10-QPeriod: Q3 FY2009

Fidelity National Information Services, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 5, 2009For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported its third-quarter 2009 financial results on November 5, 2009. A significant event during the period was the completion of the Metavante Merger on October 1, 2009. This merger is expected to create a more comprehensive provider of financial and payment solutions with enhanced geographic reach. Financially, for the nine months ended September 30, 2009, FIS reported net earnings attributable to FIS of $159.8 million, a decrease compared to $186.0 million in the prior year. This decline was largely due to the absence of significant gains from discontinued operations seen in 2008, particularly the LPS spin-off. However, earnings from continuing operations showed a substantial increase, rising to $161.5 million from $67.4 million in the same period of 2008, reflecting improved operating margins and cost management. The company also secured significant investments from Thomas H. Lee Partners and FNF concurrently with the Metavante merger, bolstering its capital position.

Financial Highlights

55 data points
Beta

Revenue

$828.70M

26.9% Gross Margin

Net Income

$67.60M

8.2% Net Margin

EPS (Diluted)

$0.35

Total Assets

$7.43B

Cash & Equivalents

$205.60M

Free Cash Flow

$166.50M

Financial Statements
Beta
Revenue$828.70M
Gross Profit$223.30M
R&D Expenses$22.30M
SG&A Expenses$89.40M
Operating Expenses$694.80M
Operating Income$133.90M
Interest Expense$31.80M
Net Income$67.60M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)191.10M
Shares Outstanding (Diluted)194.60M

Key Highlights

  • 1Completion of the Metavante Merger on October 1, 2009, positioning FIS as a leading integrated provider in the financial and payment solutions industry.
  • 2Net earnings attributable to FIS decreased to $159.8 million for the nine months ended September 30, 2009, from $186.0 million in the prior year, primarily due to the prior year's gains from discontinued operations.
  • 3Earnings from continuing operations significantly increased to $161.5 million for the nine months ended September 30, 2009, from $67.4 million in the comparable 2008 period, driven by improved operating margins.
  • 4Gross profit margin improved to 27.5% for the nine months ended September 30, 2009, from 23.2% in the prior year, attributed to cost reduction activities and operating efficiencies.
  • 5Operating income for continuing operations showed strong growth, reaching $335.0 million for the nine months ended September 30, 2009, up from $228.9 million in the prior year.
  • 6Long-term debt decreased to $1,947.9 million from $2,409.0 million at the end of 2008, reflecting debt repayment efforts.
  • 7Cash flows from operations were robust, at $505.0 million for the nine months ended September 30, 2009, an increase from $398.7 million in the prior year (excluding LPS impact).

Frequently Asked Questions

The Metavante merger, completed on October 1, 2009, is expected to enhance FIS's position as a leading provider of financial and payment solutions. While the merger itself didn't impact the reported results for the nine months ended September 30, 2009, the company incurred merger-related costs. Pro forma information suggests that the combined entity would have generated higher net earnings in the reported periods compared to FIS alone in 2008. The company anticipates realizing cost and revenue synergies over the next 24 months.

Processing and services revenues decreased slightly by 3.9% to $2,483.3 million for the nine months ended September 30, 2009, compared to $2,584.0 million in the prior year, partly due to unfavorable foreign currency translations and a strong prior-year quarter. However, profitability improved significantly. Gross profit margin increased from 23.2% to 27.5%, and operating income from continuing operations rose substantially to $335.0 million from $228.9 million, driven by cost reduction initiatives and improved operating efficiency. Net earnings attributable to FIS decreased due to the absence of significant gains from discontinued operations in the prior year, but earnings from continuing operations saw a marked increase.

FIS has been actively managing its debt. Long-term debt, excluding the current portion, decreased to $1,947.9 million as of September 30, 2009, down from $2,409.0 million at December 31, 2008. In connection with the Metavante merger, FIS entered into new financing arrangements and an accounts receivable securitization facility, which increased its total debt subsequent to the quarter-end. The company operates under debt covenants, including leverage and interest coverage ratios, and was in compliance with these covenants as of the reporting date.

The filing mentions several legal proceedings. Notably, a class action lawsuit related to check processing fees was nearing a settlement. Another class action concerning the Driver's Privacy Protection Act was subject to appeals. There was also an action filed by Lehman Brothers in bankruptcy court concerning an interest rate swap agreement, which FIS was appealing. While some of these matters were being resolved or appealed, their ultimate financial impact was not definitively stated as material at the time of filing, though ongoing litigation always presents a risk.