10-QPeriod: Q2 FY2018

Fidelity National Information Services, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 31, 2018For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported mixed results for the three and six months ended June 30, 2018, compared to the same periods in 2017. Overall revenues saw a decrease, largely attributed to the divestiture of consulting businesses (Capco and PS&E) in 2017 and a decline in the institutional and wholesale business, alongside lower license fees and card production. Despite the revenue dip, the company demonstrated improved operational efficiency and profitability in key segments. The Integrated Financial Solutions (IFS) segment showed revenue growth driven by increased volumes in banking, wealth, and digital solutions, coupled with strong Adjusted EBITDA margin expansion. The Global Financial Solutions (GFS) segment experienced a revenue decline due to the prior year's divestitures, but improved its Adjusted EBITDA margin through cost management. Net earnings attributable to FIS common stockholders significantly increased year-over-year for both the three and six-month periods, benefiting from tax reform and cost control measures. The company also reported robust cash flow from operations and maintained its capital return plans through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$2.11B

32.9% Gross Margin

Net Income

$212.00M

10.1% Net Margin

EPS (Diluted)

$0.64

Total Assets

$23.87B

Cash & Equivalents

$683.00M

Free Cash Flow

$440.00M

Financial Statements
Beta
Revenue$2.11B
Cost of Revenue$1.41B
Gross Profit$692.00M
SG&A Expenses$339.00M
Operating Income$353.00M
Net Income$212.00M
EPS (Basic)$0.64
EPS (Diluted)$0.64
Shares Outstanding (Basic)329.00M
Shares Outstanding (Diluted)333.00M

Key Highlights

  • 1Total revenues decreased by 6.7% for the three-month period and 5.3% for the six-month period compared to 2017, primarily due to business divestitures and declines in specific business lines.
  • 2Net earnings attributable to FIS common stockholders increased substantially, with diluted EPS rising to $0.64 for Q2 2018 (vs. $0.42 in Q2 2017) and $1.18 for H1 2018 (vs. $0.81 in H1 2017).
  • 3The Integrated Financial Solutions (IFS) segment reported revenue growth of 3.4% for the quarter and 2.9% for the half-year, with a notable increase in Adjusted EBITDA margin.
  • 4The Global Financial Solutions (GFS) segment saw revenue decline but improved its Adjusted EBITDA margin by 370 basis points for the quarter and 500 basis points for the half-year, indicating successful cost management post-divestiture.
  • 5Cash flow from operations significantly increased by $295 million for the six-month period, largely due to lower income tax payments resulting from tax reform and improved receivables collection.
  • 6The company actively returned capital to shareholders, with $200 million in share repurchases during the quarter under a $4.0 billion authorization and a quarterly dividend of $0.32 per common share.
  • 7The company's effective tax rate decreased significantly due to the U.S. federal income tax rate reduction from 35% to 21% enacted in late 2017.

Frequently Asked Questions

The decrease in revenue for both the three- and six-month periods ending June 30, 2018, compared to 2017, was primarily driven by the sale of consulting businesses (Capco and PS&E) in prior periods, a decline in the institutional and wholesale business due to lower license fees, and a reduction in license and one-time professional services revenue in international banking solutions. There was also a decline in the card production business.

The reduction in the U.S. federal income tax rate from 35% to 21% due to the tax reform enacted in December 2017 significantly lowered the company's effective tax rate. For the six months ended June 30, 2018, the effective tax rate was 17% compared to 43% in the prior year. This tax benefit also contributed to the substantial increase in net earnings and cash flow from operations.

The Integrated Financial Solutions (IFS) segment shows a positive trend with revenue growth and improved Adjusted EBITDA margins, driven by increased volumes in banking, wealth, and digital solutions. The Global Financial Solutions (GFS) segment, while experiencing revenue decline due to divestitures, has successfully improved its Adjusted EBITDA margins through effective cost management and a favorable revenue mix shift, indicating resilience and operational efficiency.

FIS continues to return capital through regular quarterly dividends, with $0.32 per share paid in June 2018. Additionally, the company repurchased $200 million of its common stock in the April 2018 period as part of a larger $4.0 billion authorization, demonstrating a commitment to shareholder value. Cash flow from operations has been strong, providing resources for these capital allocation strategies.