UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
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(904 ) 438-6000
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| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition
On August 4, 2020, Fidelity National Information Services, Inc. issued a press release announcing financial results for the three and six months ended June 30, 2020. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
The information included in this Item 2.02, including the accompanying exhibits, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Fidelity National Information Services, Inc. | ||||||||||||||
| Date: August 4, 2020 | By: | /s/ James W. Woodall | ||||||||||||
| Name: | James W. Woodall | |||||||||||||
| Title: | Corporate Executive Vice President and Chief Financial Officer | |||||||||||||
| Fidelity National Information Services, Inc. | ||||||||||||||
| Date: August 4, 2020 | By: | /s/ Christopher Thompson | ||||||||||||
| Name: | Christopher Thompson | |||||||||||||
| Title: | Chief Accounting Officer | |||||||||||||
Exhibit 99.1
News Release
FIS Reports Second Quarter 2020 Results
•Results demonstrated the power and durability of FIS’ unique business model
•Increased revenue 40% on a reported basis and (7)% on an organic basis to $2,962 million
•Achieved annual run-rate revenue synergies of approximately $115 million and annual run-rate expense synergies in excess of $700 million
•Earned Diluted EPS (GAAP) of $0.03 and Adjusted EPS of $1.15
•Generated net cash provided by operating activity of $1,231 million and free cash flow of $655 million
JACKSONVILLE Fla., August 4, 2020 - FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its second quarter 2020 results.
Second Quarter 2020 Results
On a GAAP basis, revenue increased 40% to $2,962 million, primarily driven by the July 31, 2019 acquisition of Worldpay, Inc. (Worldpay). Net earnings attributable to common stockholders was $19 million or $0.03 per diluted share.
On an organic basis, revenue decreased 7% compared to the prior year period, primarily due to reduced consumer spending trends caused by shelter-in-place, lockdown orders and other impacts associated with the ongoing COVID-19 pandemic. Organic growth was also impacted by a headwind of approximately 2%, or $60 million, associated with the U.S. tax filing deadline transitioning from the second quarter to the third quarter of 2020. Adjusted EBITDA margin expanded by 150 basis points (bps) over the prior year period to 39.1%, primarily driven by disciplined expense management as well as the acquisition of Worldpay and achievement of associated synergies. Adjusted net earnings were $718 million or $1.15 per diluted share.
“Our second quarter results reflect our ability to leverage the strength of our broad portfolio and the resiliency of our business model to successfully position FIS in attractive markets and execute on our growth strategy,” said Gary Norcross, FIS chairman, president and chief executive officer. “Throughout the pandemic, we have continued to invest in our technology and solutions, as our clients look for new and innovative ways to operate their businesses. As we continue to drive value to our shareholders, we embrace our responsibility to strive for sustained social change both domestically and globally.”
| ($ millions, except per share data, unaudited) | Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| % | Organic | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | Growth | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 2,962 | $ | 2,112 | 40% | (7)% | |||||||||||||||||||||||||||||||||||||||||||||||
| Merchant Solutions | 812 | 97 | * | (25)% | |||||||||||||||||||||||||||||||||||||||||||||||||
| Banking Solutions | 1,479 | 1,357 | 9% | 4% | |||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Market Solutions | 629 | 594 | 6% | 3% | |||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate and Other | 42 | 64 | (35)% | * | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,157 | $ | 794 | 46% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA Margin | 39.1 | % | 37.6 | % | 150 bps | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders (GAAP) | $ | 19 | $ | 154 | (88)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS (GAAP) | $ | 0.03 | $ | 0.47 | (94)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted net earnings | $ | 718 | $ | 424 | 69% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EPS | $ | 1.15 | $ | 1.30 | (12)% | ||||||||||||||||||||||||||||||||||||||||||||||||
* Indicates comparison not meaningful
Segment Information
•Merchant Solutions:
Second quarter revenue increased significantly to $812 million, primarily reflecting the Worldpay acquisition. On an organic basis, revenue decreased 25% when compared to the prior year period, primarily due to reduced consumer spending trends caused by shelter-in-place, lockdown orders, travel restrictions and other impacts associated with the ongoing COVID-19 pandemic. Organic growth was also impacted by a headwind of approximately 6%, or $60 million, associated with the U.S. tax filing deadline transitioning from the second quarter to the third quarter of 2020. Adjusted EBITDA margin was 40.8%.
•Banking Solutions:
Second quarter revenue increased 9% to $1,479 million. On an organic basis, revenue increased 4% when compared to the prior year period as strong growth in core processing was partially offset by a headwind of approximately 1% associated with the decline in transaction-related revenue caused by shelter-in-place and lockdown orders and other impacts associated with the ongoing COVID-19 pandemic. Adjusted EBITDA margin was 41.1%.
•Capital Market Solutions:
Second quarter revenue increased 6% to $629 million. On an organic basis, revenue increased 3% when compared to the prior year period driven by growth in our buy and sell-side solutions. Adjusted EBITDA margin was 45.6%.
•Corporate and Other:
Second quarter revenue decreased 35% to $42 million. Adjusted EBITDA loss was $69 million, including $76 million of corporate expenses.
Integration Update
The Company achieved annual run-rate synergies exiting the second quarter of 2020 as follows:
•Revenue synergies of approximately $115 million, including the origination of additional new bank referral agreements, debit routing benefits and Premium Payback product cross-selling wins during the second quarter.
•Expense synergies in excess of $700 million, including approximately $350 million of operational expense savings, approximately $275 million of interest expense savings and approximately $90 million of depreciation and amortization savings.
The integration of the Worldpay acquisition and achievement of associated synergies are progressing well ahead of schedule. As a result, the Company remains on track to meet or exceed its previously stated revenue and expense synergy targets for both year-end 2020 and 2022.
Balance Sheet and Cash Flows
As of June 30, 2020, the Company had $3,467 million of available liquidity, including $1,183 million of cash and cash equivalents and $2,284 million of capacity available under its revolving credit facility. Debt outstanding totaled $19,868 million with an effective weighted average interest rate of 1.7%.
Second quarter net cash provided by operating activities was $1,231 million, and free cash flow was $655 million. Additionally, FIS paid dividends of $217 million during the quarter.
COVID-19 Update
COVID-19 continued to impact our financial results in the second quarter of 2020. In certain locations, where government lockdowns and shelter in place orders have been loosened, consumer spending impacting our Merchant Solutions payments volume and transaction revenue have partially recovered, while certain verticals like travel, entertainment and hospitality continue to be significantly impacted. The Company’s revenue continues to be impacted by payment processing volumes within our Merchant Solutions segment and, to a lesser extent transaction volumes within our Banking Solutions segment, but both have started to improve in the second quarter of 2020. In response to COVID-19, we are continuing to take several actions to manage discretionary
expenses, including prohibiting most travel and decreasing third-party spending as well as accelerating automation and functional alignment across the organization. The Company’s liquidity remains strong and improved this quarter, as noted above.
As a result of government lockdowns, we have successfully outfitted employees to provide services from home or transferred work to other locations. Nearly 95% of our employees remain in a work-from-home status and have been effectively outfitted to continue to provide all necessary services to our clients. We will continue this work-from-home status in most locations this year, as the safety of our employees is our top priority. FIS has also helped its clients and communities through this period by providing virtual terminals, waiving certain fees for small merchants, contributing masks and supplies to the communities in which it does business, leveraging our Real Time Lending service to help banking clients process loans and foreclosures under the CARES Act, assisting a number of U.S. states to enable online purchasing of food for Supplemental Nutrition Assistance Program (SNAP) benefit recipients under a pilot program run by the U.S. Department of Agriculture (USDA) and donating to a number of hard hit communities and groups of impacted people therein. For its employees, the Company has expanded sick leave for employees affected by COVID-19, expanded telemedicine internationally, provided special pay for certain employees involved in critical infrastructure who could not work from home, and expanded its FIS Cares program to benefit employees in need around the world.
Webcast
FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EST) Tuesday, August 4, 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 constant currency revenue, organic revenue growth, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings, adjusted EPS, 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 growth measures adjust for the effects of exchange rate fluctuations, while organic revenue growth also adjusts for acquisitions and divestitures, giving investors further insight into our performance. Finally, free cash flow provides 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.
Constant currency revenue represents reported revenue 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 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, as defined above, divided by 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 EPS reflects adjusted net earnings, as defined above, divided by weighted average diluted shares outstanding.
Free cash flow reflects net cash provided by operating activities, adjusted for the net change in settlement assets and obligations and excluding 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, 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, deleveraging plans, 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 to which forward-looking statements are subject include the following, without limitation:
•the outbreak of the novel coronavirus (“COVID-19”) and measures to reduce its spread, including the impact of governmental or voluntary actions such as business shutdowns and stay-at-home orders;
•the duration of the COVID-19 pandemic and its impacts, including the general impact of an economic recession, reductions in consumer and business spending, and instability of the financial markets across the globe;
•the economic and other impacts of COVID-19 on our clients which affect the sales of our solutions and services and the implementation of such solutions;
•the risk of losses in the event of defaults by merchants (or other parties) to which we extend credit in our card settlement operations or in respect of any chargeback liability, either of which could adversely impact liquidity;
•changes in general economic, business and political conditions, including those resulting from COVID-19 or other pandemics, intensified international hostilities, acts of terrorism, changes in either or both the United States and international lending, capital and financial markets and currency fluctuations;
•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 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;
•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, 2019, 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.
For More Information
| Ellyn Raftery, 904.438.6083 | Nathan Rozof, CFA, 904.438.6918 | |||||||
| Chief Marketing Officer | Executive Vice President | |||||||
| FIS Global Marketing and Corporate Communications | FIS Corporate Finance and Investor Relations | |||||||
| Ellyn.Raftery@fisglobal.com | Nathan.Rozof@fisglobal.com | |||||||
Fidelity National Information Services, Inc.
Earnings Release Supplemental Financial Information
August 4, 2020
Exhibit A Condensed Consolidated Statements of Earnings - Unaudited for the three and six months ended June 30, 2020 and 2019
Exhibit B Condensed Consolidated Balance Sheets - Unaudited as of June 30, 2020 and December 31, 2019
Exhibit C Condensed Consolidated Statements of Cash Flows - Unaudited for the six months ended June 30, 2020 and 2019
Exhibit D Supplemental Non-GAAP Financial Information - Unaudited for the three and six months ended June 30, 2020 and 2019
Exhibit E Supplemental GAAP to Non-GAAP Reconciliations - Unaudited for the three and six months ended June 30, 2020 and 2019
FIDELITY NATIONAL INFORMATION SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED
(In millions, except per share amounts)
Exhibit A
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenue | $ | 2,962 | $ | 2,112 | $ | 6,039 | $ | 4,169 | |||||||||||||||
| Cost of revenue | 2,046 | 1,404 | 4,134 | 2,785 | |||||||||||||||||||
| Gross profit | 916 | 708 | 1,905 | 1,384 | |||||||||||||||||||
| Selling, general, and administrative expenses | 870 | 317 | 1,751 | 678 | |||||||||||||||||||
| Operating income | 46 | 391 | 154 | 706 | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense, net | (88) | (72) | (167) | (147) | |||||||||||||||||||
| Other income (expense), net | 74 | (120) | 34 | (172) | |||||||||||||||||||
| Total other income (expense), net | (14) | (192) | (133) | (319) | |||||||||||||||||||
| Earnings (loss) before income taxes and equity method investment earnings (loss) | 32 | 199 | 21 | 387 | |||||||||||||||||||
| Provision (benefit) for income taxes | 4 | 40 | (27) | 72 | |||||||||||||||||||
| Equity method investment earnings (loss) | (7) | (4) | (8) | (11) | |||||||||||||||||||
| Net earnings | 21 | 155 | 40 | 304 | |||||||||||||||||||
| Net (earnings) loss attributable to noncontrolling interest | (2) | (1) | (5) | (2) | |||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | 19 | $ | 154 | $ | 35 | $ | 302 | |||||||||||||||
| Net earnings per share-basic attributable to FIS common stockholders | $ | 0.03 | $ | 0.48 | $ | 0.06 | $ | 0.93 | |||||||||||||||
| Weighted average shares outstanding-basic | 618 | 324 | 617 | 323 | |||||||||||||||||||
| Net earnings per share-diluted attributable to FIS common stockholders | $ | 0.03 | $ | 0.47 | $ | 0.06 | $ | 0.92 | |||||||||||||||
| Weighted average shares outstanding-diluted | 625 | 327 | 625 | 327 | |||||||||||||||||||
1
FIDELITY NATIONAL INFORMATION SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(In millions, except per share amounts)
| Exhibit B | |||||||||||
| June 30, 2020 | December 31, 2019 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,183 | $ | 1,152 | |||||||
| Settlement deposits and merchant float | 2,697 | 2,882 | |||||||||
| Trade receivables, net | 3,104 | 3,242 | |||||||||
| Contract assets | 150 | 124 | |||||||||
| Settlement receivables | 834 | 647 | |||||||||
| Other receivables | 299 | 337 | |||||||||
| Prepaid expenses and other current assets | 333 | 308 | |||||||||
| Total current assets | 8,600 | 8,692 | |||||||||
| Property and equipment, net | 887 | 900 | |||||||||
| Goodwill | 51,940 | 52,242 | |||||||||
| Intangible assets, net | 14,589 | 15,798 | |||||||||
| Software, net | 3,292 | 3,204 | |||||||||
| Other noncurrent assets | 2,535 | 2,303 | |||||||||
| Deferred contract costs, net | 799 | 667 | |||||||||
| Total assets | $ | 82,642 | $ | 83,806 | |||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable, accrued and other liabilities | $ | 2,063 | $ | 2,374 | |||||||
| Settlement payables | 4,214 | 4,228 | |||||||||
| Deferred revenue | 846 | 817 | |||||||||
| Short-term borrowings | 3,217 | 2,823 | |||||||||
| Current portion of long-term debt | 1,777 | 140 | |||||||||
| Total current liabilities | 12,117 | 10,382 | |||||||||
| Long-term debt, excluding current portion | 14,874 | 17,229 | |||||||||
| Deferred income taxes | 4,091 | 4,281 | |||||||||
| Other noncurrent liabilities | 2,287 | 2,406 | |||||||||
| Deferred revenue | 40 | 52 | |||||||||
| Total liabilities | 33,409 | 34,350 | |||||||||
| Redeemable noncontrolling interest | 176 | — | |||||||||
| Equity: | |||||||||||
| FIS stockholders’ equity: | |||||||||||
| Preferred stock $0.01 par value | — | — | |||||||||
| Common stock $0.01 par value | 6 | 6 | |||||||||
| Additional paid in capital | 45,736 | 45,358 | |||||||||
| Retained earnings | 3,753 | 4,161 | |||||||||
| Accumulated other comprehensive earnings (loss) | (358) | (33) | |||||||||
| Treasury stock, at cost | (94) | (52) | |||||||||
| Total FIS stockholders’ equity | 49,043 | 49,440 | |||||||||
| Noncontrolling interest | 14 | 16 | |||||||||
| Total equity | 49,057 | 49,456 | |||||||||
| Total liabilities, redeemable noncontrolling interest and equity | $ | 82,642 | $ | 83,806 | |||||||
2
FIDELITY NATIONAL INFORMATION SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In millions)
| Exhibit C | |||||||||||
| Six months ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 40 | 304 | ||||||||
| Adjustment to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 1,830 | 736 | |||||||||
| Amortization of debt issue costs | 16 | 10 | |||||||||
| Acquisition-related financing foreign exchange | — | 104 | |||||||||
| Loss (gain) on sale of businesses, investments and other | 3 | 17 | |||||||||
| Stock-based compensation | 125 | 43 | |||||||||
| Deferred income taxes | (118) | (68) | |||||||||
| Net changes in assets and liabilities, net of effects from acquisitions and foreign currency: | |||||||||||
| Trade and other receivables | 105 | 93 | |||||||||
| Contract assets | (28) | 1 | |||||||||
| Settlement activity | 172 | (27) | |||||||||
| Prepaid expenses and other assets | (153) | (140) | |||||||||
| Deferred contract costs | (252) | (174) | |||||||||
| Deferred revenue | 22 | 39 | |||||||||
| Accounts payable, accrued liabilities and other liabilities | (149) | (118) | |||||||||
| Net cash provided by operating activities | 1,613 | 820 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions to property and equipment | (110) | (57) | |||||||||
| Additions to software | (457) | (228) | |||||||||
| Acquisitions, net of cash acquired | (469) | — | |||||||||
| Net proceeds from sale of businesses and investments | — | 43 | |||||||||
| Other investing activities, net | 90 | (42) | |||||||||
| Net cash provided by (used in) investing activities | (946) | (284) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings | 27,025 | 19,201 | |||||||||
| Repayment of borrowings and other financing obligations | (27,196) | (10,028) | |||||||||
| Debt issuance costs | — | (71) | |||||||||
| Proceeds from stock issued under stock-based compensation plans | 274 | 86 | |||||||||
| Treasury stock activity | (49) | (423) | |||||||||
| Dividends paid | (433) | (226) | |||||||||
| Other financing activities, net | (18) | (24) | |||||||||
| Net cash provided by (used in) financing activities | (397) | 8,515 | |||||||||
| Effect of foreign currency exchange rate changes on cash | (23) | 2 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 247 | 9,053 | |||||||||
| Cash and cash equivalents, beginning of period | 3,211 | 703 | |||||||||
| Cash and cash equivalents, end of period | $ | 3,458 | $ | 9,756 | |||||||
3
FIDELITY NATIONAL INFORMATION SERVICES, INC.
SUPPLEMENTAL NON-GAAP ORGANIC REVENUE GROWTH — UNAUDITED
(In millions)
| Exhibit D | |||||||||||||||||||||||||||||||||||||||||
| Three months ended June 30, | |||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
| Constant | |||||||||||||||||||||||||||||||||||||||||
| Currency | In Year | Adjusted | Organic | ||||||||||||||||||||||||||||||||||||||
| Revenue | FX | Revenue | Revenue | Adjustments (1) | Base | Growth | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 812 | $ | 5 | $ | 817 | $ | 97 | $ | 986 | $ | 1,083 | (25) | % | |||||||||||||||||||||||||||
| Banking Solutions | 1,479 | 15 | 1,494 | 1,357 | 87 | 1,443 | 4 | % | |||||||||||||||||||||||||||||||||
| Capital Market Solutions | 629 | 4 | 633 | 594 | 20 | 615 | 3 | % | |||||||||||||||||||||||||||||||||
| Corporate and Other | 42 | — | 42 | 64 | — | 64 | (35) | % | |||||||||||||||||||||||||||||||||
| Total | $ | 2,962 | $ | 24 | $ | 2,986 | $ | 2,112 | $ | 1,093 | $ | 3,206 | (7) | % | |||||||||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
| Constant | |||||||||||||||||||||||||||||||||||||||||
| Currency | In Year | Adjusted | Organic | ||||||||||||||||||||||||||||||||||||||
| Revenue | FX | Revenue | Revenue | Adjustments (1) | Base | Growth | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 1,747 | $ | 9 | $ | 1,756 | $ | 147 | $ | 1,873 | $ | 2,020 | (13) | % | |||||||||||||||||||||||||||
| Banking Solutions | 2,941 | 25 | 2,965 | 2,730 | 170 | 2,900 | 2 | % | |||||||||||||||||||||||||||||||||
| Capital Market Solutions | 1,260 | 6 | 1,266 | 1,167 | 39 | 1,206 | 5 | % | |||||||||||||||||||||||||||||||||
| Corporate and Other | 91 | — | 92 | 125 | — | 125 | (27) | % | |||||||||||||||||||||||||||||||||
| Total | $ | 6,039 | $ | 40 | $ | 6,079 | $ | 4,169 | $ | 2,083 | $ | 6,252 | (3) | % | |||||||||||||||||||||||||||
Amounts in tables may not sum or calculate due to rounding.
(1)In year adjustments primarily include adding revenue from the Worldpay and Virtus acquisitions.
4
FIDELITY NATIONAL INFORMATION SERVICES, INC.
SUPPLEMENTAL NON-GAAP CASH FLOW MEASURES — UNAUDITED
(In millions)
| Exhibit D (continued) | |||||||||||
| Three months ended | Six months ended | ||||||||||
| June 30, 2020 | June 30, 2020 | ||||||||||
| Net cash provided by operating activities | $ | 1,231 | $ | 1,613 | |||||||
| Non-GAAP adjustments: | |||||||||||
| Acquisition, integration and other payments (1) | 208 | 299 | |||||||||
| Settlement activity | (541) | (172) | |||||||||
| Adjusted cash flows from operations | 898 | 1,740 | |||||||||
| Capital expenditures (2) | (243) | (546) | |||||||||
| Free cash flow | $ | 655 | $ | 1,194 | |||||||
| Three months ended | Six months ended | ||||||||||
| June 30, 2019 | June 30, 2019 | ||||||||||
| Net cash provided by operating activities | $ | 526 | $ | 820 | |||||||
| Non-GAAP adjustments: | |||||||||||
| Acquisition, integration and other payments (1) | 46 | 90 | |||||||||
| Tax payments on divestitures (3) | 10 | 10 | |||||||||
| Settlement activity | (29) | 27 | |||||||||
| Adjusted cash flows from operations | 553 | 947 | |||||||||
| Capital expenditures | (140) | (285) | |||||||||
| Free cash flow | $ | 413 | $ | 662 | |||||||
Free cash flow reflects adjusted cash flows from operations less capital expenditures (additions to property and equipment and additions to software, excluding capital spend related to the construction of our new headquarters). Free cash flow does not represent our residual cash flows available for discretionary expenditures, since we have mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure.
(1)Adjusted cash flows from operations and free cash flow for the three and six months ended June 30, 2020 and 2019 exclude cash payments for certain acquisition, integration and other costs, net of related tax impact. The related tax impact totaled $32 million and $11 million for the three months and $47 million and $21 million for the six months ended June 30, 2020 and 2019, respectively.
(2)Capital expenditures for free cash flow for the three and six months ended June 30, 2020 exclude $18 million and $21 million in capital spend related to the construction of our new headquarters.
(3)Adjusted cash flows from operations and free cash flow exclude tax payments made in 2019 related to the sale of Reliance Trust Company of Delaware and the unwinding of the Brazilian Venture recognized during 2018.
5
FIDELITY NATIONAL INFORMATION SERVICES, INC.
SUPPLEMENTAL GAAP TO NON-GAAP RECONCILIATIONS — UNAUDITED
(In millions, except per share amounts)
Exhibit E
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | 19 | $ | 154 | $ | 35 | $ | 302 | ||||||||||||||||||
| Provision (benefit) for income taxes | 4 | 40 | (27) | 72 | ||||||||||||||||||||||
| Interest expense, net | 88 | 72 | 167 | 147 | ||||||||||||||||||||||
| Other, net | (65) | 125 | (21) | 185 | ||||||||||||||||||||||
| Operating income, as reported | 46 | 391 | 154 | 706 | ||||||||||||||||||||||
| Depreciation and amortization, excluding purchase accounting amortization | 237 | 193 | 468 | 388 | ||||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||
| Purchase accounting amortization (1) | 678 | 175 | 1,362 | 348 | ||||||||||||||||||||||
| Acquisition, integration and other costs (2) | 196 | 35 | 420 | 81 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,157 | $ | 794 | $ | 2,404 | $ | 1,523 | ||||||||||||||||||
See notes to Exhibit E.
6
FIDELITY NATIONAL INFORMATION SERVICES, INC.
SUPPLEMENTAL GAAP TO NON-GAAP RECONCILIATIONS — UNAUDITED
(In millions, except per share amounts)
Exhibit E (continued)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Earnings (loss) before income taxes and equity method investment earnings (loss) | $ | 32 | $ | 199 | $ | 21 | $ | 387 | ||||||||||||||||||
| (Provision) benefit for income taxes | (4) | (40) | 27 | (72) | ||||||||||||||||||||||
| Equity method investment earnings (loss) | (7) | (4) | (8) | (11) | ||||||||||||||||||||||
| Net (earnings) loss attributable to noncontrolling interest | (2) | (1) | (5) | (2) | ||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | 19 | 154 | 35 | 302 | ||||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||
| Purchase accounting amortization (1) | 678 | 175 | 1,362 | 348 | ||||||||||||||||||||||
| Acquisition, integration and other costs (2) | 202 | 46 | 426 | 146 | ||||||||||||||||||||||
| Loss (gain) on sale of businesses and investments (3) | — | — | — | 6 | ||||||||||||||||||||||
| Debt financing activities (4) | — | 102 | — | 102 | ||||||||||||||||||||||
| Non-operating (income) expense (5) | (74) | — | (34) | — | ||||||||||||||||||||||
| Equity method investment (earnings) loss (6) | 7 | 4 | 8 | 11 | ||||||||||||||||||||||
| (Provision) benefit for income taxes on non-GAAP adjustments | (114) | (57) | (277) | (113) | ||||||||||||||||||||||
| Total non-GAAP adjustments | 699 | 270 | 1,485 | 500 | ||||||||||||||||||||||
| Adjusted net earnings | $ | 718 | $ | 424 | $ | 1,520 | $ | 802 | ||||||||||||||||||
| Net earnings per share-diluted attributable to FIS common stockholders | $ | 0.03 | $ | 0.47 | $ | 0.06 | $ | 0.92 | ||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||
| Purchase accounting amortization (1) | 1.08 | 0.54 | 2.18 | 1.06 | ||||||||||||||||||||||
| Acquisition, integration and other costs (2) | 0.32 | 0.14 | 0.68 | 0.45 | ||||||||||||||||||||||
| Loss (gain) on sale of businesses and investments (3) | — | — | — | 0.02 | ||||||||||||||||||||||
| Debt financing activities (4) | — | 0.31 | — | 0.31 | ||||||||||||||||||||||
| Non-operating (income) expense (5) | (0.12) | — | (0.05) | — | ||||||||||||||||||||||
| Equity method investment (earnings) loss (6) | 0.01 | 0.01 | 0.01 | 0.03 | ||||||||||||||||||||||
| (Provision) benefit for income taxes on non-GAAP adjustments | (0.18) | (0.17) | (0.44) | (0.35) | ||||||||||||||||||||||
| Adjusted net earnings per share-diluted attributable to FIS common stockholders | $ | 1.15 | $ | 1.30 | $ | 2.43 | $ | 2.46 | ||||||||||||||||||
| Weighted average shares outstanding-diluted | 625 | 327 | 625 | 327 | ||||||||||||||||||||||
Amounts in table may not sum or calculate due to rounding.
See notes to Exhibit E.
7
FIDELITY NATIONAL INFORMATION SERVICES, INC.
SUPPLEMENTAL GAAP TO NON-GAAP RECONCILIATIONS — UNAUDITED
(In millions, except per share amounts)
Exhibit E (continued)
Notes to Unaudited - Supplemental GAAP to Non-GAAP Reconciliations for the three and six months ended June 30, 2020 and 2019.
The adjustments are as follows:
(1)This item represents purchase price amortization expense on all intangible assets acquired through various Company acquisitions, including customer relationships, contract value, trademarks and tradenames, and technology assets. The Company has excluded the impact of this amortization expense as such amounts can be significantly impacted by the timing and/or size of acquisitions. Although the Company excludes these amounts from its non-GAAP expenses, the Company believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of assets that relate to past acquisitions will recur in future periods until such assets have been fully amortized. Any future acquisitions may result in the amortization of future assets.
(2)This item represents acquisition and integration costs primarily related to the acquisition of Worldpay and certain other costs including those associated with data center consolidation activities of $22 million and $17 million for the three months and $40 million and $25 million for the six months ended June 30, 2020 and 2019, respectively.
(3)This item represents the net pre-tax loss (gain) on sale of businesses and investments during the six months ended June 30, 2019.
(4)This item primarily represents the non-cash foreign currency impact of non-hedged Euro- and Pound Sterling-denominated notes issued during the three months ended June 30, 2019 to finance the Worldpay acquisition.
(5)Non-operating income (expense) consists of other income and expense items outside of the Company’s operating activities. For the three and six months ended June 30, 2020 this item primarily represents foreign currency transaction remeasurement gains and losses and the fair value adjustment on convertible Visa Inc. Series B preferred stock and related contingent value rights liability from the Worldpay acquisition.
(6)This item represents our equity method investment earnings or loss and is predominantly due to our equity ownership interest in Cardinal Holdings, LP.
8