10-Q/APeriod: Q3 FY2016

Fidelity National Information Services, Inc. Quarterly Report (Amendment) for Q3 Ended Sep 30, 2016

Filed November 4, 2016For Securities:FIS

Summary

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.

Financial Highlights

55 data points
Beta

Revenue

$2.31B

33.9% Gross Margin

Net Income

$185.00M

8.0% Net Margin

EPS (Diluted)

$0.56

Total Assets

$26.13B

Cash & Equivalents

$701.00M

Free Cash Flow

$482.00M

Financial Statements
Beta
Revenue$2.31B
Gross Profit$782.00M
SG&A Expenses$384.00M
Operating Expenses$1.91B
Operating Income$398.00M
Net Income$185.00M
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)330.00M

Key Highlights

  • 1Substantial 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.
  • 2The SunGard acquisition significantly expanded FIS's portfolio into institutional and wholesale financial services, wealth management, and treasury solutions.
  • 3Adjusted 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.
  • 4Operating 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.
  • 5The company continues to experience growth in key areas such as debit payments, EMV card production, and demand for risk and compliance solutions.
  • 6Despite 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.
  • 7No share repurchases were made in the first nine months of 2016, a shift from $300 million in the prior year's comparable period.

Frequently Asked Questions

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.

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.

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.

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.