01—Abstract
Summary
Summary of the 10-Q filed May 8, 2015. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported its first quarter 2015 results, showing modest revenue growth of 2.3% year-over-year to $1,554.8 milliona.
This growth was primarily driven by acquisitions (Clear2Pay and Reliance) and increased demand for professional and consulting services, which helped offset a significant reduction in termination fees and unfavorable foreign currency impacts due to a stronger U.S. dollar. Despite revenue growth, operating income declined by 25% to $215.1 millionb, and diluted earnings per share decreased to $0.39 from $0.54 in the prior year period. This decline was largely due to increased selling, general, and administrative expenses, including a $44.6 million restructuring charge related to operational streamlining in the Global Financial Solutions segment, as well as integration costs for recent acquisitions.
The company continues to focus on its strategic shift towards providing integrated technology solutions and outsourcing services, benefiting from industry trends like the migration to outsourced solutions and demand for digital banking and mobile payment capabilities. Management highlighted ongoing investments in information security and efforts to manage foreign currency headwinds.
02—Key points
Key Highlights
- Revenue increased by 2.3% to $1,554.8 million for the first quarter of 2015, driven by acquisitions and professional services, partially offset by lower termination fees and foreign currency impacts.
- Operating income decreased by 25% to $215.1 million, impacted by a $44.6 million restructuring charge and increased SG&A expenses.
- Diluted Earnings Per Share (EPS) declined to $0.39 from $0.54 year-over-year, reflecting the decrease in operating income.
- The company finalized a reorganization into three reportable segments: Integrated Financial Solutions, Global Financial Solutions, and Corporate and Other, to better address market conditions and client needs.
- Significant investments were made in information security, a key area of focus given the growing sophistication of cyber-attacks.
- Cash flow from operations saw an increase of $8.5 million to $231.1 million, driven by changes in working capital, though offset by lower net earnings.
- The company continued its share repurchase program, spending $150.4 million in the first quarter of 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2015, Fidelity National Information Services, Inc. kept $0.07.
- Revenue$1.55B100.0%
- Cost of revenue−$1.07B68.8%
- Gross profit$485.0M31.2%
- Operating costs−$270.0M17.4%
- Operating income$215.0M13.8%
- Interest, other & tax−$104.0M6.7%
- Net income$111.0M7.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed May 8, 2015Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $1.55B$1.52B | +2.3% |
| Gross Profit | $485.00M$475.90M | +1.9% |
| SG&A Expenses | $270.00M$189.80M | +42.3% |
| Operating Expenses | $1.34B$1.23B | +8.6% |
| Operating Income | $215.00M$286.10M | −24.9% |
| Net Income | $111.00M$154.50M | −28.2% |
| EPS (Basic) | $0.39$0.54 | −27.8% |
| EPS (Diluted) | $0.39$0.53 | −26.4% |
| Shares Outstanding (Basic) | 283.00M288.00M | −1.7% |
| Shares Outstanding (Diluted) | 287.00M291.90M | −1.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in Q1 2015?
Revenue growth was primarily driven by incremental revenues from acquisitions of Clear2Pay and Reliance, as well as increased demand for professional and consulting services and processing services. These increases helped to offset a significant reduction in termination fees.
Why did operating income and EPS decline despite revenue growth?
The decline in operating income and EPS was primarily due to increased selling, general, and administrative (SG&A) expenses. This included a $44.6 million restructuring charge for streamlining operations in the Global Financial Solutions segment, integration costs related to acquisitions, and other incremental acquisition-related costs.
How is FIS positioned to address current industry trends?
FIS is benefiting from key industry trends such as the migration of financial institutions to outsourced integrated technology solutions, increased demand for consulting and professional services to address regulatory challenges and cost reduction initiatives, and the growing need for digital and mobile banking solutions. They are also investing in EMV card capabilities to address security concerns.
What is the impact of foreign currency fluctuations on FIS's results?
A stronger U.S. dollar in the first quarter of 2015 resulted in approximately $46.0 million of unfavorable foreign currency impact on revenues. The company anticipates a moderate increase in unfavorable foreign currency impact on operating income in 2015 due to the continued strength of the U.S. dollar.
06—Continue