01—Abstract
Summary
Summary of the 10-Q filed November 4, 2022. Cited figures are marked; the original filing is the authoritative source.
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 milliona, 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.
02—Key points
Key Highlights
- Total 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.
- Operating 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.
- The 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.
- Merchant 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.
- Capital 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.
- The 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.
- Despite 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, Fidelity National Information Services, Inc. kept $0.10.
- Revenue$2.42B100.0%
- Cost of revenue−$1.53B63.5%
- Gross profit$881.0M36.5%
- Operating costs−$497.0M20.6%
- Operating income$384.0M15.9%
- Interest, other & tax−$135.0M5.6%
- Net income$249.0M10.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed November 4, 2022Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $2.42B$3.51B | −31.1% |
| Cost of Revenue | $1.53B$2.18B | −29.6% |
| Gross Profit | $881.00M$1.33B | −33.7% |
| SG&A Expenses | $480.00M$989.00M | −51.5% |
| Operating Income | $384.00M$138.00M | +178.3% |
| Net Income | $249.00M$158.00M | +57.6% |
| EPS (Basic) | $0.41$0.26 | +57.7% |
| EPS (Diluted) | $0.41$0.26 | +57.7% |
| Shares Outstanding (Basic) | 605.00M613.00M | −1.3% |
| Shares Outstanding (Diluted) | 607.00M619.00M | −1.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the third quarter of 2022?
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.
How did macroeconomic factors like inflation and currency fluctuations impact FIS's financial performance?
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.
What is the company's outlook on future investments and capital allocation?
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.
How is the company managing its debt and liquidity?
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.
06—Continue