01—Abstract
Summary
Summary of the 10-Q filed May 7, 2020. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services (FIS) reported its first quarter 2020 results, highlighting a significant revenue increase of 50% to $3.078 billiona, primarily driven by the acquisition of Worldpay and growth in its Banking and Capital Markets segments.
Despite the substantial revenue growth, net earnings attributable to common stockholders saw a sharp decline to $15 millionb ($0.02 per diluted share) from $148 million ($0.45 per diluted share) in the prior year quarter. This decline in profitability is largely attributed to increased selling, general, and administrative expenses, which surged by 144%, largely due to incremental Worldpay integration costs and acquisition-related expenses.
The company also noted the emerging impact of the COVID-19 pandemic, which began affecting payment volumes in March 2020, leading to a decrease in gross profit margin due to higher amortization of acquired intangible assets. Management is actively managing discretionary expenses and monitoring the pandemic's ongoing effects on business operations and financial condition.
02—Key points
Key Highlights
- Revenue increased by 50% year-over-year to $3.078 billion, driven by the Worldpay acquisition and growth in Banking and Capital Markets segments.
- Net earnings attributable to FIS common stockholders decreased significantly to $15 million ($0.02 EPS) from $148 million ($0.45 EPS) in Q1 2019.
- Selling, general, and administrative expenses increased substantially by 144% due to Worldpay integration and acquisition costs.
- Gross profit margin decreased from 33% to 32%, primarily due to increased amortization of acquired intangible assets.
- The COVID-19 pandemic began impacting payment volumes in March 2020, adversely affecting revenue in payment businesses.
- FIS is focused on leveraging its scale and expertise to navigate the challenges posed by the COVID-19 pandemic and aims to achieve expense and revenue synergies from the Worldpay acquisition ahead of schedule.
- The company continues to manage its leverage and expects to extend the time period to achieve its target leverage into 2021 due to pandemic impacts.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Fidelity National Information Services, Inc. kept $0.00.
- Revenue$3.08B100.0%
- Cost of revenue−$2.09B67.9%
- Gross profit$989.0M32.1%
- Operating costs−$881.0M28.6%
- Operating income$108.0M3.5%
- Interest, other & tax−$93.0M3.0%
- Net income$15.0M0.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 7, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $3.08B$2.06B | +49.6% |
| Cost of Revenue | $2.09B$1.38B | +51.3% |
| Gross Profit | $989.00M$676.00M | +46.3% |
| SG&A Expenses | $881.00M$361.00M | +144.0% |
| Operating Expenses | $2.97B— | — |
| Operating Income | $108.00M$315.00M | −65.7% |
| Net Income | $15.00M$148.00M | −89.9% |
| EPS (Basic) | $0.02$0.46 | −95.7% |
| EPS (Diluted) | $0.02$0.45 | −95.6% |
| Shares Outstanding (Basic) | 616.00M323.00M | +90.7% |
| Shares Outstanding (Diluted) | 625.00M326.00M | +91.7% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant revenue increase in Q1 2020?
The primary driver of the 50% revenue increase to $3.078 billion was the acquisition of Worldpay, which closed on July 31, 2019. Additionally, growth in the Banking and Capital Markets segments contributed to the overall revenue rise.
Why did net earnings decrease so sharply despite the revenue growth?
The sharp decrease in net earnings from $148 million to $15 million was primarily due to a significant increase in selling, general, and administrative expenses (up 144%), largely driven by integration costs associated with the Worldpay acquisition and other acquisition-related expenses. Higher amortization of acquired intangible assets also impacted gross profit.
How is the COVID-19 pandemic impacting FIS's business?
The COVID-19 pandemic began to adversely impact FIS's payment processing revenues in March 2020, particularly in the travel, restaurant, entertainment, and retail sectors, due to declining payment volumes. Management has implemented various measures to manage discretionary expenses and maintain business continuity, but anticipates continued adverse effects on its business, results of operations, and financial condition in the near term.
What is FIS's strategy regarding leverage and debt repayment following the Worldpay acquisition?
FIS is committed to reducing the leverage incurred from the Worldpay acquisition. However, due to the impacts of the COVID-19 pandemic, the company now expects to extend the timeline to achieve its target leverage levels into 2021. They are managing liquidity and have access to a revolving credit facility for short-term needs.
06—Continue