John Davis: Hey. Good morning guys. Stephanie, I just wanted to talk a little bit about the RemainCo and how we should think about the EPS growth algo on a go-forward basis? So, you said 3% to 5% top line going to expand 50 basis points this year. Is that a good way to think about going forward? Could you get more margin expansion? And then on the capital allocation front, I assume buybacks maybe we get high-single digit kind of EPS growth going forward in the RemainCo, any comments there?
Stephanie Ferris: Yes. Thanks John. So, look, we are focused on kind of going back to the future, returning to our roots around becoming a compounder. I think what you should look for is really us to focus on double-digit TSR through, obviously, margin expansion, but also the focus on free cash flow and pursuing a balanced portfolio of both dividend, share repurchase and then M&A to the extent that makes sense for us going forward.
John Davis: Okay. Thanks. And then Erik, it looks like merchant margins are implied down like another 350 basis points, 400 basis points this year. How much of it is from the weaker top line versus kind of investments that you are making in the merchant business? Just any color there would be helpful.
Erik Hoag: Yes. Hey John. A couple of things going on in the margin side. Number one, you are right. We are down on €“ we have got lower-high margin revenue. So, I think UK, I think crypto, I think Russia-Ukraine to the extent that, that annualizes. We €“ to your point, we are investing in sales and product. And the third thing I would note is, we are also seeing some higher residuals and compression in the SMB book.
Operator: Thank you. And that will come from the line of David Togut with Evercore ISI. Your line is open.
David Togut: Thank you. Good morning. Could you flesh out a little bit your commentary that demand remains strong in Banking Solutions, but you continue to elongated sales cycles. What are your assumptions in other words for closing some of these deals in the pipeline in the year ahead?
Stephanie Ferris: Yes. No, happy to. Thanks David. So, if you think about where we sit in terms of what financial services we serve, we serve all sizes, but we are also the premier provider to really large financial institutions. And so what we saw in 2022, quite frankly, was some of the large €“ very large deals that we have historically won. If you think about historically T. Rowe or Franklin Templeton are examples that have driven a point of growth, where we are really one of the only providers that can serve that size of client. As economic conditions in 2022 just became more uncertain, those financial institutions became more cautious, I mean just simply put. So, those transactions continued to be there. They just continue to push out in the pipeline.
So, we feel really good about them, but frankly, until those really large financial institutions feel a little bit better about where the economy is going to go, they are going to continue to be cautious in terms of wanting to sign on the dotted line there. We have high visibility. They still hang out there. But that’s also why we don’t have those significantly closing in 2023. We have them in the pipeline, and we continue to work them. But given economic conditions and our prudent guide, we really don’t want to have a big number and have happened to us in 2022, happened to us again in 2023.
David Togut: Understood. And then as a follow-up, what are your plans to roll out additional modules in Modern Banking platform this year? And what’s incorporated in your guide from that?
Stephanie Ferris: Yes. So, Modern Banking platform continues to be a really strong product demand for us. I mean you saw us over the last couple of years, sign up a significant amount of clients. We are at full swing implementation mode. Each one of them is in a different space, and those all continue to go well. I think for us, not €“ our focus is more around making sure that we can implement those clients and continuing to sell the existing assets and deployment versus significant incremental new modules. But I do know that our deposit-taking module is good, and we continue to work on our lending modules. But I would expect that the current demand and the current products that they will meet each other.
Operator: Thank you. And that will come from the line of Ashwin Shirvaikar with Citi. Your line is open.
Ashwin Shirvaikar: Thank you, Stephanie and Erik.
Erik Hoag: Good morning.
Ashwin Shirvaikar: Good morning. I guess there was a meaningful set of investors that believe maybe a better or different course of action might have been spinning or selling in Cap Markets, your best performing business currently. Should we assume the strategic review is now concluded, and this is the structure or is it still ongoing? And then one question because you did mention multiple times the M&A needed for the merchant business. Could you talk about the early view on things such as the level of debt or leverage that you are putting on the two pieces. Can you €“ what do you were doing M&A like the in the current structure. So, I just want to get more clarity on what else is needed here?
Stephanie Ferris: Yes, happy to. So I think, first of all, we announced our strategic review 60 days ago. I am really pleased with how €“ with the sense of urgency to what we have been able to decide thus far. I think with respect to what we have took in for the next couple of quarters, we are really focused, Ashwin, on making sure we execute on this merchant spend as quickly as possible, given the need to get those guys out and refocus on M&A. We are also really focused obviously on delivering Future Forward. All that being said, no, we will not include a strategic review after 60 days. So, we will continue to evaluate opportunities. The thing that really pressed forward in terms of the merchant separation though, was our inability to allocate a capital and for it to grow properly.
On the Capital Markets side, we don’t have that same issue with respect to it continuing to grow well and the capital allocation. So, the merger business became a much bigger burning platform for us, but we will always continue to evaluate. In terms of the second piece on the Newco, I am going to speak in broad terms. I think the way we would think about it, and again, this is going to go to Charles and his team as he takes over. But clearly, given the amount of M&A that they probably will want to do and Worldpay historically did, I don’t think they would go after an investment-grade credit rating. It would probably impede them in terms of delivering the value that they want. So, I suspect they will look at something slightly below that. Historically, as you know, we were high yield, and it worked out €“ worked out quite well for us.
But given all that, the Capital Markets are in a bit of a different position €“ but I don’t think they will be investment grade, but I also don’t want to speak for them. I think in terms of M&A, we have some strategic partners that we are coupled up with today. I think there is €“ and given the market and where things sit in terms of valuations coming down, I think the timing of the spin and their ability to get market will be quite fortuitous. And that was ultimately why I moved with such a high sense of urgency because as you can see from kind of the results of this segment, there is a different capital allocation structure that it certainly needs.
Ashwin Shirvaikar: Got it. And I guess the other question is for the normalized growth rates that you are assuming for each segment, what is the normalized margin structure that one should think about?
Stephanie Ferris: I think from a banking and capital market standpoint, we would expect to continue to see margin expansion. I think once the Worldpay returns to growth, you would expect to see margin expansion there. As you know, these businesses are highly margin accretive on the right growth trajectory, highly recurring revenue generative. I can’t speak to exactly how much. You can see from Future Forward in terms of how much cost we are driving into the business. And in the Banking, Capital Markets segment, unlike merchant, there is really nothing structurally wrong there. And so we should continue to be able to expand those segment margins like we have historically.
Operator: Thank you. And that will come from the line of Ramsey El-Assal with Barclays. Your line is open.
Ramsey El-Assal: Hi. Thank you for taking my questions. I wanted to follow-up on Ashwin’s question, his first question and just inquire as to whether you would be open to entertaining possible bids on parts of the merchant business? Would it be conceivable between now and the spin to potentially sell some of the higher growth, more attractive parts of that business or whether we should think about that part of the strategic review and in keeping that business intact over the long run is sort of the final step?
Stephanie Ferris: Yes. I think we are focused on the spin of the whole business. I think the fundamentals of a Merchant business are that they are scaled platform with global distribution. We certainly looked at pieces and parts, but I think the best path for this particular business is to spend the whole thing and let the management team on the other side then determine structurally what they want to do from there. For us, again, the catalyst here is really the need for a different capital allocation structure. So, pieces and parts doesn’t really help that because I, as FIS, I can’t feed at the M&A need.
Ramsey El-Assal: Okay. Terrific. Thank you. And one follow-up for me. More generally, Stephanie, can you talk about your thoughts and your confidence levels around balancing the sort of costs and particularly OpEx reduction, while also investing for growth and potentially accelerating growth as we move forward? How do you gain confidence that you can kind of thread that needle by not €“ where can you find the sort of excess costs to take out that doesn’t impact your ability to kind of grow on a go-forward basis?
Stephanie Ferris: Yes. Ramsey, it’s a great question, and it’s one that I think about every day, all day. So, I think a couple of things. Look, we are focused in 2023 in returning the Banking and Capital Markets business to 3% to 5% revenue growth going forward. We think the investments that we have made in product have been very significant, and we will continue to develop those, albeit at lower capital expenditure levels. We do have a great set of modernized products and I think with the new Chief Revenue Officer and focus around product and profitability and mix, that that revenue growth will be very attainable as we move into 2024. I think on the cost side, you saw a lot of margin contraction in the banking business over the last couple of quarters.
I am happy to report that we will deliver expanding margins in both Banking and Capital Markets, that’s through the benefit of our Future Forward program. And like I said, that program, which is really being led by my President and Kelly Beaty, our Corporate Performance Officer is really focused on not just being a cost-cutting program, but being a speed to market, delivering results faster, lots of things like that versus just being a cost program. And I did that purposely because I wanted to make sure that we could balance appropriately revenue growth and margin expansion.
