01—Abstract
Summary
Summary of the 10-Q filed August 6, 2015. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported its second quarter 2015 results, highlighting continued revenue growth driven by acquisitions and increased demand for consulting services, despite unfavorable foreign currency impacts.
The company completed a reorganization into three reportable segments: Integrated Financial Solutions, Global Financial Solutions, and Corporate and Other, aiming for greater operational efficiency and client focus. While overall revenue saw a slight increase year-over-year on a constant currency basis, operating income experienced a decline primarily due to lower termination fees, increased SG&A expenses related to integration and severance costs, and unfavorable currency movements. Key financial developments include a significant gain from the sale of assets associated with the gaming industry check warranty business, which boosted "Other Income." The company also noted a decrease in interest expense due to debt refinancing.
FIS reaffirmed its commitment to shareholder returns through ongoing dividend payments and share repurchases, while continuing strategic investments in areas like EMV card solutions and cybersecurity to address industry trends and capture growth opportunities. Management expects ongoing operational streamlining and focus on global financial institutions to drive future margin expansion.
02—Key points
Key Highlights
- Revenue for the six months ended June 30, 2015, increased to $3,141.6 million from $3,119.4 million in the prior year period, driven by acquisitions (Clear2Pay, Reliance) and demand for professional services, partially offset by lower termination fees and foreign currency headwinds.
- Operating income for the six months ended June 30, 2015, decreased to $502.1 million from $595.8 million in the prior year, impacted by a $44.6 million severance charge for operational streamlining and lower termination fees.
- The company recognized a significant pre-tax gain of $140.4 million in the second quarter of 2015 from the sale of its gaming industry check warranty business assets.
- Selling, general, and administrative expenses increased in the first half of 2015, largely due to integration costs related to acquisitions and severance costs associated with the GFS segment reorganization.
- The company reported earnings per diluted share from continuing operations of $0.84 for the three months ended June 30, 2015, up from $0.62 in the prior year period, and $1.23 for the six-month period, up from $1.15.
- FIS continues to invest in growth areas such as EMV integrated circuit cards and cybersecurity solutions, anticipating future demand driven by industry trends and regulatory changes.
- The company maintained a strong liquidity position with $446.4 million in cash and cash equivalents as of June 30, 2015, and expects sufficient cash flow to cover operating requirements, capital expenditures, and debt service.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2015, Fidelity National Information Services, Inc. kept $0.15.
- Revenue$1.59B100.0%
- Cost of revenue−$1.07B67.4%
- Gross profit$517.0M32.6%
- Operating costs−$230.0M14.5%
- Operating income$287.0M18.1%
- Interest, other & tax−$47.0M3.0%
- Net income$240.0M15.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed August 6, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $1.59B$1.60B | −0.8% |
| Gross Profit | $517.00M$506.60M | +2.1% |
| SG&A Expenses | $230.00M$196.90M | +16.8% |
| Operating Expenses | $1.30B$1.29B | +0.8% |
| Operating Income | $287.00M$309.70M | −7.3% |
| Net Income | $240.00M$178.80M | +34.2% |
| EPS (Basic) | $0.85$0.63 | +34.9% |
| EPS (Diluted) | $0.84$0.62 | +35.5% |
| Shares Outstanding (Basic) | 281.00M285.50M | −1.6% |
| Shares Outstanding (Diluted) | 284.00M289.20M | −1.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the first half of 2015?
Revenue growth was primarily driven by incremental revenues from recent acquisitions (Clear2Pay and Reliance), increased demand for professional and consulting services, and higher transaction processing volumes. These positive factors were partially offset by a reduction in termination fees and unfavorable foreign currency impacts due to a strengthening U.S. Dollar.
How did the recent reorganization impact the company's financial performance?
The reorganization, which resulted in three reportable segments (Integrated Financial Solutions, Global Financial Solutions, and Corporate and Other), incurred a restructuring charge of $44.6 million in the first quarter of 2015, primarily related to severance costs for streamlining operations within the Global Financial Solutions segment. While the reorganization aims for future efficiency and margin expansion, it led to increased SG&A expenses in the short term.
What is the company's outlook on foreign currency impacts?
FIS experienced unfavorable foreign currency impacts, primarily from a stronger U.S. Dollar against currencies like the Brazilian Real, Euro, British Pound Sterling, and Indian Rupee, affecting both revenue and earnings. The company expects this adverse currency impact to continue for the remainder of 2015 but cannot precisely estimate its magnitude.
How is FIS addressing industry trends like EMV migration and cybersecurity?
FIS has invested in its card management solutions and processing capabilities to support the industry-wide migration to EMV integrated circuit cards, aiming to guide clients through this transition and grow card-related businesses. The company is also focusing on information security, making strategic investments to protect its systems and developing fraud, security, risk management, and compliance solutions to address the growing threat landscape in the financial services industry.
06—Continue