01—Abstract
Summary
Summary of the 10-Q filed May 3, 2017. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported a strong first quarter for 2017, demonstrating significant year-over-year growth in both revenue and net earnings.
The company's performance was bolstered by organic volume growth across its banking and payment solutions, particularly in international regions like Brazil and Asia, as well as advancements in digital and risk management solutions. The successful integration of the SunGard acquisition continues to yield benefits, with anticipated cost synergies of over $300 milliona by year-end 2017. The company also successfully divested its SunGard Public Sector and Education (PS&E) business, generating a pre-tax gain and streamlining operations.
FIS continues to navigate a dynamic financial technology landscape, with a strategic focus on adapting to evolving consumer preferences for digital banking, the growing demand for faster payment solutions, and the industry-wide shift towards EMV chip technology. Despite potential headwinds from ongoing banking industry consolidation and unfavorable foreign currency impacts, FIS's recurring revenue model and diversified solutions portfolio provide a degree of stability. The company remains committed to innovation and strategic investments in information security, positioning itself to capitalize on opportunities within the evolving financial services sector.
02—Key points
Key Highlights
- Revenue increased by 3.4% to $2,255 million in Q1 2017 compared to $2,181 million in Q1 2016, driven by volume growth in banking, payments, digital solutions, and risk/compliance offerings.
- Net earnings attributable to FIS common stockholders surged to $138 million ($0.41 per diluted share) in Q1 2017, a substantial increase from $55 million ($0.17 per diluted share) in Q1 2016.
- Operating income rose significantly to $260 million in Q1 2017 from $184 million in Q1 2016, reflecting improved operating margins due to cost management initiatives and higher margin solutions.
- The company successfully divested its SunGard Public Sector and Education (PS&E) business on February 1, 2017, for $850 million, resulting in a pre-tax gain of $85 million.
- Adjusted EBITDA for the Integrated Financial Solutions (IFS) segment grew 4.2% to $442 million, with an improved margin of 39.2% driven by higher termination fees and cost management.
- Adjusted EBITDA for the Global Financial Solutions (GFS) segment increased by 12.7% to $283 million, with improved margins reflecting expense synergies and higher margin item processing solutions.
- Cash flow from operations increased by $69 million to $454 million in Q1 2017 compared to Q1 2016, indicating improved operational cash generation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2017, Fidelity National Information Services, Inc. kept $0.06.
- Revenue$2.15B100.0%
- Cost of revenue−$1.49B69.4%
- Gross profit$657.0M30.6%
- Operating costs−$411.0M19.1%
- Operating income$246.0M11.5%
- Interest, other & tax−$117.0M5.4%
- Net income$129.0M6.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed May 3, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $2.15B$2.18B | −1.5% |
| Gross Profit | $657.00M$628.00M | +4.6% |
| SG&A Expenses | $411.00M$444.00M | −7.4% |
| Operating Expenses | $2.00B$2.00B | −0.1% |
| Operating Income | $246.00M$184.00M | +33.7% |
| Net Income | $129.00M$55.00M | +134.5% |
| EPS (Basic) | $0.39$0.17 | +129.4% |
| EPS (Diluted) | $0.39$0.17 | +129.4% |
| Shares Outstanding (Basic) | 328.00M324.00M | +1.2% |
| Shares Outstanding (Diluted) | 333.00M327.00M | +1.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the first quarter of 2017?
Revenue growth was primarily driven by increased transaction volumes in banking and payment solutions across various regions, including Brazil and APAC. Growth was also supported by corporate and digital solutions, new business payment solutions, and risk and compliance offerings. The company also benefited from a lower purchase accounting adjustment related to the SunGard acquisition compared to the prior year.
How did the SunGard acquisition continue to impact FIS's performance?
The SunGard acquisition, completed in late 2015, continued to contribute positively by broadening FIS's solution portfolio and expanding its client base. The integration process was yielding significant cost savings, with an anticipated run-rate savings of over $300 million by the end of 2017. Furthermore, the company successfully divested the non-strategic PS&E portion of SunGard, realizing a gain and streamlining operations.
What are the key risks or challenges facing FIS as outlined in the filing?
FIS faces several risks including the successful integration of future acquisitions, potential failure to realize anticipated cost savings, international business risks, changes in economic and political conditions, regulatory changes, and competitive pressures. Specific to this period, the company noted potential negative impacts from banking industry consolidation and ongoing unfavorable foreign currency impacts due to a strengthening U.S. dollar.
What is the company's liquidity and debt position as of March 31, 2017?
As of March 31, 2017, FIS had $705 million in cash and cash equivalents and approximately $9.5 billion in long-term debt. The company anticipates that its cash on hand and cash flow from operations will be sufficient to cover operating needs, capital expenditures, and mandatory debt service over the next twelve months. They also expect to continue paying quarterly dividends.
06—Continue