10-QPeriod: Q3 FY2015

Fidelity National Information Services, Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 5, 2015For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported its third-quarter and year-to-date results for 2015, highlighted by strong performance in its Integrated Financial Solutions (IFS) segment and significant progress towards the acquisition of SunGard. Despite some revenue headwinds from foreign currency fluctuations and reduced termination fees, the company demonstrated resilience, with overall processing and services revenues remaining stable year-over-year for the nine-month period. The company's strategic focus on outsourcing solutions, digital banking, and payment innovations continues to drive growth. The most significant development is the pending acquisition of SunGard, which is expected to close in the fourth quarter of 2015. This transformative deal is poised to create a larger, more comprehensive financial technology solutions provider. While the integration presents potential challenges and costs, FIS anticipates substantial synergies and expanded market reach. The company also detailed ongoing operational streamlining initiatives, including severance costs, aimed at improving efficiency and margins, particularly within the Global Financial Solutions (GFS) segment.

Financial Highlights

55 data points
Beta

Revenue

$1.58B

35.3% Gross Margin

Net Income

$175.00M

11.1% Net Margin

EPS (Diluted)

$0.62

Total Assets

$14.19B

Cash & Equivalents

$442.00M

Free Cash Flow

$230.00M

Financial Statements
Beta
Revenue$1.58B
Gross Profit$557.00M
SG&A Expenses$219.00M
Operating Expenses$1.24B
Operating Income$338.00M
Net Income$175.00M
EPS (Basic)$0.62
EPS (Diluted)$0.62
Shares Outstanding (Basic)280.00M
Shares Outstanding (Diluted)284.00M

Key Highlights

  • 1FIS is nearing the completion of its significant acquisition of SunGard, expected in Q4 2015, which will substantially expand its global reach and service offerings.
  • 2Despite a negative foreign currency impact of approximately $71.2 million in Q3 2015, revenue growth was driven by acquisitions (Clear2Pay, Reliance) and EMV card roll-out.
  • 3The Integrated Financial Solutions (IFS) segment showed revenue growth of 0.7% in Q3 2015 and 3.3% for the nine-month period, boosted by EMV, digital solutions, and acquisitions.
  • 4Operating income for the nine months decreased by 8.6% to $840.4 million, primarily due to lower termination fees and foreign currency impacts, though operating margin improved in the Q3 2015 period.
  • 5The company incurred severance costs of $44.6 million in Q1 2015 related to operational streamlining, with additional integration costs expected from the SunGard acquisition.
  • 6Cash flow from operations remained strong, totaling $697.5 million for the nine-month period, supporting ongoing operations, capital expenditures, and dividends.
  • 7FIS continues to invest in strategic areas like EMV chip card technology and mobile payment solutions, positioning itself to capitalize on evolving industry trends.

Frequently Asked Questions

The SunGard acquisition is expected to be transformative for FIS, significantly expanding its market presence and capabilities. While FIS anticipates substantial synergies and cost savings, it also acknowledges significant integration costs and potential operational disruptions. The acquisition is subject to customary closing conditions and is targeted for completion in Q4 2015. The combined entity will be larger and more diversified, but integration risks and increased debt levels are key considerations for investors.

A strengthening U.S. Dollar has had an unfavorable impact on FIS's international revenues, particularly against the Brazilian Real. For the nine months ended September 30, 2015, this foreign currency impact reduced revenues by approximately $180 million. FIS expects this trend to continue for the remainder of 2015, although the magnitude is difficult to predict. This currency headwind partially offsets growth from acquisitions and new initiatives.

FIS is benefiting from the trend of financial institutions migrating to outsourced integrated technology solutions to improve efficiency and meet regulatory demands. The company is also addressing the shift towards digital and mobile banking solutions and the increasing focus on payment security, such as EMV chip cards. To improve profitability and efficiency, FIS has undertaken operational streamlining, including severance costs, and is focused on developing innovative solutions in payments and digital banking.

The Integrated Financial Solutions (IFS) segment is showing growth, driven by EMV card activities, digital solutions, and recent acquisitions. The Global Financial Solutions (GFS) segment experienced revenue declines partly due to unfavorable foreign currency impacts and reduced termination fees, although restructuring activities improved its operating margin in the third quarter. The Corporate and Other segment reflects costs associated with acquisitions and reorganizations.