very well. We bought Everlink, which is in payments, allowing us to do the payment capabilities in Canada that we didn't previously have. And then I'm very excited to announce we just recently closed an acquisition in September called Amount, and that is providing digital account openings across the Board for credit card, deposit taking and lending. And so that is going to add into our suite of products as well.

So very focused on where we're doing that M&A. Again, it's typically we bring it in, put it on top of our global scale. We drive it out through incremental distribution out through our customer base. And the majority of these, we know very well because either we've already been in partnership selling them together or they're in the financial institutions that are our client set. So we're very excited about that.

That's great. And just to bring James into that conversation around the Amount acquisition, any color on -- was this baked into the guide? Or any color on how this might impact the back half of the year?

It wasn't in the previous guide. It's not going to be a huge number because you got 3.5, 4 months. But I just want to be clear, it will be incremental to the current [indiscernible]. We'll guide to that when we announce soon.

Perfect. That's helpful. Okay. So I guess beyond M&A, you've had a pretty balanced capital allocation philosophy between dividend increases, buybacks, managing leverage. Could you give us a quick reminder on these commitments and any updates as we close out 2025?

Yes. The total return is the target is 11% to 14%, including the 2% dividend definitely covered the M&A, it's $1 billion a year. Investor Day, we said $800 million to $1.2 billion in the first 2 years on buybacks. We're currently tracking at $1.2 billion. But in the last quarter, we've actually scaled up our repurchases. We originally had a target of $200 million repurchases in the quarter. We expect to do $300 million.

Looking at it as we sit here now, probably we are raising the target from $1.2 billion to $1.3 billion. The share price is just too low. So we see it as a value. So we started buying back the stock earlier. As of the first half, we repurchased $700 million. We did $300 million in the current quarter and another $300 million to bring us probably to $1.3 billion on the year.

Dividend, we increased 11% earlier this year. Dividends will grow in line with EPS, and that will be -- when the transaction closes, we will temporarily halt share repurchases. The dividend policy is unchanged. So the important point is looking at post transaction, we achieve 2.8x leverage. We will be back in the market with an ability to do double the amount of M&A and the combined M&A plus share repurchases. So we'll be significantly higher in our capability to repurchase shares.

Great. And then just maybe you're touching on the free cash flow outlook right now. We've been talking about cash flow conversion for the last year. You've been absorbing some elevated CapEx and working capital headwinds since over the past 12 months or so. And I know that you, James, have been very focused on finding efficiencies there. So what are the biggest to do around free cash flow conversion? And just how do you think about the potential for that to improve over the next several years?

Yes. I think the -- we did a 77% last year, the guide for conversion. The guide for this year is 82% to 85%. Very comfortable about it. The first half of the year, we're at a 61% slight conversion. There's a natural seasonality in the business, and we explained it on the prior call. Most of your annual bonus and commissions to the sales force are all paid out in the first half, not in the second half. And this year, we have a big timing shift on cash tax payments between first half and second half.

So if I don't do anything, there's an automatic improvement in first half versus second half, about close on $600 million. That being said, we -- I think there's a couple of to do, and I'll answer a different question. I think we've been communicating -- we haven't been communicating effectively enough. We're going to start focusing more on GAAP cash flow and underlying at the same time. We will finish the year with both GAAP and underlying cash flow growing 14% to 15% year-on-year, outpacing the growth in EPS. And that's really, really important for the quality of earnings because people have drawn attention to a fairly high onetime expense payment. It doesn't matter.

Year-on-year, the GAAP cash flow is up 15% and the building block to get to a 90% conversion is less capital intensity. We're currently running at 9% of revenue. The target longer term is 8% for long. That would add 4 to 5 points of conversion just by itself. And this is a year that is held back by higher tax payments. That will abate next year.

So we're super comfortable on the 90% next year. The TSYS business will bring in $0.5 billion next year. They will be operating at -- they're currently operating at 90% conversion. So what we have to make clear to the market is the sustainability of an 85% this year, rising to a 90% next year, which will basically is not highly dependent on working capital.

You did ask how are the working capital programs going. We probably have -- we had a target this year on accounts payable $100 million. We're currently tracking over 80% of that already achieved. We will probably raise the overall target as we get into next year. This is a company of paid suppliers at 30 to 45 days. We're raising it to 90 days. Tougher with the bigger suppliers, easier with middle size. We've migrated all of our consultants with the same terms already. But some of them are in the audience, actually that's why I raise it.

But we are squeezing the payables. We put in place new processes around extension of payment terms to suppliers. Finance is in the process much earlier than it was before. So we've stop any of the unnecessary cash outflows. We are going after accounts payable and optimizing that 90% next year is not reliant on improving working capital turns. It's purely on capital intensity and a change in the timing of cash payments.

Great. That's very clear, very helpful. All right. Stephanie, I think one of the focuses at the Investor Day was around the increasing overlap between the two segments between banking and Capital Markets and the opportunity to drive cross-sell as well as wallet share expansion within the Banking segment through payments. Can you update us on some of these initiatives?

Yes. So -- and I think bringing the Issuer Business in given where it sits makes it even more opportunistic. We continue -- so I recently named Nasser Khodri, our Chief Commercial Officer, who is our -- also still runs capital markets. He's taking this in particular, to make sure we have commercial excellence from the top of the house all the way through and in particular, making sure that we are really taking advantage of the unique opportunity that we have with these clients.

So we sit in the very large financial institution and financial services stack, and we have very material relationships across both banking and capital markets. And then when you think about bringing the Issuer Payments Business in, it solidifies it. So we're very excited about it. And we are -- we have been, I would say, moderately successful. And the reason why I say that is I think bringing this here in and then as he and his team really focus on those clients in particular with a new growth model and a growth mindset, we should start to see even more uptake of that as we go into '26 and '27. But I think we've done a good job.

Well, I'm pretty tough on us. I think we could always do better. I think we could move faster. I think we could sell more. I think we could develop more. So high sense of urgency. So I still think there's more juice to squeeze here as we think about being a very important partner to a lot of these financial institutions. And given the regulatory backdrop, they are typically looking to see less vendors in their ecosystem. And a lot of the reasons why M&A folks come to us as well is because we have these relationships, it's easier for us to cross-sell than it is for brand-new outside fintech providers to come in.

So with all of that being said, I think we're doing pretty good, but I'm a tough grader, and I think there's still a lot of juice to squeeze here.

That's great. No tougher audience than the one.

Yes. No, I know. Tell me about it.

Okay. So it's a good pivot to the capital markets side. It's remained very strong this year. Maybe just where are you seeing the momentum in the business?

Yes. So it has. I think the good news is, I think James and I talked a little bit about on the second quarter that we saw some slowdown in the loan syndication parts of our business. We're happy to report that, that is back on track as we looked at closing July and August. So that little bit of blip on whatever happened there with the tariffs, et cetera, is back and is normalized. So we don't expect to see that. And we're feeling really good about where capital markets is going to end Q3 and Q4.

I think the business, look, it continues to take share. It continues to have a lot of nice growth. We continue to push it to sell more recurring and less license, and it continues to take a lot of share. There's a lot of opportunity. On the trading and asset services front, whether it's front, middle or back office, they continue to sell a lot of their SaaS-enabled solutions. Lending continues to be a very high-growth area for us, given everybody's interest in doing private credit lending and that expanding outside the traditional financial institutions.

So we see a lot of growth there. And then our treasury business, which is also included there in the office of the CFO, has a nice growth market associated with it. So we're seeing demand across the universe there, and we continue to focus the team and focus capital to make sure we're driving the outsized returns.

And just switching gears to numbers, James, I know there was a range of outcomes in the near term in capital markets based on the volatility of some of the syndication volumes. It sounds like those have been going well. Could you just remind us of your thinking on kind of the range of outcomes and what will put you at the higher or the lower end of the capital markets range?

Yes. I think in Q3, we said 5.5% to 6.5% and the 5.5% basically assumes no recovery in the lending. And as a reminder, this is a business that in Q1 was up maybe 15%. Q2 was down 35%. The first 2 months of the third quarter is up 25%. So it did pull down our Q1 -- Q2 result by 100 basis points. That's why we have the wide range in Q3. So we're feeling pretty good about being solidly within the range in Q3 on capital markets same on the full year. This is a business that consistently over a multiyear period does a 6 or a 7.

You can have slight moves up or down. We're not that exposed to economics. It was a small movement on a small business in the portfolio, $6 million on a $3 billion business. So it wasn't a major thing.

And looking forward, as Stephanie said, all the businesses are in great shape. We've invested heavily in the past to get them on cloud, SaaS-enabled. We're in a strong product position entering into next year.

Very good. Okay. Well, one topic that's been highly topical over the summer has been stable coins and the regulatory clear that's emerged and a lot of banks to begin to participate in that. What are you seeing from FIS clients in terms of willingness or interest in adopting the technology? What are their concerns around it? And then what roles can FIS play to support it?

Yes. I think they are all very interested in adopting it. I think TBD in terms of where and what use case it takes on in the market. But I think every financial institution is very keen to make sure they have it in their capability set. So the way we deliver it is through a product we call Money Movement Hub. And in that Money Movement Hub, you have -- so it's a piece of software, you have the ability to provide real-time payments, ACH, wire and then digital currencies.

So we partnered with Circle who will be integrated into our Money Movement Hub such that financial institutions that buy our Money Movement Hub, then have the ability to offer out digital currency out to their customers. I'm hearing from most of them, again, they want to have it in their tool set in terms of capabilities, TBD in terms of where the use cases are for it as they see their commercial customers come in and utilize it. So it's a great thing for us. Again, it validates the Money Movement Hub and ultimately more sales of that, which helps our payments business in the banking space. TBD in terms of uptake.

Right. So I guess sort of if you build it, it will come on the stablecoin side. Anything on the blockchain side, maybe particularly around the capital markets business, you're seeing opportunities to engage in things like tokenized assets?

Yes. I think -- so that's kind of also gone in and out, tokenized assets. And we've been, again, there working with partners because, as you know, you have to invest quite a bit in terms of new technologies. I do think tokenized deposits and tokenized assets have high demand, especially in terms of going across from bank to bank. Those are -- we'll enable those through a partnership as well. Let's see how much activity gets going. Our job is the ultimate financial technology provider is to make it available and then as fast as possible, make sure that we can get it out to our banks so they can be as innovative as they want to be TBD on where it ends up.

Fair enough.

But I will say broadly, again, just going back to question one is I think all of this is good for financial services. I think putting these capabilities inside the financial services realm where they can be regulated and not outside the regulatory system is a good thing broadly for the financial services industry and gives them an opportunity to also take advantage of some of the innovations either with a disruptor or without a disruptor, but I think it's good for the overall industry.

Great. And it wouldn't be that conflict without asking about your latest thoughts on AI. I was to hear some of them earlier, and it sounds like the industry is moving. So I'll turn the floor over to you. What do you think is the most exciting thing banks are doing with AI and what FIS has rolled out to facilitate it?

Yes. First of all, I will say that I've been in and around fintech now for over 20 years. This is the fastest I've ever seen financial service firms adopt a technology ever. Now when you talk to the likes of probably [indiscernible] or something like that from the hyperscalers, they would say, yes, but they're still slow. Yes, but they're fast for them. And so it's really significant because it's opening up an opportunity for the financial services industry to materially move their cost structure, which really there hasn't been a big enough technology to allow them to do that.

So when you think about banks in particular, and how do they drive more -- their efficiency ratios, which are really important to their returns, on capital, they are adopting it at a very serious pace. Now they're focused where it makes a lot of sense for them, not just, yes, in developing faster and higher levels of productivity, but also around big places in their back offices where they have a material amount of cost, but also a material amount of -- where they've already had machine learning.

So I'll give an example. So yes, they're looking at taking out -- they're having a better contact center experience just like we all are in taking out costs there. But for a lot of financial institutions looking at fraud, fraud is a very big cost inside a bank. It costs them a ton of money. It's -- they've already had machine learning stacked against those fraud capabilities. And so now thinking about AI and creating digital agents that can ultimately make decisions. I think, is very interesting for banks.

So I think there's a lot of unique opportunity there. We, as FIS, again, our job is to lean in and make sure that where we provide the fraud models, our fraud models are also AI-enabled and have those best-in-class capabilities. And then what we're spending time on is how are we thinking about expanding the TAM. The other place that we've been leaning in very heavily across AI, and we just, I think, announced it today is around a lot of our capital markets products to fundamentally provide workflow and models, modeling, whether it's risk or climate or treasury and creating AI-enabled capabilities off of those products to make ultimately banks and capital markets firms processes faster, more efficient and better outcomes, whether you're going to underwrite something faster, have less risk, et cetera.

So I think it's a very exciting time. Again, like I said, typically, when technology comes out, you see a lot of the banks, in particular, are fast followers. They're generally leading in this case, which is exciting for us.

That's great. In the last 20 seconds here, James, I wanted to squeeze one more in just on efficiency and cost actions. I know margins in the back half of the year were a big focus around earnings. There are some FX distortions on the guidance. Maybe you could just talk around your expectations for the back half of the year and any cost actions you've got planned?

Well, we think we're plan on what we said at the beginning of the year. We said 40 to 45 and we've had an adverse currency impact, which has led to the revised guidance of 20 basis points. I think what's lost on some of the participants is within this number, we're offsetting the TSA impacts of Worldpay, and that's about 60 to 70 bps on the full year. So that's 70 on a constant currency basis, 40 add back 60 bps of offset of TSA.

We're tracking the cost reduction programs are driving 100 basis points of, call it, core normalized margin growth. And looking forward to next year, we will do at least 60 bps of margin improvement next year. Why? Stephanie has been driving what we call organizational health program, which essentially is delayering. Finance has gone from 10 to 7 functions by taking out -- and we're not focused on lower level employees. It's director plus. This has gone in successive waves and the biggest waves are in September, October, and November. It gives us a huge cost reduction tailwind going into next year. So we're ultra confident on the margin guide for next year.

Sounds good. Confident on a lot of things. Thank you guys for spending the time. I really appreciate it.

Thanks Will.

Thanks Will.