FIS: A Tale of Missed Opportunities and Future Prospects

As an investor in Fidelity National Information Services (NYSE:FIS), you may have been left wondering why the past five years haven't been as profitable as you'd hoped. Let's delve into the reasons behind FIS's underperformance and explore the potential for a turnaround.

FIS's strategic direction and execution, particularly in relation to its Worldpay acquisition and subsequent separation, have significantly impacted its financial performance. In 2023, FIS acquired Worldpay, a leading global merchant acquirer, for $18.5 billion. This acquisition expanded FIS's merchant acquiring capabilities and increased its scale in the payments industry. However, in 2024, FIS sold a majority stake in Worldpay to private equity funds managed by GTCR in a transaction valuing Worldpay at $18.5 billion. FIS retained a 45% non-controlling equity stake in Worldpay and participated on the Worldpay Board. This separation allowed FIS to focus on its core financial technology and software solutions business, while Worldpay could pursue inorganic growth opportunities with GTCR's support.

The Worldpay acquisition and separation had a significant impact on FIS's financial performance. FIS's full-year 2024 revenue increased 3% on a GAAP basis and 4% on an adjusted basis to $10.1 billion. This growth was driven by the integration of Worldpay's revenue and FIS's core business. FIS's full-year 2024 GAAP diluted EPS increased 67% over the prior year to $1.42, and adjusted EPS increased 56% to $5.22. The Worldpay acquisition contributed to this earnings growth, as FIS benefited from Worldpay's strong performance and the synergies realized from the integration. FIS used the proceeds from the Worldpay sale to pay down debt and return additional capital to shareholders through its existing share repurchase authorization. In 2024, FIS repurchased $4.0 billion of shares, and it announced a goal to repurchase $1.2 billion of shares in 2025.



Macroeconomic conditions and industry trends have also played a significant role in FIS's recent performance and will likely continue to influence its future prospects. High interest rates have put pressure on financial institutions to boost profits, leading to increased M&A activity. FIS's recent performance has benefited from this trend, as seen in its 2024 GAAP Diluted EPS growth of 67% and Adjusted EPS growth of 56%. As interest rates normalize and central banks cut rates, FIS may continue to see opportunities for growth through acquisitions and mergers. Additionally, the adoption of AI and data analytics, as well as a focus on cybersecurity and fraud protection, have driven FIS's recent performance and will continue to be important factors in its future prospects.

In conclusion, FIS's underperformance over the past five years can be attributed to several factors, including inadequate focus on its core business, lack of innovation, operational inefficiencies, lack of strategic acquisitions, and inadequate focus on cybersecurity and fraud protection. However, the company's strategic direction and execution, particularly in relation to its Worldpay acquisition and subsequent separation, have significantly impacted its financial performance. Macroeconomic conditions and industry trends have also played a significant role in FIS's recent performance and will likely continue to influence its future prospects. By staying attuned to these trends and adapting its strategies accordingly, FIS can capitalize on opportunities and maintain its position as a leading provider of financial technology solutions. As an investor, it's essential to remain patient and optimistic, as FIS has the potential to turn its recent underperformance into a period of growth and success.