At Fidelity National Information Services, cost pressures from rising employee costs have begun to ease, though the search for new hires remains challenging, CEO Stephanie Ferris said at an investor conference last week.
Her comments on labor cost pressures come as FIS pursues a $1.25 billion cost-savings plan that media outlet Bloomberg reported resulting in thousands of job cuts. The company is on track to save $1 billion this year, she said. FIS is also restructuring as it prepares to sell a majority stake in its Worldpay merchant services unit to the private equity firm GTCR.
“The cost of labor has been very significant,” Ferris said at the Goldman Sachs conference on Sept. 7. “The good news is, I do see that starting to finally moderate. It's still growing. But it's not growing at the same rate.”
Ferris, who became CEO in December, emphasized that the company’s workforce had grown in recent years, perhaps so much so that the labor cost became a damper on financial results.
The Jacksonville, Florida-based company had about 69,000 employees, including 45,000 outside the U.S., as of the end of 2022, according to its annual filing for the year with the Securities and Exchange Commission. That was up from 65,000 at the end of 2021, including about 40,000 outside the U.S., the preceding year’s filing showed.
The company didn’t specify labor expense in the filing for last year, but the cost of selling, general and administrative expenses rose 4.6% to $4.1 billion last year mainly because of higher compensation costs as well as expenses related to acquisitions, the annual filing said.
“We've been heavy on people, so we have a lot of people in our business, a lot of professional services, a lot of implementation people, a lot of back office,” Ferris said. “When labor costs are low, it's pretty easy to drive margin across that base. But when they start to escalate, it became challenging,” she explained.
Ferris suggested that the higher headcount emerged as the company signed some major contracts, such as work for asset manager T. Rowe Price. In 2021, FIS extended a contract with that asset manager for the “transformation of its retirement record-keeping business.”
After the company shifts the Worldpay business to GTCR, it will have two major business units remaining: one catering to banking industry clients and a smaller unit, based on revenue, serving capital markets clients.
“I don't think we were quite prepared in our contracts to have pricing go up that fast,” Ferris said. “As you might expect, there's a ceiling on how much you can reprice a contract. These are long-term contracts.”
FIS hasn’t landed as many of those types of big contracts this year, and it’s not preoccupied with seeking them out, she said. “We're not focused on the mega-deals,” Ferris said. “We're not relying upon them in order to hit our revenue growth number,” she explained.
Artificial intelligence might be a means for FIS to hold down labor costs as well as increase efficiency and productivity, Ferris said. For a tech company that’s reliant on software and product engineers, that’s key, she said, conceding the company hasn’t spent much time on the AI angle yet.
“We're really focused on how do we make sure that we take down the people costs and drive more through automation,” she said. That may also be a path to making sure the company can hire the employees that it needs. “That's the other challenge,” she noted. “Even if the labor costs go down, it's very difficult to hire people.”