01—Abstract
Summary
Summary of the 10-Q/A filed November 4, 2016. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported solid performance for the nine months ended September 30, 2016, largely driven by the significant contributions from the SunGard acquisition completed in late 2015.
Revenue growth was substantial across its Integrated Financial Solutions (IFS) and Global Financial Solutions (GFS) segments, with incremental revenues from SunGard being a key driver. While overall operating income saw a modest increase year-over-year, operating margins were impacted by higher amortization expenses related to acquired intangibles from the SunGard acquisition and integration costs. The company continues to benefit from recurring revenue streams derived from its outsourced technology and processing services, which provide stability amidst global economic challenges.
Key growth areas include debit payments, card production driven by EMV adoption, and demand for risk and compliance solutions. FIS is actively managing the integration of SunGard, aiming for significant cost synergies, while also navigating industry trends like digital banking, mobile payments, and declining check usage. Despite increased debt from the SunGard acquisition, the company anticipates sufficient cash flow from operations to meet its liquidity needs.
02—Key points
Key Highlights
- Substantial revenue growth in the first nine months of 2016, primarily fueled by the SunGard acquisition, with total processing and services revenues reaching $6,795 million compared to $4,721 million in the prior year.
- The SunGard acquisition significantly expanded FIS's portfolio into institutional and wholesale financial services, wealth management, and treasury solutions.
- Adjusted EBITDA saw strong growth in both IFS and GFS segments, reflecting successful integration and operational improvements, with GFS margins increasing significantly due to higher-margin SunGard revenues.
- Operating income increased to $865 million for the nine-month period, though operating margins declined due to higher amortization of acquired intangibles and integration costs associated with SunGard.
- The company continues to experience growth in key areas such as debit payments, EMV card production, and demand for risk and compliance solutions.
- Despite increased debt levels of $10.8 billion, FIS expects sufficient cash from operations and existing credit facilities to fund its liquidity requirements, capital expenditures, and dividends.
- No share repurchases were made in the first nine months of 2016, a shift from $300 million in the prior year's comparable period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2016, Fidelity National Information Services, Inc. kept $0.08.
- Revenue$2.31B100.0%
- Cost of revenue−$1.53B66.1%
- Gross profit$782.0M33.9%
- Operating costs−$384.0M16.6%
- Operating income$398.0M17.2%
- Interest, other & tax−$213.0M9.2%
- Net income$185.0M8.0%
04—Financials
Financial Highlights
Figures from 10-Q/AQ3 FY2016filed November 4, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $2.31B$1.58B | +46.2% |
| Gross Profit | $782.00M$557.00M | +40.4% |
| SG&A Expenses | $384.00M$219.00M | +75.3% |
| Operating Expenses | $1.91B$1.24B | +54.0% |
| Operating Income | $398.00M$338.00M | +17.8% |
| Net Income | $185.00M$175.00M | +5.7% |
| EPS (Basic) | $0.57$0.62 | −8.1% |
| EPS (Diluted) | $0.56$0.62 | −9.7% |
| Shares Outstanding (Basic) | 326.00M280.00M | +16.4% |
| Shares Outstanding (Diluted) | 330.00M284.00M | +16.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of FIS's revenue growth in the first nine months of 2016?
The primary driver of FIS's revenue growth was the SunGard acquisition, which was completed in November 2015. This acquisition significantly increased processing and services revenues across both the Integrated Financial Solutions (IFS) and Global Financial Solutions (GFS) segments.
How did the SunGard acquisition impact FIS's profitability?
While the SunGard acquisition boosted revenues and Adjusted EBITDA, it also led to increased costs. Specifically, higher amortization expenses for acquired intangible assets and integration and severance costs related to the acquisition negatively impacted operating margins. Despite this, the Global Financial Solutions segment saw a significant improvement in its Adjusted EBITDA margin due to higher-margin revenues from SunGard and expense synergies.
What are the key industry trends FIS is navigating, and how are they impacting the business?
FIS is navigating trends such as the shift from traditional banking to digital solutions, the growth of mobile payments, the transition to EMV cards, and declining check usage. They are investing in solutions to support digital banking, mobile payments, and EMV adoption, while managing the decline in check processing revenues. Consolidation in the banking industry is also a factor, presenting both risks and opportunities.
What is FIS's liquidity position and outlook?
As of September 30, 2016, FIS had $701 million in cash and cash equivalents and $10.8 billion in long-term debt. The company expects that its cash from operations and available borrowings will be sufficient to cover its operating expenses, capital expenditures, debt service, and dividend payments over the next twelve months.
06—Continue