Dear Shareholders,
It is an honor and a privilege to write my first report to you as chief executive officer and president of FIS. FIS is a tremendous company with considerable assets, including a marquee set of clients, superior global distribution and world-class, end-to-end capabilities. We have a history of prospering by positioning ourselves where change, challenge and opportunity intersect. We are inspired to find ourselves at this intersection once again.
Since taking over the leadership of FIS in December 2022, my team and I have been hard at work charting a new course that will define the future of our company. This new course builds on FIS’ legacy of leadership and innovation in the financial technology industry. Our strategy to unlock our financial technology to the world underscores the important and fundamental role we play in a highly complex and constantly changing global financial ecosystem.
I am confident that as we execute upon our plan, FIS will be better able to capitalize on growth opportunities in a rapidly evolving marketplace and deliver significant value for our clients, investors, employees and the communities we serve, even in challenging economic times.
THE IMPERATIVE FOR CHANGE
As we looked back on the company’s recent results, it became clear that FIS was not performing to its full potential, for either our clients or our investors. Our financial results in 2022, while solid, came in below our own expectations and those of the market. While the challenging macroeconomic environment clearly contributed to this underperformance — as slowing global growth, rising interest rates and inflationary pressures continue to impact the entire industry — internal factors also played a part. In an industry that rewards the nimble and first-to-market, we realized the need to move faster, with greater operational focus and execution, while enhancing our ability to anticipate and exceed our clients’ constantly evolving expectations.
In short, we saw the need to reflect on what makes FIS great, which is our unique ability to help clients anticipate, navigate and harness technological change for business advantage. From that foundation, we could then restart and recommit to our clients, investors, colleagues and other stakeholders around the world.
POSITIONING FOR SUCCESS IN A RAPIDLY CHANGING MARKETPLACE
Following a comprehensive assessment of the company’s strategy, operations and structure, we have moved with the highest sense of urgency to advance a multipronged plan aimed at driving stronger results, increasing shareholder value and enhancing our clients’ experience. This plan is guided by three key principles. First, we are recommitting to a culture where our clients are at the center of everything we do. Second, we are prioritizing innovation across our portfolio of solutions. Third, we are simplifying our operations, streamlining decision-making and accelerating time-to-market to drive profitable growth and enhance our margins. As part of this plan, we will separate the company into two independent, publicly traded businesses, FIS and Worldpay, through a spin-off of our Worldpay merchant solutions business. Both businesses will be leaders in their respective markets:
- FIS, the fintech leader unlocking financial technology to the world, will be focused on the distinct needs of our financial services clients, and on driving disruption by becoming the destination of choice for innovation.
- Worldpay, the leading global payments acquirer by transactions, will be focused on serving global e-commerce firms, platforms and merchants.
Why make such a bold move? The answer, quite simply, is because success in this rapidly changing industry requires it.
The marketplace continues to be fundamentally reshaped by structural changes in how consumers and organizations access, pay for and use financial technology. Banking, lending, insurance, payments and other financial services are increasingly being componentized as software becomes seamlessly embedded into point-of-sale transactions across a wide variety of industries and market sectors. By providing more frictionless experiences for consumers, such as “embedded finance” applications, we are growing rapidly and transforming the traditional delivery of financial services.
The widespread adoption of cloud-based, “as-a-service” (aaS) delivery models is also shifting the competitive dynamics of the industry. The marketplace is rapidly evolving toward a model where consumers and businesses can easily access and integrate a wide range of financial services via aaS platforms and next-generation marketplace hubs. With the huge growth potential inherent in these models, it’s no surprise that well-funded fintech startup firms are targeting these markets, pressuring the positions of established players.
Success in this developing dynamic will go to those firms that are most tightly focused and effective in allocating and deploying their assets, resources and capital to serve the needs of specific market segments. In the payments marketplace, for instance, the pace of disruption is accelerating, requiring significant capital investment to capture growth opportunities. The banking and capital markets business, meanwhile, is characterized by recurring revenue growth, consistent margin expansion and conservative capital structure.
By separating into two market-leading businesses, the FIS and Worldpay businesses will be better positioned and optimized to serve client needs, pursue growth opportunities and deliver value for their respective stakeholders. After the completion of the tax-free spin-off, FIS and Worldpay will continue to maintain a commercial relationship, allowing the two companies to deliver critical, end-to-end capabilities to clients by leveraging the combined strength of their marquee client base, global scale and distribution.
FUTURE FORWARD: ENHANCING OUR OPERATIONAL PERFORMANCE
While we complete the separation of the two businesses, we are moving swiftly and decisively to advance the various elements of our comprehensive enterprise transformation program, which we call Future Forward. This program touches every aspect of our organization, from how we serve clients and bring new commercial products to market, to how we deliver those solutions and collaborate internally and with partners. Future Forward will enhance our operational performance and improve profitability while making us more efficient, effective and nimble.
Since launching this program last fall, we have mobilized more than 1,500 leaders to identify and implement hundreds of performance improvement initiatives across the organization. We are already seeing results, and by year-end 2024, we expect to achieve a $1.25 billion reduction in cash spend across the enterprise.
The culmination of our efforts is to foster a high-performance culture, aligning the interests of the executives with those of our shareholders through pay-for-performance.
COMMITMENTS TO OUR COMMUNITIES AND GLOBAL STAKEHOLDERS
Amidst all of these changes, certain things will not change, including our commitment to stakeholders around the world. I want to reiterate those commitments here.
TO OUR CLIENTS
FIS is committed to leveraging our decades of proven experience to keep the world’s financial infrastructure running during uncertain and tumultuous times, and delivering best-in-class, next-generation innovations that advance your business goals and keep you ahead of your competition.
TO OUR EMPLOYEES
We are committed to making the company an even better, more diverse and inclusive place to work, and to provide opportunities to grow and enjoy some of the most rewarding, creative and innovative work of your careers.
TO THE COMMUNITIES IN WHICH WE LIVE AND WORK
FIS is committed to giving our time, talent and resources to philanthropic programs and research initiatives that make a difference in the community and in peoples’ lives.
TO THE BROADER GLOBAL COMMUNITY
We are committed to being a responsible global citizen and doing our part to combat climate change and protect this planet we call home.
FINALLY, TO YOU, OUR VALUED SHAREHOLDERS
We are committed to making the necessary changes to return this company to the sustained, profitable growth and value creation that we are capable of and that you expect. While 2023 will be a year of transition for us as we take the actions to reposition the company and sharpen our operational focus, we are confident these changes will set the foundation for a stronger, more profitable 2024 and beyond.
I want to express my deepest gratitude to the FIS Board of Directors for their continued guidance and support. Under the leadership of Chairman Jeffrey Goldstein, we have reshaped the Board for strong, independent governance through the addition of several deeply experienced new directors. Speaking for the management team, I know we can continue to count on the Board’s direction and partnership as we reposition FIS for the next chapter of our growth story.
Thank you for your support of our company. I look forward to reporting on our continued progress.
Sincerely,
Stephanie Ferris
Chief Executive Officer and President
Read the original letter here.
