01—Abstract
Summary
Summary of the 10-Q filed November 1, 2017. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported its third-quarter 2017 financial results, showing a mixed performance with declining revenues but improved profitability on a year-over-year basis for the nine-month period.
The company completed several divestitures, including its PS&E business and consulting businesses (Capco, risk and compliance), which impacted reported revenue figures. Despite the revenue dip, cost management initiatives and the realization of expense synergies from the SunGard acquisition contributed to an increase in operating income and Adjusted EBITDA for the nine-month period, particularly within the Global Financial Solutions segment. FIS continues to navigate a dynamic financial technology landscape, with a strategic focus on digital banking, evolving payment solutions, and cybersecurity.
The company highlighted its ongoing integration of SunGard, aiming for significant cost savings, and its commitment to innovation in areas like EMV card solutions. Management expects cash flow from operations, combined with existing cash reserves, to be sufficient for upcoming operational needs, debt service, and shareholder returns, including anticipated quarterly dividends and a substantial share repurchase program. Investors should note the impact of divestitures on revenue growth and the company's focus on margin improvement and synergy realization.
02—Key points
Key Highlights
- Total revenues for the three months ended September 30, 2017, decreased by 4.8% to $2,198 million compared to $2,309 million in the prior year, largely due to divestitures of PS&E and consulting businesses.
- For the nine-month period ended September 30, 2017, revenues remained flat at $6,794 million compared to $6,795 million in the prior year, also impacted by divestitures.
- Operating income for the nine-month period increased by 16.4% to $1,007 million, driven by cost management and synergy realization, despite lower revenues in the three-month period.
- Adjusted EBITDA for the Integrated Financial Solutions (IFS) segment increased by 1.1% to $458 million for the three months and 3.3% to $1,369 million for the nine months, with improved margins.
- Adjusted EBITDA for the Global Financial Solutions (GFS) segment increased by 4.7% to $359 million for the three months and 10.6% to $973 million for the nine months, with significant margin expansion.
- The company sold a majority interest in certain consulting businesses (Capco, risk and compliance) on July 31, 2017, and its PS&E business on February 1, 2017, impacting segment revenues and expenses.
- FIS repurchased approximately $2,000 million of debt securities, incurring pre-tax charges of $167 million for tender premiums and write-offs of debt issuance costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, Fidelity National Information Services, Inc. kept $0.03.
- Revenue$2.20B100.0%
- Cost of revenue−$1.49B67.7%
- Gross profit$710.0M32.3%
- Operating costs−$325.0M14.8%
- Operating income$385.0M17.5%
- Interest, other & tax−$326.0M14.8%
- Net income$59.0M2.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 1, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $2.20B$2.31B | −4.8% |
| Cost of Revenue | $1.39B— | — |
| Gross Profit | $710.00M$782.00M | −9.2% |
| SG&A Expenses | $325.00M$384.00M | −15.4% |
| Operating Expenses | $1.81B$1.91B | −5.3% |
| Operating Income | $385.00M$398.00M | −3.3% |
| Net Income | $59.00M$185.00M | −68.1% |
| EPS (Basic) | $0.18$0.57 | −68.4% |
| EPS (Diluted) | $0.18$0.56 | −67.9% |
| Shares Outstanding (Basic) | 331.00M326.00M | +1.5% |
| Shares Outstanding (Diluted) | 336.00M330.00M | +1.8% |
05—Questions
Frequently Asked Questions
How did the recent divestitures impact FIS's financial performance?
The divestitures of the PS&E business in Q1 2017 and consulting businesses (Capco, risk and compliance) in Q3 2017 significantly reduced reported revenues for both the three-month and nine-month periods ended September 30, 2017. While this created a year-over-year revenue decline, the company benefited from the sale of lower-margin businesses and focused on integrating remaining operations and realizing cost synergies.
What are the key drivers behind the improved profitability despite revenue challenges?
Profitability, particularly in terms of operating income and Adjusted EBITDA, was bolstered by effective cost management initiatives and the realization of cost synergies from the SunGard acquisition. The divestiture of lower-margin businesses also contributed to an improved overall margin profile for the core operations.
What is FIS's outlook on its debt and capital management?
FIS had $720 million in cash and cash equivalents and $9.1 billion in long-term debt as of September 30, 2017. The company expects its operating cash flow and cash reserves to be sufficient for its needs. Management also approved a new $4.0 billion share repurchase authorization through December 2020 and continues to pay quarterly dividends.
How is FIS addressing the evolving financial technology landscape, particularly digital banking and payments?
FIS is actively investing in solutions to enable clients to deliver integrated banking experiences across digital channels (mobile, internet). The company is also focused on innovating in the payments market to support faster and more convenient payment solutions, while also adapting to the shift towards EMV cards and addressing cybersecurity risks. The demand for outsourcing solutions remains strong due to regulatory requirements and the desire for improved profitability.
06—Continue