10-QPeriod: Q3 FY2020

Fidelity National Information Services, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:FIS

Summary

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.

Financial Highlights

56 data points
Beta

Revenue

$3.20B

34.2% Gross Margin

Net Income

$20.00M

0.6% Net Margin

EPS (Diluted)

$0.03

Total Assets

$83.19B

Cash & Equivalents

$1.83B

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$3.20B
Cost of Revenue$2.10B
Gross Profit$1.09B
SG&A Expenses$862.00M
Operating Expenses$2.97B
Operating Income$231.00M
Net Income$20.00M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)620.00M
Shares Outstanding (Diluted)627.00M

Key Highlights

  • 1Revenue 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.
  • 2The COVID-19 pandemic negatively impacted payment processing volumes, particularly in the travel, entertainment, and hospitality sectors within the Merchant Solutions segment.
  • 3FIS is actively managing costs by reducing discretionary spending and accelerating automation, aiming for approximately $300 million in expense reductions for 2020.
  • 4The company is focused on integrating Worldpay, with revenue and expense synergy targets on track to be exceeded.
  • 5Liquidity 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.
  • 6FIS continues to pay quarterly dividends, demonstrating a commitment to shareholder returns, although share repurchases have been temporarily suspended.

Frequently Asked Questions

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.

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.

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.

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.