01—Abstract
Summary
Summary of the 10-Q filed May 2, 2018. Cited figures are marked; the original filing is the authoritative source.
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 milliona 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 billionb, 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.
02—Key points
Key Highlights
- Net earnings attributable to FIS common stockholders increased to $182 million from $129 million year-over-year.
- Earnings per diluted share improved to $0.54 from $0.39 compared to the prior year's quarter.
- Overall revenues decreased by 3.8% to $2.07 billion, largely due to the divestiture of consulting businesses.
- Operating margin expanded significantly to 14.2% from 11.4%, driven by cost management and divestitures.
- Adjusted EBITDA for the Global Financial Solutions segment saw a substantial increase of 15.2% due to expense synergies.
- The company continues to return capital to shareholders through quarterly dividends and an active share repurchase program.
- FIS is strategically positioned to benefit from trends like digital banking and outsourcing, while investing in security and innovation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Fidelity National Information Services, Inc. kept $0.09.
- Revenue$2.07B100.0%
- Cost of revenue−$1.41B68.4%
- Gross profit$652.0M31.6%
- Operating costs−$358.0M17.3%
- Operating income$294.0M14.2%
- Interest, other & tax−$112.0M5.4%
- Net income$182.0M8.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 2, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $2.07B$2.15B | −3.8% |
| Cost of Revenue | $1.41B— | — |
| Gross Profit | $652.00M$657.00M | −0.8% |
| SG&A Expenses | $358.00M$411.00M | −12.9% |
| Operating Income | $294.00M$246.00M | +19.5% |
| Net Income | $182.00M$129.00M | +41.1% |
| EPS (Basic) | $0.55$0.39 | +41.0% |
| EPS (Diluted) | $0.54$0.39 | +38.5% |
| Shares Outstanding (Basic) | 330.00M328.00M | +0.6% |
| Shares Outstanding (Diluted) | 334.00M333.00M | +0.3% |
05—Questions
Frequently Asked Questions
What were the main drivers behind the increase in net earnings despite a decrease in revenue?
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.
How is FIS managing the risks associated with industry consolidation and the shift to digital banking?
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.
What is the company's approach to shareholder returns?
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.
What impact did the adoption of new accounting standards have on the financial results?
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.
06—Continue