10-QPeriod: Q1 FY2018

Fidelity National Information Services, Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 2, 2018For Securities:FIS

Summary

Fidelity National Information Services (FIS) reported for the quarter ended March 31, 2018, a notable increase in net earnings attributable to common stockholders, rising to $182 million from $129 million in the prior year, translating to an earnings per diluted share of $0.54 from $0.39. This significant improvement was driven by strategic divestitures of lower-margin businesses and successful integration and cost management initiatives, which bolstered operating margins to 14.2%. Despite a slight overall revenue decline of 3.8% to $2.07 billion, primarily due to the previously mentioned divestitures, the company demonstrated strong operational efficiency and improved profitability. The company continues to navigate evolving market trends, including the shift to digital banking and the growth of digital payments, while strategically managing risks associated with industry consolidation and cybersecurity. FIS is actively investing in innovation and security solutions to maintain its leadership position and capitalize on these trends. The company also reaffirmed its commitment to shareholder returns through consistent dividend payments and a substantial share repurchase program, indicating confidence in its future financial performance and strategic direction.

Financial Highlights

54 data points
Beta

Revenue

$2.07B

31.6% Gross Margin

Net Income

$182.00M

8.8% Net Margin

EPS (Diluted)

$0.54

Total Assets

$24.41B

Cash & Equivalents

$725.00M

Free Cash Flow

$300.00M

Financial Statements
Beta
Revenue$2.07B
Cost of Revenue$1.41B
Gross Profit$652.00M
SG&A Expenses$358.00M
Operating Income$294.00M
Net Income$182.00M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)330.00M
Shares Outstanding (Diluted)334.00M

Key Highlights

  • 1Net earnings attributable to FIS common stockholders increased to $182 million from $129 million year-over-year.
  • 2Earnings per diluted share improved to $0.54 from $0.39 compared to the prior year's quarter.
  • 3Overall revenues decreased by 3.8% to $2.07 billion, largely due to the divestiture of consulting businesses.
  • 4Operating margin expanded significantly to 14.2% from 11.4%, driven by cost management and divestitures.
  • 5Adjusted EBITDA for the Global Financial Solutions segment saw a substantial increase of 15.2% due to expense synergies.
  • 6The company continues to return capital to shareholders through quarterly dividends and an active share repurchase program.
  • 7FIS is strategically positioned to benefit from trends like digital banking and outsourcing, while investing in security and innovation.

Frequently Asked Questions

The increase in net earnings was primarily driven by the successful divestiture of lower-margin consulting businesses (PS&E, Capco, and risk/compliance consulting) in the prior year, which reduced overall revenue but improved profitability. Additionally, ongoing integration and cost management initiatives, along with realized synergies from the SunGard acquisition, significantly enhanced operating margins and overall profitability.

FIS is actively adapting to industry consolidation by aiming to secure the surviving platform when financial institutions merge, while also acknowledging the risk of losing business if their services are not selected. Regarding digital banking, the company is investing in and innovating integrated solutions and services to help clients deliver a seamless digital banking experience across all channels, positioning itself to capitalize on this trend.

FIS demonstrates a commitment to shareholder returns through regular quarterly dividends, with a dividend of $0.32 per common share paid in March 2018. Furthermore, the company has a significant share repurchase program authorized, with up to $4.0 billion approved in July 2017 and approximately $3.5 billion remaining capacity as of March 31, 2018, indicating confidence in its financial health and ability to return value.

FIS adopted ASC 606, 'Revenue from Contracts with Customers,' effective January 1, 2018, using a retrospective method. This adoption resulted in a decrease in reported revenues and net earnings for prior periods due to changes in revenue recognition, such as recording certain interchange and network fees on a net basis and adjusting the timing of license revenue recognition. While it impacted historical reporting, the company's forward-looking financial performance is expected to align with the new standard.