01—Abstract
Summary
Summary of the 10-Q filed November 10, 2008. Cited figures are marked; the original filing is the authoritative source.
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 milliona 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 millionb 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.
02—Key points
Key Highlights
- Consolidated revenues increased by 25.4% to $893.8 million in Q3 2008, largely due to the eFunds acquisition and organic growth.
- Net 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.
- The company completed the spin-off of its Lender Processing Services (LPS) segment, with results now reported as discontinued operations.
- Operating income increased significantly by 109.9% to $125.8 million in Q3 2008, driven by revenue growth and operational efficiencies.
- Cash flow from operations remained strong, totaling $398.6 million for the nine months ended September 30, 2008.
- Total 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.
- Long-term debt decreased significantly from $4.0 billion to $2.6 billion, with the retirement of Term Loan B following the LPS spin-off.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2008, Fidelity National Information Services, Inc. kept $0.05.
- Revenue$884.0M100.0%
- Cost of revenue−$661.8M74.9%
- Gross profit$222.2M25.1%
- Operating costs−$102.4M11.6%
- Operating income$119.8M13.6%
- Interest, other & tax−$76.2M8.6%
- Net income$43.6M4.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2008filed November 10, 2008Financial Statements
| 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 |
05—Questions
Frequently Asked Questions
What was the main driver behind the revenue increase in the third quarter of 2008?
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.
Why did net earnings from continuing operations decrease so significantly compared to the prior year quarter?
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.
What is the impact of the LPS spin-off on the financial statements?
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.
How is the company managing its debt and interest rate exposure?
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.
06—Continue