01—Abstract
Summary
Summary of the 10-Q filed May 2, 2013. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported solid performance for the first quarter of 2013, demonstrating revenue growth and improved profitability.
The company's ability to drive transaction volumes and offer new services in the evolving electronic payments market continues to be a key factor. Despite some headwinds from a declining check processing business and the impact of bank consolidation, FIS is well-positioned to capitalize on the ongoing migration to outsourced models by financial institutions. Key financial indicators show an increase in processing and services revenues, driven by higher transaction volumes and demand for professional services, which was partially offset by a decrease in retail check activity.
Gross profit and operating income saw notable improvements, reflecting increased operating leverage and successful cost management initiatives. While the company faces ongoing risks related to economic conditions, regulatory changes, and cybersecurity threats, its diversified business model and strategic investments in technology and security aim to mitigate these challenges and support continued growth.
02—Key points
Key Highlights
- Processing and services revenues increased by 4.6% to $1,478.0 million for the three months ended March 31, 2013, compared to the prior year period, driven by increased transaction volumes and professional services.
- Gross profit margin improved to 31.8% from 30.0% in the prior year's quarter, attributed to increased operating leverage and cost management.
- Operating income grew by 23.7% to $275.1 million, with operating margin expanding to 18.6% from 15.7%, benefiting from revenue growth and reduced SG&A expenses.
- Selling, general, and administrative expenses decreased by $6.5 million, primarily due to lower compensation charges compared to the prior year.
- Net earnings attributable to FIS common stockholders were $144.1 million ($0.49 per diluted share) for the quarter, a significant increase from $87.1 million ($0.29 per diluted share) in the same period last year.
- The company continues to invest in information security following a 2011 cyber-incident, with enhanced monitoring, risk assessment, and staffing. No material adverse effect is expected from further information regarding this incident.
- International business showed growth across major regions, though it was partially offset by unfavorable foreign currency impacts due to a stronger U.S. Dollar.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Fidelity National Information Services, Inc. kept $0.10.
- Revenue$1.48B100.0%
- Cost of revenue−$1.01B68.2%
- Gross profit$470.0M31.8%
- Operating costs−$194.9M13.2%
- Operating income$275.1M18.6%
- Interest, other & tax−$131.0M8.9%
- Net income$144.1M9.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed May 2, 2013Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $1.48B$1.41B | +4.6% |
| Gross Profit | $470.00M$423.90M | +10.9% |
| SG&A Expenses | $194.90M$201.40M | −3.2% |
| Operating Expenses | $1.20B$1.19B | +1.0% |
| Operating Income | $275.10M$222.50M | +23.6% |
| Net Income | $144.10M$87.10M | +65.4% |
| EPS (Basic) | $0.50$0.30 | +66.7% |
| EPS (Diluted) | $0.49$0.29 | +69.0% |
| Shares Outstanding (Basic) | 291.00M289.70M | +0.4% |
| Shares Outstanding (Diluted) | 295.50M295.40M | 0.0% |
05—Questions
Frequently Asked Questions
What are the main drivers of revenue growth for FIS in Q1 2013?
Revenue growth was primarily driven by increased processing volumes and transaction growth, higher demand for professional and consulting services, and increased termination fees. This growth was partially offset by a decline in retail check activity.
How did FIS manage its costs and improve profitability in the quarter?
FIS improved its gross profit margin through increased operating leverage and cost management initiatives. Selling, general, and administrative expenses decreased due to lower compensation-related charges compared to the prior year, though information security initiatives led to increased costs in certain areas.
What are the key risks facing FIS, as highlighted in the filing?
Key risks include general economic conditions, legislative and regulatory changes impacting the financial services industry, competition, the need to adapt to technological changes, cybersecurity threats and potential breaches, and the impact of consolidation within the banking industry, which can be detrimental if FIS services are not chosen for surviving entities.
How is the company addressing the ongoing cybersecurity concerns and past incidents?
FIS is making substantial investments in network security and has implemented significant enhancements since the 2011 cyber-incident, including hiring new security leadership, increasing monitoring, expanding risk assessments, and improving network segmentation. They continue to cooperate with federal law enforcement and do not expect the recent additional information from the 2011 incident investigation to have a material adverse effect.
06—Continue