01—Abstract
Summary
Summary of the 10-Q filed August 5, 2009. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported its financial results for the quarter ended June 30, 2009.
The company demonstrated a notable improvement in operating income compared to the prior year, driven by reduced operating expenses, including lower integration, restructuring, and stock-based compensation costs. Despite a slight decrease in overall revenue, largely due to unfavorable foreign currency translations, the company managed to increase its gross profit margin through cost-reduction initiatives and improved operating efficiency. A significant development during the period was the pending merger with Metavante Technologies, Inc., announced in March 2009.
The company also provided updates on its ongoing interest rate swap hedging activities and its compliance with debt covenants. While the company is navigating a challenging economic environment, it anticipates that its operational cash flows will be sufficient to meet its financial obligations.
02—Key points
Key Highlights
- Operating income for the three months ended June 30, 2009, increased to $117.4 million from $57.9 million in the prior year period, and for the six-month period, it rose to $199.3 million from $109.1 million.
- Gross profit margin improved significantly, reaching 27.8% for the three-month period and 26.5% for the six-month period, up from 22.5% and 22.2% in the respective prior year periods, attributed to cost reductions and operational efficiencies.
- Selling, general, and administrative expenses decreased due to lower integration, restructuring, and stock-based compensation costs compared to the prior year.
- The company is pursuing a merger with Metavante Technologies, Inc., with shareholder meetings planned for September 4, 2009, and expects the merger to close in the fourth quarter of 2009.
- Net earnings attributable to FIS common stockholders from continuing operations were $59.6 million ($0.31 per diluted share) for the three-month period and $93.9 million ($0.49 per diluted share) for the six-month period, showing substantial increases from the prior year.
- Cash flows from operating activities were strong, totaling $331.1 million for the six-month period ended June 30, 2009, an increase from $242.8 million in the same period last year (excluding the impact of LPS in 2008).
- Long-term debt was reduced from $2,409.0 million at December 31, 2008, to $2,134.0 million (excluding current portion) at June 30, 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2009, Fidelity National Information Services, Inc. kept $0.07.
- Revenue$829.2M100.0%
- Cost of revenue−$622.8M75.1%
- Gross profit$206.4M24.9%
- Operating costs−$93.0M11.2%
- Operating income$113.4M13.7%
- Interest, other & tax−$54.2M6.5%
- Net income$59.2M7.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2009filed August 5, 2009Financial Statements
Q2 FY2009 against Q2 FY2008
| Line item | Q2 FY2009Q2 FY2008 | Change |
|---|---|---|
| Revenue | $829.20M$869.70M | −4.7% |
| Gross Profit | $206.40M$195.70M | +5.5% |
| R&D Expenses | $21.50M$19.90M | +8.0% |
| SG&A Expenses | $93.00M$117.90M | −21.1% |
| Operating Expenses | $715.80M— | — |
| Operating Income | $113.40M$57.90M | +95.9% |
| Interest Expense | $31.30M$43.60M | −28.2% |
| Net Income | $59.20M$71.90M | −17.7% |
| EPS (Basic) | $0.31$0.37 | −16.2% |
| EPS (Diluted) | $0.31$0.37 | −16.2% |
| Shares Outstanding (Basic) | 190.30M192.50M | −1.1% |
| Shares Outstanding (Diluted) | 192.70M194.40M | −0.9% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the increase in operating income year-over-year?
The increase in operating income is primarily driven by a reduction in operating expenses. This includes lower selling, general, and administrative expenses due to decreased integration and restructuring costs from prior acquisitions (e.g., eFunds) and the LPS spin-off. Additionally, stock-based compensation expenses were significantly lower in the current period.
How is the pending merger with Metavante expected to impact FIS?
The merger with Metavante is expected to close in the fourth quarter of 2009, subject to shareholder and regulatory approvals. The filing details the exchange ratio of 1.35 FIS shares for each Metavante share and private placements of FIS stock to certain affiliates of Thomas H. Lee Partners and FNF to finance part of the transaction. While merger-related costs are being incurred, the company anticipates the merger will be a tax-free reorganization. The impact on immediate cash operating requirements is not expected to be significant.
What is the company's stance on its debt and liquidity in the current economic climate?
FIS had $227.9 million in cash on hand at June 30, 2009, with a significant portion held internationally. The company expects its operating cash flows to be sufficient to cover its operating requirements and debt service payments. Long-term debt has been reduced, and the company has interest rate swap agreements in place to manage interest rate risk. They are also monitoring the financial stability of their lenders and counterparties in the current economic environment.
How did foreign currency fluctuations affect the company's revenue and operations?
A strengthening U.S. dollar negatively impacted reported revenues, causing a decrease of 4.0% in both the three-month and six-month periods compared to 2008, primarily affecting the International segment. However, the company notes that excluding unfavorable foreign currency effects, its International segment revenue showed growth in constant currency.
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