01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services (FIS) reported strong revenue growth in its 2009 10-K, driven by the significant acquisition of Metavante in October 2009.
This acquisition substantially expanded FIS's scale, service offerings, and market reach, particularly in core processing, payments, and emerging markets like healthcare and government payments. The company operates across four segments: Financial Solutions Group (FSG), Payment Solutions Group (PSG), International Solutions Group (ISG), and Corporate and Other. Despite a challenging economic environment impacting consumer transactions, FIS demonstrated resilience with recurring revenue comprising about 85%a of its total.
The company's strategy focuses on solution integration, superior execution, enterprise sales, global diversification, strategic acquisitions, and expense management to drive profitable growth. Investors should note the significant goodwill generated from acquisitions, the company's leverage, and ongoing efforts to integrate the Metavante acquisition and realize expected synergies. The company's financial performance in 2009 showed increased revenues and gross profit compared to 2008, benefiting from the Metavante acquisition in the latter part of the year.
However, operating income and margins were impacted by substantial restructuring, integration, and merger-related charges, as well as significant impairment charges related to rebranding efforts. Despite these one-time expenses, the core business operations, particularly in the FSG and PSG segments, showed robust performance. FIS also continued its commitment to returning value to shareholders through consistent quarterly dividends.
02—Key points
Key Highlights
- Completed the significant acquisition of Metavante on October 1, 2009, expanding service offerings and market presence.
- Reported consolidated revenues of $3,769.5 million in 2009, an increase of 10.0% over 2008, driven by the Metavante acquisition.
- Achieved a gross margin of 25.7% in 2009, an improvement from 21.5% in 2008, attributed to cost efficiencies and Metavante synergies.
- Experienced increased Selling, General, and Administrative (SG&A) expenses in 2009, largely due to $108.5 million in restructuring, integration, and merger-related charges.
- Recorded significant impairment charges of $136.9 million in 2009, primarily related to rebranding and software asset write-offs.
- Maintained a strong recurring revenue base, with approximately 85% of total revenue derived from multiyear agreements.
- Continued to pay a consistent quarterly dividend of $0.05 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Fidelity National Information Services, Inc. kept $0.03.
- Revenue$3.71B100.0%
- Cost of revenue−$2.74B73.9%
- Gross profit$969.6M26.1%
- Operating costs−$684.0M18.4%
- Operating income$285.6M7.7%
- Interest, other & tax−$179.7M4.8%
- Net income$105.9M2.9%
Where FY2009 revenue went
$3.71B- Cost of revenue: $2.74B, 74% of revenue
- SG&A: $547.1M, 15% of revenue
- Net income: $105.9M, 2.9% of revenue
- Other operating costs: $136.9M, 3.7% of revenue
- Interest, other & tax: $179.7M, 4.8% of revenue
Kept 2.9% as net incomeNet income $105.9M · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $3.71B$3.36B | +10.5% |
| Gross Profit | $969.60M$743.40M | +30.4% |
| SG&A Expenses | $547.10M$381.00M | +43.6% |
| Operating Expenses | $3.43B$3.02B | +13.3% |
| Operating Income | $285.60M$336.40M | −15.1% |
| Interest Expense | $134.00M$163.40M | −18.0% |
| Net Income | $105.90M$214.80M | −50.7% |
| EPS (Basic) | $0.45$1.12 | −59.8% |
| EPS (Diluted) | $0.44$1.11 | −60.4% |
| Shares Outstanding (Basic) | 236.40M191.60M | +23.4% |
| Shares Outstanding (Diluted) | 239.40M193.50M | +23.7% |
05—Questions
Frequently Asked Questions
What was the impact of the Metavante acquisition on FIS's 2009 financial performance?
The acquisition of Metavante, completed on October 1, 2009, was a major driver of FIS's revenue growth in 2009. It contributed $404.1 million in revenue in the fourth quarter alone. While this boosted overall revenues by 10.0% year-over-year, the integration of Metavante also led to significant restructuring, integration, and merger-related charges, impacting operating income and margins in the short term.
How did the challenging economic environment affect FIS's business in 2009?
FIS acknowledged that the economic downturn impacted consumer transactions, which, in turn, affected transaction-based revenue streams. Sales of software licenses and professional services, considered discretionary spending, also faced pressure. However, the company's substantial base of recurring revenue (around 85%) provided a degree of stability. FIS managed costs prudently by reducing headcount and capital expenditures.
What are the main risks facing FIS according to the 10-K filing?
Key risks include industry consolidation and failures that could reduce customer base, the need to adapt to technological changes, intense competition, long sales cycles for applications, and risks associated with its significant leverage. Additionally, the company highlighted the potential for impairment charges on goodwill and intangible assets if economic conditions worsen and the integration risks associated with acquisitions like Metavante.
What is FIS's strategy for future growth?
FIS's strategy is built on several pillars: continuing to invest in solution integration and internal innovation, ensuring superior execution in delivering value, leveraging enterprise sales for cross-selling and up-selling, pursuing global diversification, making strategic acquisitions, and maintaining a strong focus on expense management for operational efficiencies.
06—Continue