FIS Reports Fourth Quarter and Full-Year 2019 Results

  • Increases 2020 synergy targets for revenue and expense synergies by $50 million and $250 million, respectively
  • Increases total synergy targets for revenue and expense synergies by $50 million and $175 million, respectively
  • Provides first quarter and full-year 2020 guidance

JACKSONVILLE, Fla.--(BUSINESS WIRE)--FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its fourth quarter and full-year 2019 results.


2019 was a transformative year for FIS,” said Gary Norcross, FIS chairman, president and chief executive officer. “We closed the largest fintech acquisition of the year and exited 2019 well ahead of our Worldpay integration synergy schedule. Our record-setting new sales performance was underpinned by our ongoing investment in next-generation technology, and we are seeing significant cross sell gains from our expanded payments portfolio. These substantial accomplishments give us confidence in achieving our 2020 guidance.”

Fourth Quarter 2019

On a GAAP basis, revenue increased 54 percent to $3,341 million from $2,167 million in the prior year period, primarily driven by the July 31, 2019 acquisition of Worldpay, Inc. (Worldpay). Net earnings (loss) attributable to common stockholders was $(158) million or $(0.26) per diluted share.

On an adjusted basis, organic revenue growth grew to 7 percent over the prior year period. Adjusted EBITDA margin expanded by 470 basis points (bps) over the prior year period to 44.6 percent, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $977 million or $1.57 per diluted share.

($ millions, except per share data, unaudited)

 

Three Months Ended December 31,

 

 

 

 

 

 

%

 

Organic

 

 

2019

 

2018

 

Change

 

Growth

Revenue

 

$

3,341

 

 

$

2,167

 

 

54%

 

7%

Merchant Solutions

 

1,116

 

 

71

 

 

*

 

10%

Banking Solutions

 

1,556

 

 

1,474

 

 

6%

 

5%

Capital Market Solutions

 

669

 

 

622

 

 

8%

 

8%

Adjusted EBITDA

 

$

1,490

 

 

$

864

 

 

73%

 

 

Adjusted EBITDA Margin

 

44.6

%

 

39.9

%

 

470 bps

 

 

Net earnings (loss) attributable to FIS common stockholders (GAAP)

 

$

(158)

 

 

$

299

 

 

*

 

 

Diluted EPS (GAAP)

 

$

(0.26)

 

 

$

0.91

 

 

*

 

 

Adjusted net earnings

 

$

977

 

 

$

526

 

 

86%

 

 

Adjusted EPS

 

$

1.57

 

 

$

1.60

 

 

(2)%

 

 

* Indicates comparison not meaningful

Full-Year 2019

On a GAAP basis, revenue increased 23 percent to $10,333 million from $8,423 million in the prior year, primarily driven by the July 31, 2019 acquisition of Worldpay. Net earnings attributable to common stockholders was $298 million or $0.66 per diluted share.

On an adjusted basis, organic revenue growth was 6 percent over the prior year. Adjusted EBITDA margin expanded 350 basis points over the prior year to 40.7 percent, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $2,530 million or $5.61 per diluted share.

($ millions, except per share data, unaudited)

 

Twelve Months Ended December 31,

 

 

 

 

 

 

%

 

Organic

 

 

2019

 

2018

 

Change

 

Growth

Revenue

 

$

10,333

 

 

$

8,423

 

 

23%

 

6%

Merchant Solutions

 

2,013

 

 

276

 

 

*

 

9%

Banking Solutions

 

5,873

 

 

5,712

 

 

3%

 

6%

Capital Market Solutions

 

2,447

 

 

2,391

 

 

2%

 

3%

Corporate and Other

 

-

 

44

 

 

*

 

*

Adjusted EBITDA

 

$

4,204

 

 

$

3,133

 

 

34%

 

 

Adjusted EBITDA Margin

 

 

40.7

%

 

 

37.2

%

 

350 bps

 

 

Net earnings attributable to FIS common stockholders (GAAP)

 

$

298

 

 

$

846

 

 

*

 

 

Diluted EPS (GAAP)

 

$

0.66

 

 

$

2.55

 

 

*

 

 

Adjusted net earnings

 

$

2,530

 

 

$

1,737

 

 

46%

 

 

Adjusted EPS

 

$

5.61

 

 

$

5.23

 

 

7%

 

 

* Indicates comparison not meaningful

Segment Information

  • Merchant Solutions:
    Fourth quarter 2019 GAAP revenue increased significantly to $1,116 million as compared to $71 million in the prior year period, primarily reflecting the Worldpay acquisition. Organic revenue growth was 10 percent over the prior year period, primarily driven by ongoing growth in the global eCommerce business, and Adjusted EBITDA margin was 52.4 percent.

    Full-year 2019 GAAP revenue increased significantly to $2,013 million as compared to $276 million in the prior year, primarily reflecting the Worldpay acquisition. Organic revenue growth was 9 percent over the prior year, and Adjusted EBITDA margin was 49.4 percent.
  • Banking Solutions:
    Fourth quarter GAAP revenue increased 6 percent to $1,556 million as compared to $1,474 million in the prior year period. Organic revenue growth was 5 percent over the prior year period, primarily driven by increased volume and new sales, and Adjusted EBITDA margin was 43.8 percent.

    Full-year 2019 GAAP revenue increased 3 percent to $5,873 million as compared to $5,712 million in the prior year. Organic revenue growth was 6 percent over the prior year, and Adjusted EBITDA margin was 41.8 percent.
  • Capital Market Solutions:
    Fourth quarter GAAP revenue increased 8 percent to $669 million as compared to $622 million in the prior year period. Organic revenue growth was 8 percent over the prior year period, primarily driven by improved recurring revenue growth trends and license sales, and Adjusted EBITDA margin was 50.6 percent.

    Full-year 2019 GAAP revenue increased 2 percent to $2,447 million as compared to $2,391 million in the prior year. Organic revenue growth was 3 percent over the prior year, and Adjusted EBITDA margin was 46.1 percent.

Integration Update

FIS continued to realize revenue and expense synergies during the fourth quarter of 2019. Teams across the combined Company continue to execute on synergy workflows and to identify additional opportunities for both revenue and cost synergies.

The Company achieved annual run-rate synergies exiting the fourth quarter 2019 as follows:

  • Revenue synergies of $80 million
  • Expense synergies of $465 million, inclusive of $275 million interest expense savings

The Company is increasing its 2020 annual run-rate synergy targets and now expects to achieve the following by the end of the year:

  • Revenue synergies of $200 million, an increase of $50 million
  • Expense synergies of $600 million, an increase of $250 million

The Company is also increasing its total annual run-rate synergy targets and now expects to achieve the following by the end of 2022:

  • Revenue synergies of $550 million, an increase of $50 million
  • Expense synergies of $675 million, an increase of $175 million

Virtus Partners Acquisition

FIS recently closed the acquisition of a majority interest in Virtus Partners, a provider of high value managed services and technology to the credit and loan market. This tuck-in acquisition is expected to accelerate the organic revenue growth of the Capital Market Solutions segment by enabling a more robust offering to both buy-side and sell-side market participants in the middle- and back-office. The Virtus acquisition does not change the Company’s prior expectation to reduce leverage to approximately 2.7x by the end of the year 2020 and is not expected to have a material impact on consolidated organic revenue growth.

Balance Sheet and Cash Flows

As of December 31, 2019, cash and cash equivalents totaled $1,152 million, and debt outstanding totaled $20,192 million with an effective weighted average interest rate of 1.7 percent. Net cash provided by operating activities was $670 million, and free cash flow was $812 million in the quarter. FIS paid dividends of $215 million in the quarter.

First Quarter and Full-Year 2020 GAAP Guidance

 

($ millions, except share data)

 

Q1 2020

 

FY 2020

Revenue

 

$3,180 - $3,210

 

$13,550 - $13,675

Diluted EPS

 

$(0.15) - $0.00

 

$0.50 - 1.30

First Quarter and Full-Year 2020 Non-GAAP Guidance

 

($ millions, except share data)

 

Q1 2020

 

FY 2020

Revenue (GAAP)

 

$3,180 - $3,210

 

$13,550 - $13,675

Adjusted EPS

 

$1.30 - $1.34

 

$6.17 - $6.35

Webcast

FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EST) Thursday, February 13, 2020. To access the webcast, go to the Investor Relations section of FIS’ homepage, www.fisglobal.com. A replay will be available after the conclusion of the live webcast.

About FIS

FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our over 55,000 people are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.

To learn more, visit www.fisglobal.com. Follow FIS on Facebook, LinkedIn and Twitter (@FISGlobal).

FIS Use of Non-GAAP Financial Information

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, we have provided certain non-GAAP financial measures.

These non-GAAP measures include adjusted revenue, constant currency revenue, organic revenue increase/decrease, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings (including per share amounts), adjusted cash flows from operations and free cash flow. These non-GAAP measures may be used in this release and/or in the attached supplemental financial information.

We believe these non-GAAP measures help investors better understand the underlying fundamentals of our business. As further described below, the non-GAAP revenue and earnings measures presented eliminate items management believes are not indicative of FIS’ operating performance. The constant currency and organic revenue increase/decrease measures adjust for the effects of exchange rate fluctuations, while organic revenue increase/decrease also adjusts for acquisitions and divestitures, giving investors further insight into our performance. Finally, the non-GAAP cash flow measures provide further information about the ability of our business to generate cash. For these reasons, management also uses these non-GAAP measures in its assessment and management of FIS’ performance.

Adjusted revenue consists of revenue, increased to reverse the purchase accounting deferred revenue adjustment made upon the acquisition of SunGard. The deferred revenue adjustment represents revenue that would have been recognized in the normal course of business by SunGard under GAAP but was not recognized due to GAAP purchase accounting adjustments. The deferred revenue adjustment in purchase accounting was made entirely in the Corporate and Other segment; reported GAAP results for the other operating segments are not affected by this adjustment and, therefore, no adjusted revenue is presented for these segments.

Constant currency revenue represents (i) adjusted revenue, as defined above, in respect of the consolidated results and the Corporate and Other segment and (ii) reported revenue in respect of the other operating segments, in each case excluding the impact of fluctuations in foreign currency exchange rates in the current period.

Organic revenue growth is constant currency revenue, as defined above, for the current period compared to an adjusted revenue base for the prior period, which is further adjusted to add pre-acquisition revenue of acquired businesses for a portion of the prior year matching the portion of the current year for which the business was owned, and subtract pre-divestiture revenue for divested businesses for the portion of the prior year matching the portion of the current year for which the business was not owned, for any acquisitions or divestitures by FIS.

EBITDA reflects earnings from continuing operations before interest, taxes, depreciation and amortization.

Adjusted EBITDA is EBITDA, as defined above, excluding certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, adjusted EBITDA, as it relates to our segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K.

Adjusted EBITDA margin reflects adjusted EBITDA divided by adjusted revenue.

Adjusted net earnings excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of acquisition-related purchase accounting amortization and equity method investment earnings (loss), both of which are recurring.

Adjusted net earnings per diluted share, or Adjusted EPS, reflects adjusted net earnings from continuing operations divided by weighted average diluted shares outstanding.

Adjusted cash flows from operations reflect net cash provided by operating activities adjusted for the net change in settlement assets and obligations and exclude certain transactions that are closely associated with non-operating activities or are otherwise non-operational in nature and not indicative of future operating cash flows.

Free cash flow reflects adjusted cash flows from operations less capital expenditures. Free cash flow does not represent our residual cash flow available for discretionary expenditures, since we have mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure.

Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. Further, FIS’ non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures, including footnotes describing the specific adjustments, are provided in the attached schedules and in the Investor Relations section of the FIS website, www.fisglobal.com.

Forward-Looking Statements

This earnings release and today’s webcast contain “forward-looking statements” within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about anticipated financial outcomes, including any earnings guidance of the Company, projected revenue or expense synergies, business and market conditions, outlook, foreign currency exchange rates, expected dividends and share repurchases, the Company’s sales pipeline and anticipated profitability and growth, as well as other statements about our expectations, beliefs, intentions, or strategies regarding the future, are forward-looking statements. These statements relate to future events and our future results, and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements.

Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include the following, without limitation:

  • the risk that the Worldpay transaction will not provide the expected benefits, or that we will not be able to achieve the cost or revenue synergies anticipated;
  • the risk that the integration of FIS and Worldpay will be more difficult, time-consuming or expensive than anticipated;
  • the risk of customer loss or other business disruption in connection with the Worldpay transaction, or of the loss of key employees;
  • the fact that unforeseen liabilities of FIS or Worldpay may exist;
  • the risk that other acquired businesses will not be integrated successfully, or that the integration will be more costly or more time-consuming and complex than anticipated;
  • the risk that cost savings and other synergies anticipated to be realized from other acquisitions may not be fully realized or may take longer to realize than expected;
  • the risks of doing business internationally;
  • changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, pandemics, changes in either or both the United States and international lending, capital and financial markets, and currency fluctuations;
  • the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy and cybersecurity laws and regulations;
  • the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in, or new laws or regulations affecting, the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;
  • changes in the growth rates of the markets for our solutions;
  • failures to adapt our solutions to changes in technology or in the marketplace;
  • internal or external security breaches of our systems, including those relating to unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our software or platforms, and the reactions of customers, card associations, government regulators and others to any such events;
  • the risk that implementation of software (including software updates) for customers or at customer locations or employee error in monitoring our software and platforms may result in the corruption or loss of data or customer information, interruption of business operations, outages, exposure to liability claims or loss of customers;
  • the reaction of current and potential customers to communications from us or regulators regarding information security, risk management, internal audit or other matters;
  • competitive pressures on pricing related to the decreasing number of community banks in the U.S., the development of new disruptive technologies competing with one or more of our solutions, increasing presence of international competitors in the U.S. market and the entry into the market by global banks and global companies with respect to certain competitive solutions, each of which may have the impact of unbundling individual solutions from a comprehensive suite of solutions we provide to many of our customers;
  • the failure to innovate in order to keep up with new emerging technologies, which could impact our solutions and our ability to attract new, or retain existing, customers;
  • an operational or natural disaster at one of our major operations centers;
  • failure to comply with applicable requirements of payment networks or changes in those requirements;
  • fraud by merchants or bad actors; and
  • other risks detailed in the “Risk Factors” and other sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, in our quarterly reports on Form 10-Q and in our other filings with the Securities and Exchange Commission.

Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.

   

Fidelity National Information Services, Inc.

Earnings Release Supplemental Financial Information

February 13, 2020

   

Exhibit A

 

Condensed Consolidated Statements of Earnings - Unaudited for the three months and years ended December 31, 2019 and 2018

 

 

 

Exhibit B

 

Condensed Consolidated Balance Sheets - Unaudited as of December 31, 2019 and 2018

 

 

 

Exhibit C

 

Condensed Consolidated Statements of Cash Flows - Unaudited for the years ended December 31, 2019 and 2018

 

 

 

Exhibit D

 

Supplemental Non-GAAP Financial Information - Unaudited for the three months and years ended December 31, 2019 and 2018

 

 

 

Exhibit E

 

Supplemental GAAP to Non-GAAP Reconciliations - Unaudited for the three months and years ended December 31, 2019 and 2018

 

 

 

Exhibit F

 

Supplemental GAAP to Non-GAAP Reconciliations on Guidance - Unaudited for the year ended December 31, 2020

FIDELITY NATIONAL INFORMATION SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED

(In millions, except per share amounts)

Exhibit A

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Years ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

$

3,341

 

 

$

2,167

 

 

$

10,333

 

 

$

8,423

 

Cost of revenue

 

1,986

 

 

1,377

 

 

6,610

 

 

5,569

 

Gross profit

 

1,355

 

 

790

 

 

3,723

 

 

2,854

 

Selling, general and administrative expenses

 

1,232

 

 

321

 

 

2,667

 

 

1,301

 

Asset impairments

 

 

 

 

 

87

 

 

95

 

Operating income

 

123

 

 

469

 

 

969

 

 

1,458

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense, net

 

(95

)

 

(72

)

 

(337

)

 

(297

)

Other income (expense), net

 

(211

)

 

3

 

 

(219

)

 

(57

)

Total other income (expense), net

 

(306

)

 

(69

)

 

(556

)

 

(354

)

Earnings (loss) before income taxes and equity method investment earnings (loss)

 

(183

)

 

400

 

 

413

 

 

1,104

 

Provision (benefit) for income taxes

 

(19

)

 

85

 

 

100

 

 

208

 

Equity method investment earnings (loss)

 

7

 

 

(4

)

 

(10

)

 

(15

)

Net earnings (loss)

 

(157

)

 

311

 

 

303

 

 

881

 

Net (earnings) loss attributable to noncontrolling interest

 

(1

)

 

(12

)

 

(5

)

 

(35

)

Net earnings (loss) attributable to FIS common stockholders

 

$

(158

)

 

$

299

 

 

$

298

 

 

$

846

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per share-basic attributable to FIS common stockholders

 

$

(0.26

)

 

$

0.92

 

 

$

0.67

 

 

$

2.58

 

Weighted average shares outstanding-basic

 

614

 

 

326

 

 

445

 

 

328

 

Net earnings (loss) per share-diluted attributable to FIS common stockholders

 

$

(0.26

)

 

$

0.91

 

 

$

0.66

 

 

$

2.55

 

Weighted average shares outstanding-diluted

 

614

 

 

329

 

 

451

 

 

332

 

 

FIDELITY NATIONAL INFORMATION SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

(In millions, except per share amounts)

Exhibit B

 

 

 

 

 

 

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,152

 

 

$

703

 

Settlement deposits and merchant float

 

2,882

 

 

700

 

Trade receivables, net

 

3,242

 

 

1,472

 

Contract assets

 

124

 

 

123

 

Settlement receivables

 

647

 

 

281

 

Other receivables

 

337

 

 

166

 

Prepaid expenses and other current assets

 

308

 

 

288

 

Total current assets

 

8,692

 

 

3,733

 

Property and equipment, net

 

900

 

 

587

 

Goodwill

 

52,242

 

 

13,545

 

Intangible assets, net

 

15,798

 

 

3,132

 

Software, net

 

3,204

 

 

1,795

 

Other noncurrent assets

 

2,303

 

 

503

 

Deferred contract costs, net

 

667

 

 

475

 

Total assets

 

$

83,806

 

 

$

23,770

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable, accrued and other liabilities

 

$

2,374

 

 

$

1,099

 

Settlement payables

 

4,228

 

 

972

 

Deferred revenue

 

817

 

 

739

 

Short-term borrowings

 

2,823

 

 

267

 

Current portion of long-term debt

 

140

 

 

48

 

Total current liabilities

 

10,382

 

 

3,125

 

Long-term debt, excluding current portion

 

17,229

 

 

8,670

 

Deferred income taxes

 

4,281

 

 

1,360

 

Other noncurrent liabilities

 

2,406

 

 

326

 

Deferred revenue

 

52

 

 

67

 

Total liabilities

 

34,350

 

 

13,548

 

Equity:

 

 

 

 

FIS stockholders’ equity:

 

 

 

 

Preferred stock $0.01 par value

 

 

 

 

Common stock $0.01 par value

 

6

 

 

4

 

Additional paid in capital

 

45,358

 

 

10,800

 

Retained earnings

 

4,161

 

 

4,528

 

Accumulated other comprehensive earnings (loss)

 

(33

)

 

(430

)

Treasury stock, at cost

 

(52

)

 

(4,687

)

Total FIS stockholders’ equity

 

49,440

 

 

10,215

 

Noncontrolling interest

 

16

 

 

7

 

Total equity

 

49,456

 

 

10,222

 

Total liabilities and equity

 

$

83,806

 

 

$

23,770

 

 

Contacts

Ellyn Raftery, 904.438.6083
Chief Marketing Officer
FIS Global Marketing and Corporate Communications
Ellyn.Raftery@fisglobal.com

Nathan Rozof, CFA, 866.254.4811
Executive Vice President
FIS Corporate Finance and Investor Relations
Nathan.Rozof@fisglobal.com


Read full story here