Summary
Fidelity National Information Services, Inc. (FIS) reported mixed financial results for the second quarter and first half of 2013. While overall revenue saw a modest increase year-over-year, driven by acquisitions, increased processing volumes, and demand for professional services, the company experienced a decline in operating income, particularly in the three-month period. This was largely attributed to increased selling, general, and administrative expenses, notably a significant charge related to contingent payments for the Capco acquisition and higher information security spending. Despite these headwinds, the company highlighted continued growth in its international segment, despite unfavorable foreign currency impacts. FIS also addressed ongoing regulatory scrutiny regarding its information security and risk management functions, noting that while a recent report led to client inquiries, no significant business has been lost to date. The company reaffirmed its commitment to substantial investments in security and reiterated its expectation that operational cash flow will be sufficient to meet its financial obligations, including ongoing dividend payments.
Financial Highlights
55 data points| Revenue | $1.51B |
| Gross Profit | $481.30M |
| SG&A Expenses | $232.60M |
| Operating Expenses | $1.26B |
| Operating Income | $248.70M |
| Net Income | $104.80M |
| EPS (Basic) | $0.36 |
| EPS (Diluted) | $0.36 |
| Shares Outstanding (Basic) | 289.90M |
| Shares Outstanding (Diluted) | 294.30M |
Key Highlights
- 1Total revenue for the three months ended June 30, 2013, increased by 3.8% to $1.51 billion, and by 4.2% to $2.99 billion for the six-month period, compared to the prior year.
- 2Operating income decreased in the three-month period (down 12.4% to $247.6 million) but saw a slight increase in the six-month period (up 3.5% to $522.7 million) due to increased SG&A expenses, including a $43.9 million charge for Capco contingent payments.
- 3The company invested over $100 million in Risk and Information Security over the past 18 months due to growing global cyber-attack threats.
- 4International Solutions Group (ISG) revenue grew, with notable increases in Brazil, European consulting, and expanded presence in Asia and Latin America, although impacted by foreign currency headwinds.
- 5FIS successfully completed debt refinancing activities in April 2013, increasing its revolving loan capacity to $2.0 billion.
- 6The company continues to pay a quarterly dividend of $0.22 per share, with a new payment scheduled for September 30, 2013.
- 7The company is facing ongoing patent infringement litigation with CheckFree Corporation and CashEdge, Inc. (Fiserv) and a new lawsuit from DataTreasury Corporation, though FIS believes it has strong defenses for the latter.