FIS’s Top Brass Combats a ‘Bear Case’ As the Company Reports Strong Merchant Results

Top executives with FIS Inc. spent a good deal of time Thursday morning countering what they said is a “bear case” that has developed among at least some investors and observers of the company. “The bear case is that FIS is standing still and not able to compete. This is clearly not the case,” said chief executive Gary Norcross during a conference call with analysts to discuss the company’s third-quarter performance.

Norcross cited positive developments, including the impending conclusion of the massive Worldpay integration that began in 2019 with FIS’s acquisition of the big merchant processor. He argued the company’s merchant unit as a whole is “generating record new sales.” Indeed, chief financial officer Woody Woodall stressed FIS’s processing volume in its merchant unit “tracks with the [card] networks.” He added, “that challenges the bear case.” 

But at the same time, both Norcross and Woodall said FIS is “aggressively” buying back the company’s stock. That stock was trading early Thursday just shy of $120 following the earnings call, down from a 2021 high above $150 this spring.

To help bolster their case, Norcross and Woodall presented expanded details about the company’s merchant solutions unit, the company’s second-largest, with $1.16 billion in third-quarter revenue. Banking and capital markets are the other two. The merchant unit’s revenue was up 18% year-over-year and 16% compared to the same quarter in 2019, the company reported. 

With its strength in e-commerce, FIS is particularly situated to benefit from the explosive growth in that sector since the pandemic set in, the company argues. E-commerce revenue in the third quarter was up 22% over the same period in 2019, and up 34% with travel and airline revenue excluded, according to the figures presented Thursday. “FIS is benefiting from the accelerating shift online,” Woodall said.

Revenue from small and medium-size businesses, which rely on payments-enabled software from resellers, was up 18% in the quarter compared to 2019, FIS reported. Revenue from restaurants, which accounts for 26% of the total in this SMB category, was flat with 2019. This, though, is an improvement in that category from 4% and 22% drops in the first and second quarters compared with 2019. “Restaurant growth is slower than the other verticals, but we continue to sign [independent software vendor] partners,” said Woodall. “We continue to enjoy significant advantages.” Norcross added: “We are pushing FIS as a destination for innovators. That will speed time to revenue for FIS.”

All told, FIS reported $3.51 billion in third-quarter revenue, up 10% year-over-year.