FIS dropped 24% after earnings. I think there's more to it than just the guidance cut.

Was going through FIS's earnings yesterday after the stock dropped almost 24%, and something about their revenue numbers caught my attention. Q3 itself wasn't even that bad. Adjusted EPS was $1.61 compared to $1.51 last year, EBITDA margins were 42.9%, and they generated $862M in free cash flow. The problem was the guidance. They cut 2026 banking revenue growth expectations from 5-5.5% to 3.5-4%, and adjusted EPS guidance is now $5.82-5.89. But what I found more interesting was the explanation behind it. FIS makes money from termination fees when banking clients get acquired and exit their contracts. With all the bank mergers happening recently, they've been collecting quite a bit of this revenue. Management said they're reducing their assumptions for non-recurring revenue by over $100M. And for 2027, they're expecting roughly $100M less in termination fees compared to 2026, along with another $140M in strategic distribution partnership revenue that won't repeat. So even though they're expecting organic growth to contribute 2.5-3.5 percentage points next year, most of that gets offset by a 250-300 basis point headwind from non-recurring revenue. Adjusted revenue growth is expected to be somewhere between -0.5% and +1%. That made me curious about how other banking software companies account for these fees. I looked at Jack Henry (JKHY), which reported $17.9M in deconversion revenue last quarter, about $9M more than the previous year. Most of this comes from clients being acquired by other banks. The difference is that Jack Henry removes these fees from its non-GAAP adjusted revenue. Even after excluding them, adjusted revenue still grew around 7% to $682M. From what I can tell, FIS includes termination fees in its adjusted growth figures, while JKHY excludes them. I'm not saying FIS is doing anything wrong here. The fees are real revenue. But I think it makes a difference when you're trying to figure out how fast the underlying business is actually growing. Interestingly, JKHY was up around 11% on November 4 while FIS fell 24%. Now the bull case for FIS is still pretty interesting. Around 80% of its revenue is recurring, and recurring revenue grew 2.5% on a pro forma basis in Q3. They also maintained their $2.15-2.25B free cash flow guidance. At $29.76 and roughly 516M diluted shares, that's around a 14% FCF yield using their guidance, although their FCF calculation excludes cash taxes related to the Worldpay sale. That's a pretty attractive number on paper. What makes me hesitant is the debt. They've got $20.8B in debt, leverage is at 3.5x against a 2.8x target, buybacks are on hold, and the CFO is leaving. Management expects these revenue issues to be temporary, with normal growth returning in 2028. Maybe they're right. I just wonder how much of the apparent cheapness is because we're looking at earnings that benefited from unusually high bank consolidation activity. I've seen quite a few discussions about FIS being cheap based on its P/E, but not much about what its recurring revenue growth looks like once these termination fees normalize. For people who follow FIS, JKHY, or other software businesses with similar contracts, how do you account for termination fees when valuing them? Do you strip them out entirely, or do you treat them as a normal part of the business over a longer cycle? No position yet in either, just following them.