10-QPeriod: Q3 FY2008

Fidelity National Information Services, Inc. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 10, 2008For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported its third-quarter 2008 results, showing a mixed financial performance impacted by significant corporate actions. While consolidated revenues increased by 25.4% to $893.8 million year-over-year, driven by the acquisition of eFunds and organic growth, net earnings from continuing operations decreased significantly to $45.6 million from $133.4 million in the prior year period. This decline was largely due to a substantial gain on the sale of Covansys stock in the prior year which did not repeat, alongside increased interest expense and operating expenses related to integration and restructuring activities. The company completed the spin-off of its Lender Processing Services (LPS) segment, which is now reported as discontinued operations, impacting year-over-year comparability. Despite the decrease in net earnings from continuing operations, the company generated strong operating cash flows of $398.6 million for the nine-month period, demonstrating operational resilience. Management highlighted ongoing integration efforts for the eFunds acquisition and strategic reviews of the company's structure. The company also provided updates on its debt structure and ongoing interest rate swap activities to manage financial risk.

Financial Highlights

33 data points
Beta

Revenue

$884.00M

25.1% Gross Margin

Net Income

$43.60M

4.9% Net Margin

EPS (Diluted)

$0.23

Cash & Equivalents

$238.50M

Free Cash Flow

$142.70M

Financial Statements
Beta
Revenue$884.00M
Gross Profit$222.20M
R&D Expenses$22.50M
SG&A Expenses$79.90M
Operating Income$119.80M
Interest Expense$47.70M
Net Income$43.60M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)189.50M
Shares Outstanding (Diluted)191.80M

Key Highlights

  • 1Consolidated revenues increased by 25.4% to $893.8 million in Q3 2008, largely due to the eFunds acquisition and organic growth.
  • 2Net earnings from continuing operations decreased to $45.6 million in Q3 2008, down from $133.4 million in Q3 2007, primarily due to the absence of a significant gain on sale of Covansys stock recorded in the prior year.
  • 3The company completed the spin-off of its Lender Processing Services (LPS) segment, with results now reported as discontinued operations.
  • 4Operating income increased significantly by 109.9% to $125.8 million in Q3 2008, driven by revenue growth and operational efficiencies.
  • 5Cash flow from operations remained strong, totaling $398.6 million for the nine months ended September 30, 2008.
  • 6Total assets decreased from $9.8 billion to $7.5 billion, primarily due to the LPS spin-off and a reduction in goodwill and intangible assets.
  • 7Long-term debt decreased significantly from $4.0 billion to $2.6 billion, with the retirement of Term Loan B following the LPS spin-off.

Frequently Asked Questions

The primary driver for the revenue increase in the third quarter of 2008 was the acquisition of eFunds in September 2007, which contributed $116.2 million to revenue. Organic growth also contributed to the overall increase.

The significant decrease in net earnings from continuing operations was primarily due to a large, non-recurring gain on the sale of Covansys stock that was recognized in the third quarter of 2007. This gain did not repeat in the current year, alongside increased interest expenses and operating costs related to ongoing integration and restructuring efforts.

The spin-off of the Lender Processing Services (LPS) segment, completed on July 2, 2008, resulted in LPS being reported as discontinued operations. This significantly impacts the comparability of financial results between the periods presented, particularly in terms of total assets and reported net earnings.

The company has reduced its long-term debt by retiring Term Loan B following the LPS spin-off. Additionally, FIS has entered into interest rate swap transactions to convert a portion of its variable interest rate exposure on its term and revolving loans to fixed rates, mitigating the risk of rising interest rates.