10-QPeriod: Q1 FY2020

Fidelity National Information Services, Inc. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:FIS

Summary

Fidelity National Information Services (FIS) reported its first quarter 2020 results, highlighting a significant revenue increase of 50% to $3.078 billion, 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 million ($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.

Financial Highlights

56 data points
Beta

Revenue

$3.08B

32.1% Gross Margin

Net Income

$15.00M

0.5% Net Margin

EPS (Diluted)

$0.02

Total Assets

$82.47B

Cash & Equivalents

$1.37B

Free Cash Flow

$328.00M

Financial Statements
Beta
Revenue$3.08B
Cost of Revenue$2.09B
Gross Profit$989.00M
SG&A Expenses$881.00M
Operating Expenses$2.97B
Operating Income$108.00M
Net Income$15.00M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)616.00M
Shares Outstanding (Diluted)625.00M

Key Highlights

  • 1Revenue increased by 50% year-over-year to $3.078 billion, driven by the Worldpay acquisition and growth in Banking and Capital Markets segments.
  • 2Net earnings attributable to FIS common stockholders decreased significantly to $15 million ($0.02 EPS) from $148 million ($0.45 EPS) in Q1 2019.
  • 3Selling, general, and administrative expenses increased substantially by 144% due to Worldpay integration and acquisition costs.
  • 4Gross profit margin decreased from 33% to 32%, primarily due to increased amortization of acquired intangible assets.
  • 5The COVID-19 pandemic began impacting payment volumes in March 2020, adversely affecting revenue in payment businesses.
  • 6FIS 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.
  • 7The company continues to manage its leverage and expects to extend the time period to achieve its target leverage into 2021 due to pandemic impacts.

Frequently Asked Questions

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.

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.

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.

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.