01—Abstract
Summary
Summary of the 10-Q filed October 29, 2020. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS) reported a significant year-over-year increase in revenue for the third quarter and the first nine months of 2020, primarily driven by the acquisition of Worldpay.
While the overall revenue growth is positive, the company's financial performance is being impacted by the ongoing COVID-19 pandemic. Reduced payment processing volumes in certain sectors, particularly travel, entertainment, and hospitality, have affected the Merchant Solutions segment. Despite these headwinds, FIS is actively managing expenses and continuing strategic investments in technology and innovation, such as its Modern Banking Platform.
The company remains focused on its deleveraging plans post-Worldpay acquisition and expects to meet its target leverage in 2021. The company's liquidity remains robust, supported by strong operating cash flow and available credit facilities. FIS continues to pay quarterly dividends, reflecting a commitment to shareholder returns, although future dividend declarations are subject to the Board's discretion and market conditions.
Management has temporarily suspended share repurchases to prioritize debt repayment following the Worldpay transaction. Overall, FIS demonstrates resilience by navigating the pandemic's challenges while pursuing long-term growth strategies and integration synergies from its significant acquisition.
02—Key points
Key Highlights
- Revenue increased by 13% in Q3 2020 and 32% for the first nine months of 2020 compared to the prior year, largely due to the Worldpay acquisition.
- The COVID-19 pandemic negatively impacted payment processing volumes, particularly in the travel, entertainment, and hospitality sectors within the Merchant Solutions segment.
- FIS is actively managing costs by reducing discretionary spending and accelerating automation, aiming for approximately $300 million in expense reductions for 2020.
- The company is focused on integrating Worldpay, with revenue and expense synergy targets on track to be exceeded.
- Liquidity remains strong with $4.2 billion in available liquidity, including cash and credit facilities, and the company expects to meet its target leverage in 2021.
- FIS continues to pay quarterly dividends, demonstrating a commitment to shareholder returns, although share repurchases have been temporarily suspended.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2020, Fidelity National Information Services, Inc. kept $0.01.
- Revenue$3.20B100.0%
- Cost of revenue−$2.10B65.8%
- Gross profit$1.09B34.2%
- Operating costs−$862.0M27.0%
- Operating income$231.0M7.2%
- Interest, other & tax−$211.0M6.6%
- Net income$20.0M0.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed October 29, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $3.20B$2.82B | +13.3% |
| Cost of Revenue | $2.10B$1.84B | +14.5% |
| Gross Profit | $1.09B$984.00M | +11.1% |
| SG&A Expenses | $862.00M$757.00M | +13.9% |
| Operating Expenses | $2.97B$2.68B | +10.6% |
| Operating Income | $231.00M$140.00M | +65.0% |
| Net Income | $20.00M$154.00M | −87.0% |
| EPS (Basic) | $0.03$0.30 | −90.0% |
| EPS (Diluted) | $0.03$0.29 | −89.7% |
| Shares Outstanding (Basic) | 620.00M516.00M | +20.2% |
| Shares Outstanding (Diluted) | 627.00M524.00M | +19.7% |
05—Questions
Frequently Asked Questions
How has the COVID-19 pandemic impacted FIS's financial performance?
The COVID-19 pandemic has had a mixed impact. While it has led to reduced payment processing volumes, particularly in the travel, entertainment, and hospitality sectors, and some slowdown in customer decision-making, FIS has also seen increased demand for digital banking solutions and experienced growth in certain areas like card production and prepaid card services related to pandemic relief programs. The company is actively managing expenses and adapting its business practices to mitigate negative impacts.
What is the status of the Worldpay integration and its impact on FIS?
The integration of Worldpay, acquired in July 2019, is a key driver of revenue growth. FIS is focused on achieving potential incremental revenue opportunities and expense efficiencies from this combination. The company reports that its achievement of revenue and expense synergies are on track to exceed previously announced targets. However, the acquisition also significantly increased amortization expense and integration costs.
What is FIS's approach to managing its debt and leverage post-Worldpay acquisition?
FIS remains committed to reducing the leverage incurred from the Worldpay acquisition. The company expects to reach its target leverage levels in 2021. They are prioritizing debt repayment over share repurchases, which have been temporarily suspended, and are confident that their cash flow and liquidity are sufficient to meet operational and debt service requirements.
How is FIS addressing cybersecurity and data privacy risks?
FIS recognizes the growing threat of cyberattacks and is making strategic investments in information security. This includes capital expenditures and operating expenses for hardware, software, personnel, and consulting services. The company also participates in industry and governmental initiatives to improve information security and has developed fraud, security, risk management, and compliance solutions as a growth opportunity.
06—Continue