Fidelity National Information Services Inc (FIS) 2018 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the FIS Third Quarter 2018 Earnings Call. (Operator Instructions) And as a reminder, today's conference is being recorded.

I'd now like to turn the conference over to our first speaker, Pete Gunnlaugsson. Please go ahead.

Thank you, Ryan. Good morning, everyone, and welcome to FIS' Third Quarter 2018 Earnings Conference Call.

Turning to Slide 2. Gary Norcross, Chairman, President and Chief Executive Officer, will begin today's call with company highlights for the quarter; Woody Woodall, Chief Financial Officer, will continue with the financial results. This conference call is also being webcast with today's news release and corresponding presentation available on our website at fisglobal.com.

Moving to Slide 3. Today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. I refer you to the safe harbor language on the slide.

The materials presented today will also include references to non-GAAP financial measures in order to provide a more meaningful comparison between the periods presented. Reconciliations between the GAAP and non-GAAP results are provided in the attachments to the press release and in the appendix of the supplemental slide presentation.

Turning to Slide 4. It is now my pleasure to turn the call over to Gary to discuss the business highlights for the third quarter. Gary?

Thank you, Pete. Good morning, and thank you for joining us. I'm pleased to announce that FIS delivered strong results again this quarter, delivering 4% organic growth. Our sales, pipeline and revenue backlog are strong and continue to grow. These are positive signals that our clients are continuing to invest for the future.

Growth in the quarter was driven by strong sales over the prior 3 quarters as well as exceptional operational execution. The continued expansion of existing client relationships, growth of our clients through higher volumes of transactions and accounts and new client logos builds on our positive momentum as we near the end of the year. We continue to be pleased by the accelerating market momentum globally for our mission-critical products and services.

Turning to Slide 5 for key themes. In the year, we continue to make strong progress executing against our modernization and market expansion strategies, which we have shared throughout the year. Our focused investment in our enterprise DIGITAL ONE platform brings modern, best-in-class capabilities to both self-service channels such as mobile, web and tablet to banker-assisted channels like branch systems, teller, kiosk, call center and back office. Its new architecture and design provides a clear path to a modern banking experience for financial institutions around the world and allows us to expand our reach into new markets.

DIGITAL ONE has already had early success throughout 2018 in the large regional and direct bank market in the U.S. We are excited about this solution making an even broader impact to financial institutions and credit unions for the remainder of the year and throughout 2019.

Similarly, our investments in more modern payment loyalty solutions are seeing strong demand, with solid end-quarter results. These solutions are also opening new markets globally to FIS. Additionally, through our modernization focus, we continue to successfully execute on our data center consolidation strategy and expect to run more than 50% of our production workloads in our private cloud by year-end. This data center strategy is not only driving higher availability for our clients, but we're also seeing the significant cost savings flow through our results in line with our projections during our May investor update.

Based on these comprehensive modernization programs, along with other initiatives, we will continue to drive long-term scalability, growth and resiliency for FIS. As a result, we are confident that we will exit 2018 with a solid foundation that positions us well for success in 2019 and beyond.

Turning to our segments. Integrated Financial Solutions drove another strong quarter of organic growth and margin expansion. Exceeding our expectations, these results were underpinned by increased transaction and processing volumes, and as mentioned, robust year-to-date sales. Demand for our retail banking, digital, wealth and payments businesses remained strong in the quarter as our clients continue to seek more efficient and modern ways to run their operations, grow their businesses and connect with their customers across digital channels.

I'd like to share a few client highlights across our broad financial services portfolio. In a competitive core takeaway deal, a fast-growing Texas-based community bank chose FIS as its core banking platform to support its strategy to outpace its competitors, while growing and expanding into new markets. This multiyear deal also includes a full suite of ancillary solutions, including debit and image processing, fraud and new digital banking and payments capabilities, providing the bank with advanced operating efficiencies and a more modern user experience for its customers.

In addition, a global energy giant is modernizing the way it engages with customers by deploying our digital payment loyalty solution. This innovative solution enables customers to redeem earned rewards at the pump and within stores using their mobile phones. With this new deployment, the growing FIS premium payback redemption network now supports millions of consumers across more than 24,000 U.S. fuel stations.

Finally, as an example of our success in cross-selling, the depth and breadth of our solutions portfolio, a top 20 retirement plan sponsor expanded its relationships with us by selecting an outsourced FIS wealth solution to reduce its operational cost and improve servicing. This new win enables the organization to increase operational efficiencies by replacing 3 existing solutions with a single hosted retirement plan administration solution for its entire defined contribution retirement business.

As we look across the IFS spending environment, it remains robust with strong sales forecast for Q4. We continue to build on these positive results established over the last several quarters, creating momentum into 2019.

As expected, results for our Global Financial Solutions segment rebounded in the quarter, with notably strong growth for our banking and payment solutions. Also as expected, our institutional and wholesale businesses had a nice rebound over Q2. We continue to expand our leadership position in the direct bank market and have become the de facto partner of choice for institutions looking to increase deposits through direct bank offerings. For example, our enterprise DIGITAL ONE solution that I referenced earlier is powering a recently launched direct bank offering for a top 25 financial institution, joining the ranks of direct banks running on FIS technology. Another top 100 bank also selected DIGITAL ONE in the quarter to power its branch transformation strategy.

Also, as you saw after a 10-year partnership, we recently announced winding down our Brazilian joint venture. The JV was an exceptional entry point to the highly attractive Latin America payments market. Moving forward, we have the intellectual property, talent and infrastructure to effectively expand our commercial relationship for Bradesco. And more importantly, we are well positioned to gain new clients in the Latin America region. Based on our discussions in Brazil, we see the recent election as a positive to our continued long-term business expansion in the country.

As you are aware, FIS has completed several strategic divestitures since acquiring SunGard over 3 years ago. The JV transaction will complete our plan to divest businesses and allow us to offer our most focused mission-critical portfolio to date as we plan for 2019.

Looking at other international regions, we continue to gain market share and are successfully capitalizing on increasing demand for our solutions. For example, a large European payments processor became a new FIS client this quarter by entering into a multiyear debit and prepaid processing agreement. As with many of our European clients, this partnership supports the organization's strategy to more efficiently comply with the increasing demands of the European regulatory landscape.

In summary, the spend environment in our GFS segment remains strong. Our solid pipeline and sales forecast points to a strong Q4, therefore giving us confidence in our full year results as well as creating strong momentum into 2019.

Turning to Slide 6. Overall, we continue to drive solid momentum and are making very good progress on executing our strategy that will drive long-term transformational results for us and our clients, including focusing our investments and accelerating our initiatives to provide the most modern solution set in the industry, remaining on track with our data center consolidation and cloud strategy and continually driving increased efficiency within our operations.

This focused execution of our strategy has been a pervasive hallmark of our success. This month, we celebrated our 50th anniversary, a very impressive milestone for the fast-moving FinTech industry. Our 52,000 employees shared in this achievement through celebrations in more than 70 of our worldwide locations. One of our core tenets is giving back, and our employees participated in activities supporting the communities where we live and work. While employees enjoyed looking back at where we have come, they are even more energized on how we will continue to evolve FIS and remain on the forefront of solving for the future of our industry for the next 50 years.

Woody will now provide additional detail on the financial results for the quarter. Woody?

Thanks, Gary. I'll begin with Slide 8 with a summary of our consolidated results for the quarter. In the third quarter, revenue increased 4% to $2.1 billion on an organic basis and adjusted EBITDA increased 7.6% to $808 million. Adjusted EBITDA margin expanded 290 basis points to 38.7% for the quarter.

Adjusted net earnings was $438 million and adjusted earnings per share increased 13.7% to $1.33 per share compared to $1.17 per share in the prior year quarter.

For the first 9 months of the year, revenue increased 2.7% on an organic basis to $6.3 billion and adjusted EBITDA grew 4.9% to $2.3 billion. Adjusted EBITDA margin expanded 310 basis points to 36.3%. Adjusted earnings per share grew 19.7% to $3.64 per share.

Moving to Slide 9. In the third quarter, IFS revenue grew a healthy 5.6% on an organic basis and EBITDA grew 5.9% to $496 million versus $469 million in the prior year quarter. EBITDA margins expanded 30 basis points to 45.5%.

For the first 9 months of the year, revenue increased 4.3% on an organic basis and adjusted EBITDA grew to $1.4 billion, a 4.8% increase compared to the prior year period.

Turning to Slide 10. Banking and wealth grew 5.2% for the quarter. This strong performance was driven by growth in our community bank channels as well as continuing demand for our outsourced wealth solutions.

Payments grew a robust 7%. And as Gary mentioned, we are seeing interest and demand in our innovative solutions. These market-differentiating solutions were called out at our Investor Day in May, and they continue to gain traction in the market. Performance was also enhanced by increasing transaction volumes in our debit and fraud solutions.

Term fees were $21 million for the quarter versus $18 million in the prior year period. We still anticipate full year term fees to be relatively flat compared to the prior year, and they make up less than 1% of total FIS annual revenue. As Gary mentioned, we're very pleased with the revenue growth year-to-date for this segment and market demand remains healthy.

Turning to Slide 11. As expected, GFS returned to growth during the quarter and grew 2.5% on an organic basis. EBITDA increased 5.2% to $355 million. Margins expanded 420 basis points to 38.7%, reflecting a positive revenue mix. For the first 9 months of the year, revenue increased 1.6% organically. Adjusted EBITDA grew to $973 million, a 3.5% increase compared to the prior year period. This represents 480 basis points of margin expansion to 35.5%.

Moving to Slide 12. Our institutional and wholesale business rebounded from the second quarter and grew 1.1%. We continue to anticipate improved growth in the fourth quarter. Banking and payments grew 4.4%, reflecting strengthened demand in North America for our digital suite of solutions as well as payments growth in Latin America.

Moving to Slide 13. Corporate and other revenue increased 1.2% on an organic basis to $79 million. As previously mentioned, we expect that the top line headwind is subsiding in the second half of 2018. Going forward, we do not anticipate this segment to be a headwind to consolidated top line growth.

The Corporate and other segment results included $55 million of corporate expenses for the quarter compared to $75 million in the prior year period. This reduction was partially driven by benefits from the acceleration of our data center consolidation program. Moving forward, these ongoing incremental cost savings will positively impact the margin profile of the IFS and GFS segments, and our corporate expense will revert to historical levels.

Moving to Slide 14. Free cash flow for the quarter was $356 million. As you recall, last year, free cash flow was benefited by approximately $50 million related to a delay in tax payments due to Hurricane Irma. This year, there was no deferral, and therefore, taxes were paid in the normal course of business. We're also making some modest working capital investments to support growth initiatives, and we're seeing higher sales commissions. Both of these impact near-term cash flow, but will support longer-term revenue and profit growth.

Debt outstanding as of September 30 was $9 billion with a weighted average interest rate of 3.5%. Approximately 95% of our debt outstanding is at fixed interest rates, which provides stability in a rising interest rate environment.

During the third quarter, we returned $570 million to our shareholders in the form of dividends and share buybacks. We paid $105 million in dividend and repurchased 4.3 million shares. Through the end of September, we have purchased -- repurchased 10.5 million shares for $1.1 billion. We have $2.8 billion remaining on our existing share repurchase authorization. Our weighted average diluted share count was 331 million at the end of the quarter and our basic share count was 328 million.

We continue to see strong sales results, which have contributed to an increase of $400 million to our backlog compared to the prior year.

Before I move onto guidance, I wanted to spend a few minutes discussing some recent transactions and our expectations for foreign currency impact for the remainder of the year. First, we divested our Certegy Check Services business on August 31, which was reported in our Corporate and Other segment. This transaction reduced Q3 EPS by $0.01. And for the fourth quarter, we expected this business to contribute $0.02 of EPS and a little over $20 million of revenue. Annually, this business would have contributed approximately $80 million of revenue and $0.06 of EPS in 2018.

We also began the process to unwind our joint venture in Brazil. Currently, we anticipate the transaction to close no later than the end of the second quarter of 2019. Upon closing, this will enable us to serve our clients in Brazil on a direct basis. In addition, this positions us to more effectively compete in this very attractive market as a fully independent third-party payment processor. This transaction does not have an impact to 2018 adjusted results and will have no meaningful impact to the medium-term outlook we provided in May. The unwinding of our joint venture, in addition to the announced divestitures, leaves us with the most focused set of assets serving the financial services industry. As Gary mentioned, we do not anticipate further divestitures.

Finally, given the current expectations of foreign exchange rates, we anticipate FX to negatively impact our fourth quarter top line by approximately $45 million and EPS by about $0.01.

Move to Slide 15. This morning, we revised our full year consolidated revenue growth guidance to approximately 3%. We now also expect IFS organic revenue growth to be approximately 4% and GFS organic revenue growth to be approximately 3%. Adjusted EBITDA margin outlook remains at approximately 37% for the full year.

And finally, we're tightening our full year EPS range. For the full year, we now expect adjusted EPS to be $5.20 to $5.24 per share, representing 22% to 23% growth.

Moving to Slide 16. We will continue to leverage our market leadership to produce predictable top line growth, exceptional margin expansion, double-digit EPS growth and strong cash flows. These strengths allow us to invest for the future growth and return value to our shareholders.

That concludes our prepared remarks. Operator, you may now open the line for questions.

(Operator Instructions) Our first question comes from the line of David Togut with Evercore.

It looks like for 2018, your revenue growth for IFS and GFS will actually be sort of the mirror opposite of what is in your long-term guidance, which has GFS growing significantly higher than IFS. So my question is, is this more of a 2018 phenomenon really driven by higher bank IT spending? Or do you think this is more sustainable, where the higher-margin IFS business can outgrow GFS in 2019 as well?

Yes -- no. It's a great question, David. We're coming off of 3 really good quarters of sales in IFS. You're seeing that flow through toward the organic growth rates. Frankly, as Woody and I both talked about, Q3 exceeded our expectations. We're looking at a strong Q4, so -- from a sales perspective and confident going into 2019. So I do think the fundamental spending environment has improved across our regional and community banks. And we're certainly seeing stronger demand for our solutions, given the fact that we're focused on our modernization strategy, movement into the cloud, the new DIGITAL ONE announcement. We're actually pretty excited that IFS will continue strong growth rates into 2019.

Understood. And then just as a quick follow-up, your long-term guide called for 75 to 125 basis points of average annual EBITDA margin expansion. Do you expect to be on that trajectory in 2019?

Yes. I think, David, we don't have any broad change to the midterm guidance we outlined in May, and we believe we'll absolutely be in that level of margin expansion in 2019.

In fact, you're really seeing some great traction and pull-through with our data center consolidation. So you're starting to see those numbers drop to the bottom line, which is a great positive. So we're actually very confident in our guide on continued margin expansion going forward.

Our next question comes from the line of David -- excuse me, Dave Koning with Baird.

Nice reacceleration in GFS.

Thanks.

Yes. In -- I guess, first of all, when we think of GFS, I think you imply now about 7% or so growth in Q4 to get to that 3% for the year. But I guess, I'm kind of wondering, as we look into next year now, because 2018 had a lot of lumpiness because of license and 606, is next year going to be a smoother trajectory to kind of normal growth all through the year? I guess, those couple of questions, first.

Yes. I think as you remember, we talked about some lumpiness because of the adoption of 606 in 2018. Our expectation in 2019 is a smoother alignment. Although you may have some renewals in a particular quarter versus another, but we don't expect the level of movement that we had because of the adoption of 606. As you remember, we are looking at a robust fourth quarter growth rate to get to the range we talked about, but we anticipate at least a few points out of the shoot just from the adoption of 606 and then the remainder of the organic growth to be driven through a robust pipeline and good solid license sales that we anticipate in the fourth quarter. But I think going back to your original question, we do anticipate less lumpiness in 2019 than we had this year.

Yes. And Dave, I just want to remind you, Q4 is always a big quarter for the GFS business. It's just cyclically always a quarter in which there's a lot of decisions made by the Tier 1s around the globe. And frankly, they're cleaning out their budgets for the year they're in and preparing for their implementation of their big programs starting in the next year. So even as Woody described the smoothing out and some in next year, you'll still see Q4 as a big year next year.

Okay. And then, I guess, secondly, on the JV change, how does that affects kind of annualized revenue and margins? And does -- is that going to be included kind of in your margin expansion if it doesn't have an EPS impact, but it takes revenue down? That would seemingly help your margins.

It's a great question, Dave. And I'll give you some color around the JV itself. We put out a press release that had roughly an annualized impact to reported revenue of about $200 million. First, while we consolidate the JV, we only own 51% of the economics. Bradesco owns the other 49%. And after we close the transaction, we'll remove ourselves from some low-margin call center operations and some low-margin, almost no-margin pass-through revenues from a third-party vendor. The combination of those and removing the minority interest is why we anticipate really no impact on EPS, but it will impact reported revenue sum. That -- all those collectively will help our margin profile in '19.

And to build on that, Dave, I mean, one of the things that's exciting about this, as we've talked about in the past, it was a great partnership that allowed us to really penetrate the higher growth market of Brazil. But now that the fact that we're going to be independent, we've got a great commercial arrangement moving forward with Bradesco, but it really does allow us now to fill the full capabilities of FIS, not only in Brazil, but the broader Latin America market. So we're pretty bullish on our opportunities down there in the future, given the fact that we've now unwound the JV. In the past, we had prospects that really didn't want to enter the JV because of the Bradesco ownership. So now all of that -- all that goes away as a barrier for our sales going forward. So it's a great outcome for us.

Next question comes from the line of Brett Huff with Stephens.

One question. Gary, you talked about the modernization progress you guys are doing. So less a numbers question. I know you've talked about modularizing your cores, customizing sort of the front UIs and then trying to make sort of, I guess, I don't know, manufacture a infrastructure that kind of works across all those. Can you give us a more specific update on that, number one? And then kind of related to that, do we have any implementations of some of those new modules? And how is the conversation going with some of those mid and larger banks in terms of -- are they buying into this -- to this thesis that you guys have?

Yes -- no. Brad, I mean, it's a great question. As we talked about, we're very far down the path of our modernization transformation. And it really spans from the technology side to data center consolidation. As you're aware, we're wrapping up year 3 of a 5-year journey. You're seeing great outcome from the operating savings. We'll have $100 million in run rate by the end of this year. We'll have $250 million by the end of year 5. And we'll have over 50% of our production compute in the cloud by the end of this year. So great progress and being very well received. And that's not just cloud-based deployment, that's modernizing our network, modernizing our infrastructure, using artificial intelligence, et cetera, through the whole process of delivery. So that's going very well. I highlighted a number of key wins on our more modern, digital omni-channel platform that we're able to deploy globally across any and all financial institutions. I highlighted a number of DIGITAL ONE wins in the quarter. We've had quite a bit of success with that solution throughout the year, not only with sales, but also going live in production on a true future of where we see both the assisted and unassisted. From a core modernization standpoint, we have had great progress on that development and a number of key wins this year in the market and a lot of traction in the larger financial institutions. We're deploying those components under our brand Profile 8, which is the next generation of our profile suite, but we're also now consuming those components in a number of our regional and community bank cores as well. So all of that combined, we feel really good about the retail banking side and what we're doing. I also highlighted a number of key wins with our modernization effort around payments. You're starting to see some traction in our payments growth. A lot of that is next-generation technologies that we're starting to deploy and gain traction. I highlighted the example with U.S. fuel stations and that success. We're also seeing, and we highlighted several wins -- a significant win in Europe, where our PaaS products, Payment as a Service product, is gaining a lot of success. We've now had 3 wins there. And then on the institutional and wholesale side, doing a number of key modernization efforts around some of our SunGard assets. So long-winded answer to -- we have a lot of traction across this, and it really is starting to resonate with our client base.

That's helpful. And just the quick follow-up is on M&A. I think, Woody, you said -- if I heard you right, it sounds like post the Check business -- congrats on that sale -- it seems like we've trimmed most of what we want to trim and feel pretty good about our portfolio. And if that's the case, as we look forward on now that our balance sheet is in pretty good shape, what are we thinking about from an M&A point of view, maybe even as some of the valuations have come in with this market turnaround?

Yes. With regard to the first question, I think that's right. We're about as clean and focused as we can and we have been since I've been with the company for 10 years. We feel very good about where we're at in terms of the amount of technology and software-related, mission-critical-related applications that are in the portfolio and things that we've pruned off over the last few years. With regard to future M&A, I think it's the same philosophy that we've always had. We try to find things that are good strategic fits, that increase our capabilities in markets that we serve or break us into new markets, and they also have to make sure they make good financial sense and drive solid returns to our shareholders. I don't think that's changed very much. We continue to watch the market dynamics as everyone does, but we're always keeping an eye out for what's going on out there.

Our next question comes from the line of George Mihalos with Cowen.

Wanted to ask, on the IFS strength, specifically within the payments division, that obviously accelerated significantly from the first half of the year. Is that 1 or 2 deals that are kind of dropping in now, really pushing that growth rate? Or is it more broad-based? And then related to that, you talked about stronger market and also some competitive takeaways. Is there a way to kind of gauge the strength between those 2, so sort of break it down between those 2 drivers?

Yes. I would think -- I would say it's a combination of both, George. The nice thing about IFS business is it's got a very diversified client base. And so the acceleration in payments, you're seeing that -- from economic indicators, you're seeing increased volumes, especially around credit, debit and our network businesses. So we saw nice volume increases across the quarter, which obviously contribute to our organic growth. But we've -- the team has also done a very nice job over the last 3 quarters selling some nice payment sales, and you're seeing the team get those onboarded and starting to gain traction as well. So it's really a combination of market dynamics as well as sales dynamics, both contributing to an accelerated growth rate. Across IFS, it was a very clean quarter. And if you look, we're encouraged about what we're seeing in that market, what we're seeing in the sales force, taking market share and the growth across it. So I think there's a lot of good indicators that make us excited for not only the rest of the year but into 2019.

And I'll follow on to that too. I mean, We had robust growth in payments. I think it's an indicator that the investments in the -- the investments we've been making over the past few years are actually paying dividends now. And we continue to anticipate robust growth in payments going into Q4.

Okay. That's great to hear. And then not sure if I missed it, but the outsized margin expansion in GFS that you saw this quarter, what were sort of the key drivers of that?

You've got a couple of things. We continue to monitor costs, no doubt about it. We've got some absence of lower-margin business from divestitures that we made in the prior year. And we've seen some of the data center consolidation efforts flowing through to the margin health within that business.

Next question comes from the line of James Schneider with Goldman Sachs.

I was wondering if you could maybe talk a little bit about what you're seeing in the M&A landscape among your bank partners. Clearly, we've seen a little bit more elevated M&A in the space, maybe not to the lower end of the market. Maybe talk about what you're seeing and how you expect that is going to potentially impact your growth rate going into next year?

Yes. It's a good question, Jim. We're seeing a pretty consistent trend across M&A. Woody highlighted the term fees, and -- in Q3, pretty much in alignment. You can almost use that as a proxy for M&A activity, pretty much in alignment over last year, and looks like they'll be down a little bit in Q4 based on where we sit, which makes us come in flat year-over-year. Yes, there's a lot of discussion going on, I would say it that way. But that -- but those discussions, and frankly, decisions have been fairly consistent over the years. There's some indication as we've raised the SIFI limit that we might see more activity in the larger bank space. But I'd also come back and say valuations are high in the markets. And so the good news about FIS is we've got very strong positioning in the large bank market. And typically, we're the net benefactor as our customers are buying other clients and driving scale. And then as -- even in the smaller bank market, as banks grow into the larger bank space, they tend to look to FIS to really drive their capabilities necessary to compete at that level. So long-winded answer to it, not seeing a lot of change, but something that we monitor very closely.

That's helpful color. And then maybe just as a follow-up, at the macro level, you clearly highlighted that IFS is coming in a little above plan because of the strong sales and the IT spending backdrop. What's your client conversations look like in terms of their expectations for 2019 spending, and directionally, whether that's going to be quite as strong as it was this year?

Well, right now, all we can look to is what Q4 looks like. As I highlighted in my prepared remarks, looks like we're going to have a strong sales quarter in Q4. And I'll remind everybody, as we onboard these sales, you need to look that those are -- that's going to drive organic growth 9 and 12 months out, right, because it takes time to not only sell the solution, it takes time to implement it. And I'd also highlight that our pipeline continues to be highly qualified and robust in the IFS segment. So that gives us confidence as we look into 2019. And I think a lot of our clients, as interest rates continue to rise, their net interest margin continues to spread and they're more bullish on spending on some programs that they've held back. There's also a real need to modernize these platforms, and FIS is certainly leading the way in that category. The benefits the cloud computing drives, the benefits to omni-channel deployment, next-generation components, payments and institutional wholesale are really resonating across those client bases. So we feel good about 2019 as it sits today, given the size of the qualified pipeline and the activities we're having in the sales channel.

And our last question comes from the line of Chris Shutler with William Blair.

Could you just talk about the free cash conversion? When we quantify, it provides more details on the 2 impacts that you called out, Woody, working capital investments and higher sales commissions. And then is there any update on free cash flow guidance for the year or beyond?

Yes. If you look at free cash flow, again, which are the highlight, year-over-year, we had a benefit in Q3 2017 of roughly $50 million. That would get you to about flat year-to-year. We have had some modest investment in working capital support to growth primarily in the payments area, and we've had some higher sales commissions this year that frankly we're happy to pay. If you look back, we've been trying to increase the percentage of revenue conversion and the free cash flow. If you go back to 2014, that was roughly 14% conversion of free cash flow from revenue. And we are looking to be very close to 20% this year. And we want to continue to drive growth in that revenue to free cash flow conversion at or above 20% going forward. So that's where we're at on the free cash flow comment.

Do you still expect it could be north of 100% of adjusted net income going forward?

I would anticipate it to be roughly 100% this year. And then we'll continue to think it could be 100% to 110% on a go-forward basis.

Got it. Okay. Just -- my follow-up would just be on the sales commentary, great to hear that, that's solid. I know you don't quantify the kind of retention rate type of comment, but can you give us some comments, at least qualitatively, on dollar retention rates?

Yes. From a retention standpoint, I mean, we continue to do very well, not only taking share with new wins. Obviously, in this -- on this call, we highlighted a lot of new wins. But I would tell you, our renewal rates continue to be in line with historicals, and we're very pleased with the retention rates that the team is executing on. That's a great opportunity for us during the renewal cycle to cross-sell and up-sell our new capabilities, to really communicate our modernization story, help push people to the cloud and also gain the benefits of many of the next-generation technologies we've talked on the call.

Thank you for joining us today and for your ongoing interest in FIS. We are pleased with our year-to-date results and are confident that this positive momentum is paving the way for a successful 2019 and beyond.

In closing, I'd like to reinforce our core fundamentals. We have a proven market leadership position, driving continuous innovation for modernization and improving our capabilities. We are serving healthy and improving market segments and have very strong financial fundamentals with a proven track record of generating shareholder returns. And we believe our business continues to have a compelling investment thesis, and we look forward to delivering on our commitments.

I'd like to thank our loyal clients who depend on us to keep their businesses running and growing every day. The successful partnership between our clients, leaders and employees enables FIS to continue to empower the financial world. Thank you for joining us today.

Ladies and gentlemen, today's conference was recorded and is available for replay starting at 11 a.m. Eastern today and going through November 13 at midnight. You may access the AT&T replay system by dialing 1 (800) 475-6701 and entering the access code 455360.

That does conclude today's conference. I want to thank you for your participation. You may now disconnect.