10-QPeriod: Q3 FY2022

Fidelity National Information Services, Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 4, 2022For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS) reported a solid third quarter of 2022, demonstrating resilience amidst a challenging macroeconomic environment. Revenue saw a 3% increase year-over-year for the three months ended September 30, 2022, reaching $3,604 million, driven by new client wins in Banking, increased Merchant volumes, and strong sales in Capital Markets. Despite inflationary pressures and unfavorable foreign currency movements negatively impacting margins, the company managed to improve operating income significantly, up 235% to $462 million. For the nine-month period, revenue grew by 6% to $10,814 million. The company highlighted strategic investments in platform modernization and innovation, which are expected to drive future efficiencies. While facing headwinds such as slower economic growth, higher inflation, and a stronger U.S. dollar, FIS remains focused on its long-term strategy, supported by recurring revenue streams and ongoing investments in technology and acquisitions. The company maintained strong liquidity and continued its capital return programs, including a planned dividend increase and share repurchases, signaling confidence in its operational performance and future outlook.

Financial Highlights

54 data points
Beta

Revenue

$2.42B

36.5% Gross Margin

Net Income

$249.00M

10.3% Net Margin

EPS (Diluted)

$0.41

Total Assets

$78.32B

Cash & Equivalents

$1.93B

Free Cash Flow

$835.00M

Financial Statements
Beta
Revenue$2.42B
Cost of Revenue$1.53B
Gross Profit$881.00M
SG&A Expenses$480.00M
Operating Income$384.00M
Net Income$249.00M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)605.00M
Shares Outstanding (Diluted)607.00M

Key Highlights

  • 1Total revenue increased by 3% to $3.6 billion for the third quarter and 6% to $10.8 billion for the first nine months of 2022, reflecting growth across most segments.
  • 2Operating income saw a substantial increase of 235% to $462 million for the third quarter, driven by revenue growth and lower asset impairments, and a 66% increase to $993 million for the nine-month period.
  • 3The Banking Solutions segment revenue grew 4% year-over-year for the quarter, supported by recurring revenue and new client wins, though Adjusted EBITDA margin saw a slight decrease due to cost inflation and onboarding of new contracts.
  • 4Merchant Solutions revenue increased by 2% for the quarter, boosted by higher card-not-present volumes, including those from the Payrix acquisition, despite currency headwinds and investments in e-commerce.
  • 5Capital Markets Solutions demonstrated robust performance with revenue up 3% and Adjusted EBITDA increasing by 4% in the third quarter, driven by strong recurring revenue and expense management.
  • 6The company reported strong liquidity with $4.8 billion in available liquidity as of September 30, 2022, and continued its commitment to capital return through dividends and share repurchases.
  • 7Despite facing challenges like inflation, a stronger U.S. dollar, and lengthening sales cycles, FIS is investing in platform modernization and innovation to enhance operational efficiencies and long-term value.

Frequently Asked Questions

Revenue growth in the third quarter of 2022 was primarily driven by new client wins in the Banking segment, increased transaction volumes in the Merchant segment, and strong new sales contributing to recurring revenue growth in the Capital Markets segment. Favorable timing of non-recurring software license sales also contributed to growth in Banking.

Inflationary cost pressures and a stronger U.S. dollar negatively impacted margins across segments, particularly in Merchant Solutions. While revenue growth was achieved, these factors offset some of the gains and led to a decrease in Adjusted EBITDA margins in certain segments, such as Banking and Merchant Solutions. The company also noted that slower economic growth and lengthening sales cycles were observed.

FIS continues to strategically allocate resources to both organic and inorganic growth initiatives, including ongoing investments in platform modernization and innovation. The company expects these investments to improve operational efficiencies over time. Regarding capital allocation, FIS plans to continue paying quarterly dividends, with a recent increase in its target annual dividend growth rate, and is actively engaged in share repurchases, having repurchased $1.3 billion in the first nine months of 2022.

As of September 30, 2022, FIS maintained strong liquidity with $4.8 billion available, comprising $1.9 billion in cash and cash equivalents and $2.9 billion in Revolving Credit Facility capacity. Total debt stood at $18.9 billion with a weighted average interest rate of 2.0%. The company believes its current liquidity and operational cash flow are sufficient to meet its obligations and capital expenditures for the foreseeable future.