Fidelity National Information Systems, which provides software for payments processing, plans to cut $500 million in costs after announcing lackluster third-quarter financial results last week.
CEO Gary Norcross and President Stephanie Ferris expressed disappointment with the company’s performance during a Nov. 3 company conference call with analysts and pledged the cost cuts.
“We are not pleased with the profitability performance of the business and are taking actions to address them,” Norcross said during the call.
Ferris, who will become CEO next year, echoed his sentiments. “We are not satisfied with our results,” she said, promising “immediate action” for a “transformation program.”
Even though third-quarter revenue rose 3% to $3.6 billion, the adjusted earnings figure the company deems indicative of its performance declined one percent to $1.58 billion, according to the Nov. 3 earnings press release. That entailed an earnings margin contraction for the banking and merchant solutions segments, the release said.
The company, also known as FIS, blamed cost inflation, a drop in pandemic-related revenue, investments in e-commerce and recent outsourcing contracts, among other factors.
“Early expectations are to deliver at least $500 million of cash savings with an additional update to be determined as we go through the planning process,” Ferris said during the call.
The company said last month that Ferris will succeed Norcross in January when he becomes executive chairman.
To reduce costs, the Jacksonville, Florida-based company is planning to streamline its operating structure, taper capital spending and cut back on vendors, according to a slide presentation that accompanied the earnings report. FIS plans to provide an update on the cost-cutting program early next year.
An FIS spokesperson declined to comment for this story via email.
In August, the company reported disappointing second-quarter results too, with FIS saying at that time that a decline in net earnings stemmed from macroeconomic factors weighing on the business.
In addition to banks and merchants, the company provides its payments processing software in other industries too, including to insurance companies, restaurants and investment firms.
“FIS is going through a transition which takes time,” Oppenheimer analyst Dominick Gabriele said in a note to that financial firm’s clients. “It is a structurally slower growing, lower profitability business vs. peers with more international exposure and thus hurt more by FX and inflation costs, making margin more vulnerable.”
Gabriele also noted the long road ahead: “Cost cuts are a temporary fix, and slower than market peer growth likely reignites market share loss conversations and investment needs, while banking growth slows.”
Under Norcross’s leadership, FIS acquired Worldpay for $35 billion in 2019 in what was the largest payments deal at the time. Another potential FIS combination in late 2020, with Global Payments, fell apart after after the two sides failed to come to terms, according to a Wall Street Journal report that cited anonymous sources.