01—Abstract
Summary
Summary of the 10-Q filed August 4, 2020. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported a significant increase in revenue for the three and six months ended June 30, 2020, driven primarily by the acquisition of Worldpay.
While overall revenue grew substantially due to the integration of Worldpay and contributions from Paycheck Protection Program (PPP) loan volumes and increased card production, the company's profitability was impacted by higher integration costs, amortization expenses, and the adverse effects of the COVID-19 pandemic on payment processing volumes, particularly in the Merchant Solutions segment. The company is actively managing its operations through the pandemic, implementing cost-saving measures and adapting to remote work.
Despite the challenges, FIS remains focused on its deleveraging strategy post-Worldpay acquisition and continues to invest in innovation and modernization, including its cloud infrastructure and digital banking solutions. The company maintains a strong liquidity position and expects to meet its financial obligations while continuing to pay dividends.
02—Key points
Key Highlights
- Revenue surged by 40% for the three months and 45% for the six months ended June 30, 2020, largely attributable to the Worldpay acquisition.
- Merchant Solutions revenue saw a significant increase, primarily from Worldpay, though overall payment processing volumes were negatively impacted by COVID-19.
- Banking Solutions experienced revenue growth driven by Worldpay integration, PPP loan volumes, and increased digital banking demand, despite some transaction volume declines.
- Operating income saw a substantial decrease due to higher selling, general, and administrative expenses, including Worldpay integration costs and amortization, as well as revenue impacts from COVID-19.
- The company ended the quarter with $3.47 billion in available liquidity, including $1.18 billion in cash and equivalents, and maintained a debt of $19.9 billion with a weighted average interest rate of 1.7%.
- FIS is committed to reducing leverage incurred from the Worldpay acquisition and expects to reach its target leverage in 2021.
- The COO, Stephanie Ferris, announced her resignation, effective September 2, 2020, after playing a key role in the Worldpay integration.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Fidelity National Information Services, Inc. kept $0.01.
- Revenue$2.96B100.0%
- Cost of revenue−$2.05B69.1%
- Gross profit$916.0M30.9%
- Operating costs−$870.0M29.4%
- Operating income$46.0M1.6%
- Interest, other & tax−$27.0M0.9%
- Net income$19.0M0.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed August 4, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $2.96B$2.11B | +40.2% |
| Cost of Revenue | $2.05B$1.40B | +45.7% |
| Gross Profit | $916.00M$708.00M | +29.4% |
| SG&A Expenses | $870.00M$317.00M | +174.4% |
| Operating Expenses | $2.92B— | — |
| Operating Income | $46.00M$391.00M | −88.2% |
| Net Income | $19.00M$154.00M | −87.7% |
| EPS (Basic) | $0.03$0.48 | −93.7% |
| EPS (Diluted) | $0.03$0.47 | −93.6% |
| Shares Outstanding (Basic) | 618.00M324.00M | +90.7% |
| Shares Outstanding (Diluted) | 625.00M327.00M | +91.1% |
05—Questions
Frequently Asked Questions
How did the Worldpay acquisition impact FIS's financial performance in the second quarter of 2020?
The Worldpay acquisition significantly boosted FIS's revenue, contributing substantially to the reported growth in both the three-month and six-month periods ending June 30, 2020. However, it also increased acquisition, integration, and other costs, as well as amortization expense, which negatively impacted operating income and gross margins.
What is the impact of COVID-19 on FIS's business segments?
COVID-19 has adversely impacted payment processing volumes, especially in the Merchant Solutions segment, affecting sectors like airlines, hospitality, and retail. While some recovery was observed in the second quarter, transaction volumes remain below pre-pandemic levels. The pandemic has also accelerated digitization trends, which FIS aims to leverage through its digital banking and payment solutions.
What is FIS's strategy for managing its debt and deleveraging post-Worldpay acquisition?
FIS remains committed to reducing its leverage incurred from the Worldpay acquisition. The company has a target to reach its desired leverage ratio in 2021. Management had temporarily suspended share repurchases after the Worldpay transaction to prioritize debt repayment, and they expect cash flow from operations and available liquidity to be sufficient to fund ongoing requirements and debt service.
How is FIS managing operational changes and employee well-being during the COVID-19 pandemic?
FIS has implemented a comprehensive Pandemic Plan, including travel restrictions, remote work strategies for nearly 95% of its employees, and enhanced safety protocols. The company has also expanded sick leave, provided telemedicine options, and offered special pay for critical employees, prioritizing employee safety while ensuring business continuity.
06—Continue