- Increased revenue 13% on a reported basis and 1% on an organic
basis to $3,197 million
- Achieved annual run-rate revenue synergies of approximately
$150 million and annual run-rate expense synergies exceeding $700
million
- Realized Diluted EPS of $0.03 and Adjusted EPS of $1.42
- Generated net cash provided by operating activities of $1,411
million and free cash flow of $866 million
FIS™ (NYSE:FIS), a global leader in financial services
technology, today reported its third quarter 2020 results.
Third Quarter 2020
Results
On a GAAP basis, revenue increased 13% to $3,197 million,
primarily due to the July 31, 2019 acquisition of Worldpay, Inc.
(Worldpay). Net earnings attributable to common stockholders was
$20 million or $0.03 per diluted share.
On an organic basis, revenue increased 1% as compared to the
prior year period, primarily due to consumer spending trends
associated with the ongoing COVID-19 pandemic. Adjusted EBITDA
margin expanded by 30 basis points (bps) over the prior year period
to 42.5%, primarily due to the achievement of Worldpay cost
synergies. Adjusted net earnings were $887 million or $1.42 per
diluted share.
“COVID-19 has greatly influenced how businesses must interact
with their customers in order to survive and thrive,” said Gary
Norcross, FIS chairman, president and chief executive officer. “We
are pleased that our unique business model enables us to quickly
deliver solutions that are helping our clients adapt to these
rapidly shifting market dynamics. Our strong third quarter results
demonstrate the momentum we’re building to continue accelerating
revenue growth.”
($ millions, except per share data,
unaudited)
Three Months Ended September
30,
%
Organic
2020
2019
Change
Growth
Revenue
$
3,197
$
2,822
13%
1%
Merchant Solutions
1,017
705
44%
-
Banking Solutions
1,507
1,443
4%
3%
Capital Market Solutions
626
611
2%
(1)%
Corporate and Other
47
63
(24)%
*
Adjusted EBITDA
$
1,357
$
1,192
14%
Adjusted EBITDA Margin
42.5
%
42.2
%
30 bps
Net earnings attributable to FIS common
stockholders (GAAP)
$
20
$
154
(87)%
Diluted EPS (GAAP)
$
0.03
$
0.29
(90)%
Adjusted net earnings
$
887
$
751
18%
Adjusted EPS
$
1.42
$
1.43
(1)%
* Indicates comparison not meaningful
Segment Information
- Merchant Solutions: Third quarter revenue increased 44% to
$1,017 million, primarily due to the Worldpay acquisition. On an
organic basis, revenue was relatively flat compared to the prior
year period. When adjusting for the shifted timing of the U.S. tax
filing deadline, organic growth increased 14% sequentially as
compared to the second quarter, primarily due to continued marquee
client wins and improving consumer spending trends associated with
the ongoing COVID-19 pandemic. Adjusted EBITDA margin was
47.9%.
- Banking Solutions: Third quarter revenue increased 4% to $1,507
million. On an organic basis, revenue increased 3% as compared to
the prior year period, primarily due to growth in recurring
revenue. Organic growth was reduced by a headwind of approximately
3% associated with COVID-19 and a large license comparison in the
prior year period. Adjusted EBITDA margin was 43.3%.
- Capital Market Solutions: Third quarter revenue increased 2% to
$626 million. On an organic basis, revenue decreased 1% as compared
to the prior year period, primarily due to quarterly variability in
license renewal timing as the business transitions to a recurring,
SAAS-based revenue model. Year to date, revenue increased 3% on an
organic basis, reflecting more than a percentage point of
acceleration as compared to the prior year period, which better
represents underlying trends of the business by normalizing for the
timing of quarterly license renewals. Adjusted EBITDA margin was
45.7%.
- Corporate and Other: Third quarter revenue decreased 24% to $47
million. Adjusted EBITDA loss was $68 million, including $10
million of Adjusted EBITDA from our non-strategic businesses offset
by $78 million of corporate expenses.
Integration Update
The Company achieved annual run-rate synergies related to the
Worldpay acquisition, exiting the third quarter of 2020 as
follows:
- Revenue synergies of approximately $150 million, including
continued successful origination of new bank referral agreements
and Premium Payback cross-selling wins. Revenue synergies remain on
track to exceed $200 million in annual run-rate achievement exiting
2020.
- Expense synergies exceeding $700 million, including
approximately $385 million of operational expense savings.
Operational expense synergies remain on track to exceed $400
million in annual run-rate achievement exiting 2020.
Balance Sheet and Cash
Flows
As of September 30, 2020, the Company had $4,227 million of
available liquidity, including $1,826 million of cash and cash
equivalents and $2,401 million of capacity available under its
revolving credit facility. Debt outstanding totaled $20,189 million
with an effective weighted average interest rate of 1.6%.
Third quarter net cash provided by operating activities was
$1,411 million, and free cash flow was $866 million or 27% of
revenue. Additionally, FIS paid dividends of $217 million during
the quarter.
COVID-19 Update
COVID-19 continued to impact our financial results in the third
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 reduced
payment processing volumes within our Merchant Solutions segment
and, to a lesser extent transaction volume within our Banking
Solutions segment, but both have improved in the third quarter of
2020. In response to COVID-19, we are continuing to take several
actions to manage discretionary expenses, including reducing office
space, prohibiting most travel and reducing incentive compensation
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.
Webcast
FIS will sponsor a live webcast of its earnings conference call
with the investment community beginning at 9:00 a.m. (EST)
Thursday, October 29, 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 employees 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, 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.
As described below, our Adjusted EBITDA and Adjusted Net
Earnings measures also exclude incremental and direct costs
resulting from the COVID-19 pandemic. Management believes that this
adjustment may help investors understand the longer-term
fundamentals of our underlying business.
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.
Adjusted EBITDA reflects net earnings before interest,
other income (expense), taxes, equity method investment earnings
(loss), and depreciation and amortization, and excludes certain
costs and other transactions that management deems non-operational
in nature, the removal of which improves comparability of operating
results across reporting periods. It also excludes incremental and
direct costs resulting from the COVID-19 pandemic. 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. It
also excludes incremental and direct costs resulting from the
COVID-19 pandemic.
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, including incremental and direct costs resulting from
the COVID-19 pandemic, 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 or projections 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, or other characterizations of
future events or circumstances, 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.
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 or recurrence 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, including any recurrence, 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 and results of
operations;
- 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;
- the risk that election results in the U.S. may result in
additional regulation and additional regulatory and tax costs;
- 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.
Fidelity National Information
Services, Inc.
Earnings Release Supplemental
Financial Information
October 29, 2020
Exhibit A
Condensed Consolidated Statements
of Earnings - Unaudited for the three and nine months ended
September 30, 2020 and 2019
Exhibit B
Condensed Consolidated Balance
Sheets - Unaudited as of September 30, 2020 and
December 31, 2019
Exhibit C
Condensed Consolidated Statements
of Cash Flows - Unaudited for the nine months ended
September 30, 2020 and 2019
Exhibit D
Supplemental Non-GAAP Financial
Information - Unaudited for the three and nine months ended
September 30, 2020 and 2019
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three and nine months ended
September 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 September
30,
Nine months ended September
30,
2020
2019
2020
2019
Revenue
$
3,197
$
2,822
$
9,236
$
6,991
Cost of revenue
2,104
1,838
6,238
4,623
Gross profit
1,093
984
2,998
2,368
Selling, general, and administrative
expenses
862
757
2,613
1,435
Asset impairments
—
87
—
87
Operating income
231
140
385
846
Other income (expense):
Interest expense, net
(84
)
(95
)
(252
)
(242
)
Other income (expense), net
(4
)
164
31
(8
)
Total other income (expense), net
(88
)
69
(221
)
(250
)
Earnings (loss) before income taxes and
equity method investment earnings (loss)
143
209
164
596
Provision (benefit) for income taxes
121
48
94
119
Equity method investment earnings
(loss)
—
(5
)
(9
)
(18
)
Net earnings
22
156
61
459
Net (earnings) loss attributable to
noncontrolling interest
(2
)
(2
)
(7
)
(3
)
Net earnings attributable to FIS common
stockholders
$
20
$
154
$
54
$
456
Net earnings per share-basic attributable
to FIS common stockholders
$
0.03
$
0.30
$
0.09
$
1.18
Weighted average shares
outstanding-basic
620
516
618
388
Net earnings per share-diluted
attributable to FIS common stockholders
$
0.03
$
0.29
$
0.09
$
1.15
Weighted average shares
outstanding-diluted
627
524
626
396
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS — UNAUDITED
(In millions, except per share
amounts)
Exhibit B
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,826
$
1,152
Settlement deposits and merchant float
2,840
2,882
Trade receivables, net
3,146
3,242
Contract assets
164
124
Settlement receivables
774
647
Other receivables
361
337
Prepaid expenses and other current
assets
823
308
Total current assets
9,934
8,692
Property and equipment, net
914
900
Goodwill
52,567
52,242
Intangible assets, net
14,224
15,798
Software, net
3,301
3,204
Other noncurrent assets
1,404
2,303
Deferred contract costs, net
851
667
Total assets
$
83,195
$
83,806
LIABILITIES, REDEEMABLE
NONCONTROLLING INTEREST AND EQUITY
Current liabilities:
Accounts payable, accrued and other
liabilities
$
2,586
$
2,374
Settlement payables
4,438
4,228
Deferred revenue
775
817
Short-term borrowings
3,144
2,823
Current portion of long-term debt
1,832
140
Total current liabilities
12,775
10,382
Long-term debt, excluding current
portion
15,213
17,229
Deferred income taxes
4,172
4,281
Other noncurrent liabilities
1,768
2,406
Deferred revenue
46
52
Total liabilities
33,974
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
45,821
45,358
Retained earnings
3,556
4,161
Accumulated other comprehensive earnings
(loss)
(212
)
(33
)
Treasury stock, at cost
(140
)
(52
)
Total FIS stockholders’ equity
49,031
49,440
Noncontrolling interest
14
16
Total equity
49,045
49,456
Total liabilities, redeemable
noncontrolling interest and equity
$
83,195
$
83,806
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS — UNAUDITED
(In millions)
Exhibit C
Nine months ended September
30,
2020
2019
Cash flows from operating activities:
Net earnings
$
61
$
459
Adjustment to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
2,760
1,488
Amortization of debt issue costs
24
17
Acquisition-related financing foreign
exchange
—
(112
)
Asset impairments
—
87
Loss (gain) on sale of businesses,
investments and other
3
18
Stock-based compensation
182
138
Deferred income taxes
(24
)
(75
)
Net changes in assets and liabilities, net
of effects from acquisitions and foreign currency:
Trade and other receivables
78
12
Contract assets
(41
)
(14
)
Settlement activity
594
165
Prepaid expenses and other assets
(128
)
(2
)
Deferred contract costs
(354
)
(258
)
Deferred revenue
(50
)
(51
)
Accounts payable, accrued liabilities and
other liabilities
(81
)
(131
)
Net cash provided by operating
activities
3,024
1,741
Cash flows from investing
activities:
Additions to property and equipment
(186
)
(135
)
Additions to software
(652
)
(409
)
Acquisitions, net of cash acquired
(469
)
(6,629
)
Net proceeds from sale of businesses and
investments
—
49
Other investing activities, net
92
(43
)
Net cash provided by (used in) investing
activities
(1,215
)
(7,167
)
Cash flows from financing
activities:
Borrowings
37,125
25,425
Repayment of borrowings and other
financing obligations
(37,646
)
(15,997
)
Debt issuance costs
—
(71
)
Proceeds from stock issued under
stock-based compensation plans
302
136
Treasury stock activity
(102
)
(422
)
Dividends paid
(650
)
(441
)
Other financing activities, net
(222
)
(39
)
Net cash provided by (used in) financing
activities
(1,193
)
8,591
Effect of foreign currency exchange rate
changes on cash
8
(38
)
Net increase (decrease) in cash and cash
equivalents
624
3,127
Cash and cash equivalents, beginning of
period
3,211
703
Cash and cash equivalents, end of
period
$
3,835
$
3,830
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
SUPPLEMENTAL NON-GAAP ORGANIC
REVENUE GROWTH — UNAUDITED
(In millions)
Exhibit D
Three months ended September
30,
2020
2019
Constant
Currency
In Year
Adjusted
Organic
Revenue
FX
Revenue
Revenue
Adjustments (1)
Base
Growth
Merchant Solutions
$
1,017
$
(12
)
$
1,005
$
705
$
298
$
1,003
—
%
Banking Solutions
1,507
7
1,513
1,443
29
1,473
3
%
Capital Market Solutions
626
(5
)
621
611
18
630
(1
)%
Corporate and Other
47
—
47
63
—
63
(24
)%
Total
$
3,197
$
(10
)
$
3,187
$
2,822
$
346
$
3,168
1
%
Nine months ended September
30,
2020
2019
Constant
Currency
In Year
Adjusted
Organic
Revenue
FX
Revenue
Revenue
Adjustments (1)
Base
Growth
Merchant Solutions
$
2,764
$
(3
)
$
2,761
$
852
$
2,171
$
3,023
(9
)%
Banking Solutions
4,447
31
4,479
4,173
200
4,373
2
%
Capital Market Solutions
1,886
2
1,887
1,778
57
1,836
3
%
Corporate and Other
139
—
139
188
—
188
(26
)%
Total
$
9,236
$
30
$
9,266
$
6,991
$
2,429
$
9,420
(2
)%
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.
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
SUPPLEMENTAL NON-GAAP CASH
FLOW MEASURES — UNAUDITED
(In millions)
Exhibit D (continued)
Three months ended
Nine months ended
September 30, 2020
September 30, 2020
Net cash provided by operating
activities
$
1,411
$
3,024
Non-GAAP adjustments:
Acquisition, integration and other
payments (1)
140
438
Settlement activity
(422
)
(594
)
Adjusted cash flows from operations
1,129
2,868
Capital expenditures (2)
(263
)
(808
)
Free cash flow
$
866
$
2,060
Three months ended
Nine months ended
September 30, 2019
September 30, 2019
Net cash provided by operating
activities
$
921
$
1,741
Non-GAAP adjustments:
Acquisition, integration and other
payments (1)
171
260
Tax payments on divestitures (3)
—
10
Settlement activity
(193
)
(165
)
Adjusted cash flows from operations
899
1,846
Capital expenditures
(259
)
(544
)
Free cash flow
$
640
$
1,302
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 nine months ended September 30, 2020 and 2019
exclude cash payments for certain acquisition, integration and
other costs (see Note 2 to Exhibit E), net of related tax
impact. The related tax impact totaled $23 million and $30
million for the three months and $70 million and $51 million for
the nine months ended September 30, 2020 and 2019,
respectively.
(2)
Capital expenditures for free cash flow for the three and nine
months ended September 30, 2020 exclude $9 million and $30 million,
respectively, 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.
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
SUPPLEMENTAL GAAP TO NON-GAAP
RECONCILIATIONS — UNAUDITED
(In millions, except per share
amounts)
Exhibit E
Three months ended
September 30,
Nine months ended
September 30,
2020
2019
2020
2019
Net earnings attributable to FIS common
stockholders
$
20
$
154
$
54
$
456
Provision (benefit) for income taxes
121
48
94
119
Interest expense, net
84
95
252
242
Other, net
6
(157
)
(15
)
29
Operating income, as reported
231
140
385
846
Depreciation and amortization, excluding
purchase accounting amortization
238
206
705
594
Non-GAAP adjustments:
Purchase accounting amortization (1)
693
546
2,055
894
Acquisition, integration and other costs
(2)
195
213
616
293
Asset impairments
—
87
—
87
Adjusted EBITDA
$
1,357
$
1,192
$
3,761
$
2,714
See Notes to Exhibit E.
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
SUPPLEMENTAL GAAP TO NON-GAAP
RECONCILIATIONS — UNAUDITED
(In millions, except per share
amounts)
Exhibit E (continued)
Three months ended
September 30,
Nine months ended
September 30,
2020
2019
2020
2019
Earnings (loss) before income taxes and
equity method investment earnings (loss)
$
143
$
209
$
164
$
596
(Provision) benefit for income taxes
(121
)
(48
)
(94
)
(119
)
Equity method investment earnings
(loss)
—
(5
)
(9
)
(18
)
Net (earnings) loss attributable to
noncontrolling interest
(2
)
(2
)
(7
)
(3
)
Net earnings attributable to FIS common
stockholders
20
154
54
456
Non-GAAP adjustments:
Purchase accounting amortization (1)
693
546
2,055
894
Acquisition, integration and other costs
(2)
195
213
622
358
Asset impairments (3)
—
87
—
87
Loss (gain) on sale of businesses and
investments (4)
—
—
—
6
Debt financing activities (5)
—
(5
)
—
98
Non-operating (income) expense (6)
4
(164
)
(31
)
(164
)
Equity method investment (earnings) loss
(7)
—
5
9
18
Tax rate change (8)
103
—
103
—
(Provision) benefit for income taxes on
non-GAAP adjustments
(128
)
(85
)
(405
)
(200
)
Total non-GAAP adjustments
867
597
2,353
1,097
Adjusted net earnings
$
887
$
751
$
2,407
$
1,553
Net earnings per share-diluted
attributable to FIS common stockholders
$
0.03
$
0.29
$
0.09
$
1.15
Non-GAAP adjustments:
Purchase accounting amortization (1)
1.11
1.04
3.28
2.26
Acquisition, integration and other costs
(2)
0.31
0.41
0.99
0.90
Asset impairments (3)
—
0.17
—
0.22
Loss (gain) on sale of businesses and
investments (4)
—
—
—
0.02
Debt financing activities (5)
—
(0.01
)
—
0.25
Non-operating (income) expense (6)
0.01
(0.31
)
(0.05
)
(0.41
)
Equity method investment (earnings) loss
(7)
—
0.01
0.01
0.05
Tax rate change (8)
0.16
—
0.16
—
(Provision) benefit for income taxes on
non-GAAP adjustments
(0.20
)
(0.16
)
(0.65
)
(0.51
)
Adjusted net earnings per share-diluted
attributable to FIS common stockholders
$
1.42
$
1.43
$
3.85
$
3.92
Weighted average shares
outstanding-diluted
627
524
626
396
Amounts in table may not sum or calculate
due to rounding.
See Notes to Exhibit E.
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 nine months ended
September 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 $20 million and $25 million for the three months and
$60 million and $50 million for the nine months ended
September 30, 2020 and 2019, respectively, and incremental
charges directly related to COVID-19 of $41 million and $56 million
for the three and nine months ended September 30, 2020,
respectively.
(3)
For the three and nine months ended September 30, 2019 this item
primarily represents asset impairments for certain software
resulting from the Company's net realizable value analysis.
(4)
This item represents the net pre-tax loss (gain) on sale of
businesses and investments during the nine months ended
September 30, 2019.
(5)
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.
(6)
Non-operating (income) expense consists of other income and
expense items outside of the Company's operating activities. For
the three and nine months ended September 30, 2020 this item
primarily represents the fair value adjustment on certain assets
and liabilities offset by foreign currency transaction
remeasurement losses and the pending settlement of the Reliance
Trust claims described in our Commitments and Contingencies note in
our quarterly reports on Form 10-Q. For the three and nine months
ended September 30, 2019, this item primarily represents the
non-cash foreign currency gain on non-hedged Euro- and Pound
Sterling-denominated notes to finance the Worldpay acquisition.
(7)
This item represents our equity method investment earnings or
loss and is predominantly due to our equity ownership interest in
Cardinal Holdings, LP.
(8)
This item represents the one-time net remeasurement of certain
deferred tax liabilities due to the increase in the U.K. corporate
statutory tax rate from 17% to 19% enacted on July 22, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029005274/en/
Ellyn Raftery, 904.438.6083 Chief Marketing Officer FIS Global
Marketing and Corporate Communications
Ellyn.Raftery@fisglobal.com
Nathan Rozof, CFA, 904.438.6918 Executive Vice President FIS
Corporate Finance and Investor Relations
Nathan.Rozof@fisglobal.com
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