Fidelity National Information Services, Inc. (FIS Quick QuoteFIS - Free Report) reported second-quarter 2024 adjusted EPS of $1.36, which beat the Zacks Consensus Estimate by 10.6%. Also, the bottom line increased 79% year over year.

Revenues grew 3% year over year to $2.5 billion. Also, the top line beat the consensus mark by 0.1%.

The strong second-quarter results benefited from strong recurring revenue growth in both segments and new sales momentum. It witnessed improved results from both the Banking Solutions and Capital Market Solutions units. However, higher expenses partially offset the positives.

Q2 Performance

The cost of revenues was $1.54 billion in the quarter under review, which rose 1.3% year over year. Selling, general and administrative expenses of Fidelity National increased 10.1% year over year to $609 million and were higher than our estimate of $527.3 million. Net interest expenses declined 73.1% year over year to $43 million and was lower than our estimate of $60 million.

Adjusted EBITDA from continuing operations rose 6% year over year to $998 million but marginally missed our model estimate of $1 billion. Adjusted EBITDA margin of 40.1% improved 110 basis points (bps) year over year in the second quarter.

Segmental Update

Revenues from the Banking Solutions unit increased 3% year over year to $1.71 billion, beating the Zacks Consensus Estimate by 0.2% and our estimate by 0.3%. Improved adjusted recurring revenues and adjusted non-recurring revenues shaped the segment’s quarterly performance. Adjusted EBITDA margin of 44.8% improved 140 bps year over year, attributable to cost efficiencies and favorable revenue mix.

The Capital Market Solutions segment recorded revenues of $722 million, which grew 7% year over year in the second quarter and beat both the Zacks Consensus Estimate and our model estimate of $720.9 million. The metric improved as a result of strong recurring revenue growth. Adjusted EBITDA margin increased 60 bps year over year to 50.8% thanks to operating leverage.

The Corporate and Other segment’s revenues amounted to $57 million, which declined 33% year over year in the quarter under review. The reported figure missed the Zacks Consensus Estimate of $59.8 million and our estimate of $60.1 million. Adjusted EBITDA loss was $134 million in the quarter under review.

Financial Update (As of Jun 30, 2024)

Fidelity National exited the second quarter with cash and cash equivalents of $2.1 billion, up from $440 million at 2023-end. Total assets of $34.6 billion fell from $55.1 billion at 2023-end.

Long-term debt, excluding the current portion, amounted to $10.6 billion, down from $13 billion at 2023-end. The current portion of long-term debt totaled $578 million. There were no short-term borrowings at the second-quarter end.

Total equity of $17 billion dropped from $19.1 billion at 2023-end.

Fidelity National generated net cash from operations of $752 million in the first half of 2024, which declined 2% year over year. Adjusted free cash flows increased 13% year over year to $600 million.

Share Repurchase & Dividend Update

Fidelity National rewarded $1.3 billion to its shareholders to the tune of share buybacks worth $1.1 billion and dividends of $200 million in the second quarter.

Management reiterated its target of $4 billion of share buybacks in 2024. The company added $3 billion in its share repurchase kitty on Aug 1. Fidelity National reiterates its aim to achieve a dividend payout ratio of 35% of adjusted net earnings, excluding equity method investment earnings (loss).

3Q24 View

Management forecasts revenues between $2.555 billion and $2.570 billion. Adjusted EBITDA is projected to be in the range of $1.035-$1.045 billion. Adjusted EPS is estimated to be between $1.27 and $1.31. Adjusted EBITDA margin is projected to be in the range of 40.5-40.7%.

Revenues from the Banking Solutions unit are anticipated to witness a year-over-year increase of 2.5-3%, while it is estimated to grow in the range of 7.5-8% for the Capital Market Solutions business.

2024 Guidance

Revenues are now expected to be within $10.12-$10.17 billion for 2024, indicating 4-4.5% adjusted revenue growth. The Banking Solutions and Capital Market Solutions units are estimated to record year-over-year increases of 3-3.5% and 6.5-7%, respectively.  

Adjusted EBITDA is projected between $4.115 billion and $4.140 billion in 2024, growing from the 2023 figure of $4 billion. Adjusted EBITDA margin is anticipated around 40.7%.

Adjusted EPS guidance is revised upward between $5.03 and $5.11, which implies a significant growth from the 2023 figure of $3.37. Net interest expenses are likely to stay within $310-$315 million for 2024.

Zacks Rank & Key Picks

Fidelity National currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Business Services space are Paysign, Inc. (PAYS Quick QuotePAYS - Free Report) , Remitly Global, Inc. (RELY Quick QuoteRELY - Free Report) and Shift4 Payments, Inc. (FOUR Quick QuoteFOUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Paysign’s current-year bottom line indicates a 58.3% year-over-year growth. The consensus estimate for PAYS’ current-year top line is pegged at $58 million, suggesting 22.6% year-over-year growth.

The Zacks Consensus Estimate for Remitly Global’s current year earnings indicates a 50.8% year-over-year improvement. RELY beat earnings estimates in two of the trailing four quarters and missed twice, with an average surprise of 8%. The consensus estimate for current-year revenues suggests 31.8% year-over-year growth.

The Zacks Consensus Estimate for Shift4 Payments’ current-year earnings is pegged at $3.86 per share, which indicates 36.4% growth from the year-ago period. FOUR beat earnings estimates in two of the trailing four quarters and missed on other occasions, with an average surprise of 12.3%. The consensus mark for current-year revenues suggests a 40.8% year-over-year increase.