10-QPeriod: Q2 FY2019

Fidelity National Information Services, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported for the second quarter of 2019, a period marked by the significant completion of its acquisition of Worldpay on July 31, 2019. While overall revenue saw a slight increase of 0.3% ($6 million) for the three-month period, and a marginal decrease of 0.1% ($3 million) for the six-month period compared to the prior year, these figures mask the ongoing integration efforts and the strategic shift towards a broader payments and financial technology landscape. The company's operational results were impacted by the unwinding of the Brazilian Venture and the sale of certain business units, alongside foreign currency headwinds. However, strong performance in the Integrated Financial Solutions (IFS) segment, with revenue growth of 4.9% and a 150 basis point improvement in Adjusted EBITDA margin, provided a positive offset. Looking ahead, FIS is focused on integrating Worldpay to become a global leader in merchant, banking, and capital markets technology. The company anticipates leveraging Worldpay's extensive payment processing capabilities, global reach, and advanced analytics to drive future growth. Management's discussion highlights the strategic importance of cloud migration, ongoing R&D investments in digital solutions, and the competitive pressures in the evolving financial services and payments markets. Investors should closely monitor the successful integration of Worldpay, synergy realization, and the management of increased debt levels resulting from the acquisition, as these will be critical drivers of future performance.

Financial Highlights

55 data points
Beta

Revenue

$2.11B

33.5% Gross Margin

Net Income

$154.00M

7.3% Net Margin

EPS (Diluted)

$0.47

Total Assets

$32.86B

Cash & Equivalents

$9.76B

Free Cash Flow

$506.00M

Financial Statements
Beta
Revenue$2.11B
Cost of Revenue$1.40B
Gross Profit$708.00M
SG&A Expenses$317.00M
Operating Income$391.00M
Net Income$154.00M
EPS (Basic)$0.48
EPS (Diluted)$0.47
Shares Outstanding (Basic)324.00M
Shares Outstanding (Diluted)327.00M

Key Highlights

  • 1Completed the acquisition of Worldpay on July 31, 2019, positioning FIS as a global leader in financial services technology for merchants, banks, and capital markets.
  • 2Revenue for the three months ended June 30, 2019, increased slightly by 0.3% ($6 million) compared to the prior year, while the six-month revenue saw a marginal decrease of 0.1% ($3 million).
  • 3The Integrated Financial Solutions (IFS) segment demonstrated robust growth, with revenue up 4.9% for the quarter and 5.7% for the six months, driven by banking, wealth, and payment solutions.
  • 4Adjusted EBITDA for IFS improved significantly, increasing by 8.7% for the quarter and 9.5% for the six months, with margins expanding by 150 basis points in both periods.
  • 5The Global Financial Solutions (GFS) segment experienced revenue declines, primarily due to the unwinding of the Brazilian Venture and unfavorable foreign currency impacts.
  • 6Operating income saw a notable increase, rising 10.8% for the three-month period and 9.1% for the six-month period, reflecting improved margins and cost management.
  • 7As of June 30, 2019, FIS held $9.8 billion in cash and cash equivalents and $18.2 billion in debt, with a significant portion of cash being proceeds from Worldpay acquisition-related debt issuances.

Frequently Asked Questions

The most significant strategic development for FIS during this period was the completion of the acquisition of Worldpay on July 31, 2019. This acquisition aims to position FIS as a leading global provider of technology, solutions, and services across merchant, banking, and capital markets.

The acquisition of Worldpay was completed at the very end of the quarter (July 31, 2019), so its full financial impact on revenue and expenses for the three months ended June 30, 2019, is limited. The primary financial impacts discussed in this period relate to the financing of the acquisition and preparations for integration, including acquisition financing costs and foreign currency impacts related to debt issuances. The substantial operational and financial integration benefits are expected to be more evident in future reporting periods.

Management highlights several key risks related to the Worldpay acquisition, including the potential that the transaction may not yield expected benefits or synergies, challenges in integrating the two companies which could be more difficult, time-consuming, or expensive than anticipated, the risk of customer or employee loss during the integration process, and the possibility of unforeseen liabilities from either company. There is also a risk associated with increased indebtedness following the merger.

As of June 30, 2019, FIS had $9.8 billion in cash and cash equivalents and $18.2 billion in debt. A significant portion of the cash balance represents proceeds from debt issued to finance the Worldpay acquisition. Management expects that existing cash and future cash flows from operations will be sufficient to cover operating needs, capital expenditures, and mandatory debt service over the next 12 months. Share repurchases have been suspended due to the Worldpay transaction.