FIS Restarts Its M&A Engine As It Looks to Its Worldpay Stake for a Payoff

More than a year after spinning off a majority interest in the massive Worldpay merchant-processing platform, FIS Inc.’s top brass said early Monday the move is already paying off. And the company is revving up its acquisition engine again, with $1 billion committed to do deals this year.

For now, FIS is looking at so-called tuck-in pick-ups that will supplement existing operations in banking and capital markets, chief financial officer James Kehoe said during a conference call held to discuss the Jacksonville, Fla.-based company’s September-quarter results. The total purse for these prospective deals stands at $1 billion, he said.  “We expect to see a step-up in acquisitions,” he noted, but added, “if we do not spend the $1 billion this year, we will look to return it to [shareholders] next year.”

As for Worldpay, in which FIS retains a 45% stake, Kehoe and chief executive Stephanie Ferris readily admitted the results so far have  been encouraging. “Worldpay is performing better under [new chief executive] Charles Drucker, better than when we had it,” Ferris said, referring to the unit’s revenue growth. Private-equity firm GTCR holds the 55% majority interest following the spin-off in January.  The move has been “an orderly transition,” Kehoe said, with no top-line “surprises.”

For now, Ferris and Kehoe see a rewarding business in Premium Payback, a program that enables banks to let customers spend unused rewards points online or at the point of sale. FIS launched the program in the summer of 2020 but now it’s taking on greater importance at the company, Ferris said, as FIS begins to push loyalty solutions on behalf of its bank clients.

For the quarter, FIS reported $2.57 billion in revenue, up 3.2% from the same period last year, an acceleration on the 2.9% growth rate the company recorded for the first nine months. With that growth, the company recorded quarterly operating income of $490 million, up 4.25%, and $1.22 billion for the first nine months, up 9% .

“There was quite an acceleration” from the first half of the year to the second, Kehoe noted, adding, “We’re quite comfortable” with that going forward.