FIS Reports Full-Year and Fourth Quarter 2018 Results

Full-Year 2018

  • GAAP revenue decreased 2.8 percent; organic revenue increased 2.8
    percent
  • Diluted EPS of $2.55; Adjusted EPS increased 22.5 percent to $5.23
  • Returned $1.6 billion to shareholders: $1.2 billion in share
    repurchases and $421 million in dividends

Fourth Quarter 2018

  • GAAP revenue was flat; organic revenue increased 3.2 percent
  • Diluted EPS of $0.91; Adjusted EPS increased 29.0 percent to $1.60
  • Returned $255 million to shareholders: $150 million in share
    repurchases and $105 million in dividends

JACKSONVILLE, Fla.–(BUSINESS WIRE)–FIS
(NYSE:FIS), a global leader in financial services technology, today
reported full-year and fourth quarter 2018 results. All financial
results, calculations and year over year comparisons reflect the
adoption of Accounting Standards Codification 606 (ASC 606) on a full
retrospective basis. The comparability of the Company’s full-year
results is impacted by the divestitures of its public sector and
education business and consulting businesses in 2017, and its Kingstar
business in China and its Certegy Check Services business in North
America in 2018.

Full-Year 2018

On a GAAP basis, revenue decreased 2.8 percent to $8,423 million from
$8,668 million in the prior year. Operating income increased to $1,458
million from $1,432 million in the prior year, while operating income
margin expanded 80 basis points to 17.3 percent. Net earnings
attributable to common stockholders was $846 million for the year, or
$2.55 per diluted share, compared to $3.75 per diluted share in the
prior year, a decrease of 32.0 percent. The prior period reflected a
large favorable adjustment due to tax reform.

On an adjusted basis, organic revenue increased 2.8 percent. Adjusted
EBITDA increased to $3,133 million from $2,984 million in the prior
year, while adjusted EBITDA margin expanded 280 basis points to 37.2
percent. Adjusted net earnings attributable to common stockholders was
$1,737 million, or $5.23 per diluted share, compared to $4.27 per
diluted share in the prior year, an increase of 22.5 percent.

Fourth Quarter 2018

On a GAAP basis, revenue was flat at $2,167 million from $2,166 million
in the prior year quarter. Operating income increased to $469 million
from $431 million in the prior year quarter, while operating income
margin expanded 180 basis points to 21.7 percent. Net earnings
attributable to common stockholders was $299 million for the quarter, or
$0.91 per diluted share, compared to $2.77 per diluted share in the
prior year quarter, a decrease of 67.1 percent. The prior period
reflected a large favorable adjustment due to tax reform.

On an adjusted basis, organic revenue increased 3.2 percent. Adjusted
EBITDA increased to $864 million from $820 million in the prior year
quarter, while adjusted EBITDA margin expanded 200 basis points to 39.9
percent. Adjusted net earnings attributable to common stockholders was
$526 million, or $1.60 per diluted share, compared to $1.24 per diluted
share in the prior year quarter, an increase of 29.0 percent.

“We are very pleased with delivering full-year 2018 results exceeding
both profitability and earnings expectations and meeting full-year
revenue expectations,” said Gary Norcross, FIS chairman, president and
chief executive officer. “Our strong sales results in 2018 create
positive momentum for 2019, and our ability to execute on our strategy
is accelerating organic growth and creating sustainable value for our
shareholders.”

Segment Information

The Company’s full-year 2018 segment results are impacted by the
divestitures of its public sector and education business in Corporate /
Other in 2017 and its consulting businesses in Global Financial
Solutions (GFS) and Integrated Financial Solutions (IFS) in 2017, its
Kingstar business in China in GFS in 2018 and its Certegy Check Services
business in North America in Corporate / Other in 2018.

The Company’s fourth quarter segment results are impacted by the
divestitures of its Kingstar business in China in Global Financial
Solutions (GFS) in 2018 and its Certegy Check Services business in North
America in Corporate / Other in 2018.

  • Integrated Financial Solutions (IFS):

    Full-year 2018 GAAP
    revenue increased 3.3 percent to $4,401 million from $4,260 million in
    the prior year. Organic revenue increased 3.9 percent. Adjusted EBITDA
    increased to $1,962 million from $1,874 million in the prior year, and
    adjusted EBITDA margin was 44.6 percent, representing expansion of 60
    basis points.

    Fourth Quarter 2018 GAAP revenue increased
    2.5 percent to $1,126 million from $1,098 million in the prior year
    quarter. Organic revenue increased 2.5 percent. Adjusted EBITDA
    increased to $523 million from $500 million in the prior year quarter,
    and adjusted EBITDA margin was 46.4 percent, representing expansion of
    90 basis points.

  • Global Financial Solutions (GFS):

    Full-year 2018 GAAP
    revenue decreased 8.2 percent to $3,718 million from $4,050 million in
    the prior year. Organic revenue increased 2.1 percent. Adjusted EBITDA
    increased to $1,391 million from $1,323 million in the prior year, and
    adjusted EBITDA margin was 37.4 percent, representing expansion of 470
    basis points.

    Fourth quarter 2018 GAAP revenue decreased
    1.0 percent to $976 million from $986 million in the prior year
    quarter. Organic revenue increased 3.7 percent. Adjusted EBITDA
    increased to $418 million from $383 million in the prior year quarter,
    and adjusted EBITDA margin was 42.8 percent, representing expansion of
    400 basis points.

  • Corporate / Other:

    Full-year 2018 GAAP revenue decreased
    15.0 percent to $304 million from $358 million in the prior year.
    Organic revenue decreased 3.1 percent. Adjusted EBITDA loss was $220
    million and is inclusive of $271 million of corporate expenses.

    Fourth
    quarter 2018 GAAP revenue decreased 20.7 percent to $65 million
    compared to $82 million in the prior year quarter. Organic revenue
    increased 8.3 percent. Adjusted EBITDA loss was $77 million and is
    inclusive of $87 million of corporate expenses.

Balance Sheet and Cash Flows

As of December 31, 2018, cash and cash equivalents totaled $703 million
and debt outstanding totaled $8,985 million with an effective weighted
average interest rate of 3.3 percent. Full-year 2018 net cash provided
by operating activities was $1,993 million and free cash flow was $1,482
million. Fourth quarter 2018 net cash provided by operating activities
was $705 million and free cash flow was $551 million.

The Company repurchased 12.0 million common shares at a total cost of
approximately $1,215 million for the full-year 2018 and 1.4 million
common shares at a total cost of approximately $150 million for the
fourth quarter 2018. Approximately $2,680 million remained under the
existing share repurchase authorization as of December 31, 2018. The
Company paid dividends of $421 million for the full-year 2018 and $105
million for the fourth quarter 2018.

Depreciation and Amortization Update

Historically, FIS has excluded the cost of amortization of purchase
accounting intangibles from the calculation of its Adjusted Net Earnings
and Adjusted Earnings Per Share non-GAAP measures (the “Prior Method”).
In response to a recent comment letter from the staff of the U.S.
Securities and Exchange Commission (“SEC”), FIS agreed that in the
future it would exclude all depreciation and amortization, and not only
amortization of purchase accounting intangibles, from those non-GAAP
measures (the “New Method”).

Under the New Method, full-year 2018 adjusted net earnings attributable
to common stockholders was $2,304 million, or $6.93 per diluted share,
compared to $1,892 million, or $5.64 per diluted share for the prior
year. Under the New Method, fourth quarter 2018 adjusted net earnings
attributable to common stockholders was $681 million, or $2.07 per
diluted share, compared to $538 million, or $1.60 per diluted share in
the prior year quarter. The attached schedules include a reconciliation
of results for the 2018 and 2017 periods under the New Method with those
under the Prior Method (See Exhibit E).

Additionally, FIS will include footnote information in future earnings
releases enabling a comparison of these measures as determined under the
New Method with the measures as they would have been determined under
the Prior Method.

Full-Year 2019 Guidance

Full-year 2019 Adjusted EPS guidance accounts for the change in our
Adjusted EPS definition to the New Method described above, which now
excludes all depreciation and amortization from its calculation.

2019 GAAP Guidance

  • Consolidated GAAP revenue growth approximately flat
  • Net earnings margin expansion of 350 to 450 bps
  • Diluted EPS of $3.50 to $3.80

2019 Non-GAAP Guidance

  • Consolidated organic revenue increase of 3.5 to 4.5 percent
  • Adjusted EBITDA margin expansion of 150 to 200 bps
  • Adjusted EPS of $7.35 to $7.55

Webcast

FIS will sponsor a live webcast of its earnings conference call with the
investment community beginning at 8:30 a.m. (EDT) Tues., February 12,
2019. 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.

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 IFS and GFS 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 IFS and
GFS segments, in each case excluding the impact of fluctuations in
foreign currency exchange rates in the current period.

Organic revenue increase/decrease 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 (New Method) 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 depreciation
and amortization and equity method investment earnings (loss), both of
which are recurring. We began excluding the equity method investment
earnings (loss) impact in 2018, but have not excluded it from the
comparative 2017 amounts as it was insignificant.

Adjusted net earnings (Prior Method) 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.
We began excluding the equity method investment earnings (loss) impact
in 2018, but have not excluded it from the comparative 2017 amounts as
it was insignificant.

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

Adjusted net earnings per diluted share, or Adjusted EPS (Prior
Method),
reflects adjusted net earnings from continuing operations
(Prior Method) 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.

About
FIS

FIS is a global leader in financial services technology, with a focus on
retail and institutional banking, payments, asset and wealth management,
risk and compliance, and outsourcing solutions. Through the depth and
breadth of our solutions portfolio, global capabilities and domain
expertise, FIS serves more than 20,000 clients in over 130 countries.
Headquartered in Jacksonville, Fla., FIS employs more than 47,000 people
worldwide and holds leadership positions in payment processing,
financial software and banking solutions. Providing software, services
and outsourcing of the technology that empowers the financial world, FIS
is a Fortune 500 company and is a member of Standard & Poor’s 500®
Index. For more information about FIS, visit www.fisglobal.com.

Follow FIS on Facebook (facebook.com/FIStoday)
and Twitter (@FISGlobal).

Forward-Looking Statements

This news 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, 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,
without limitation:

  • the risk that 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 acquisitions may not be fully realized or may take
    longer to realize than expected;
  • the risk of doing business internationally;
  • changes in general economic, business and political conditions,
    including the possibility of 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 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;
  • the failure to meet financial goals to grow the business in Brazil
    after the unwinding of the Brazilian Venture;
  • the risks of reduction in revenue from the loss of existing and/or
    potential customers in Brazil after the unwinding of the Brazilian
    Venture;
  • an operational or natural disaster at one of our major operations
    centers; and
  • other risks detailed under “Risk Factors” and other sections of our
    Annual Report on Form 10-K for the fiscal year ended December 31, 2017
    and other filings with the SEC.

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 12, 2019

   
Exhibit A Condensed Consolidated Statements of Earnings – Unaudited for the
three months and years ended December 31, 2018 and 2017
 
Exhibit B Condensed Consolidated Balance Sheets – Unaudited as of December 31,
2018 and 2017
 
Exhibit C Condensed Consolidated Statements of Cash Flows – Unaudited for the
years ended December 31, 2018 and 2017
 
Exhibit D Supplemental Non-GAAP Financial Information – Unaudited for the
three months and years ended December 31, 2018 and 2017
 
Exhibit E Supplemental GAAP to Non-GAAP Reconciliations – Unaudited for the
three months and years ended December 31, 2018 and 2017
 
Exhibit F Supplemental GAAP to Non-GAAP Reconciliations on Guidance –
Unaudited for the year ended December 31, 2019
 
 
               

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,
2018 2017 2018 2017
Revenue $ 2,167 $ 2,166 $ 8,423 $ 8,668
Cost of revenue 1,377   1,398   5,569   5,794  
Gross profit 790 768 2,854 2,874
Selling, general and administrative expenses 321 337 1,301 1,442
Asset impairments     95    
Operating income 469   431   1,458   1,432  
Other income (expense):
Interest expense, net (72 ) (70 ) (297 ) (337 )
Other income (expense), net 3   4   (57 ) (119 )
Total other income (expense), net (69 ) (66 ) (354 ) (456 )
Earnings before income taxes and equity method investment earnings
(loss)
400 365 1,104 976
Provision (benefit) for income taxes 85 (581 ) 208 (321 )
Equity method investment earnings (loss) (4 ) (2 ) (15 ) (3 )
Net earnings 311 944 881 1,294
Net (earnings) loss attributable to noncontrolling interest (12 ) (10 ) (35 ) (33 )
Net earnings attributable to FIS common stockholders $ 299   $ 934   $ 846   $ 1,261  
 
Net earnings per share-basic attributable to FIS common stockholders $ 0.92   $ 2.81   $ 2.58   $ 3.82  
Weighted average shares outstanding-basic 326   332   328   330  
Net earnings per share-diluted attributable to FIS common
stockholders
$ 0.91   $ 2.77   $ 2.55   $ 3.75  
Weighted average shares outstanding-diluted 329   337   332   336  
 

Amounts in table may not sum due to rounding.

 

Contacts

Ellyn Raftery, 904.438.6083
Chief Marketing Officer
FIS Global
Marketing and Corporate Communications
[email protected]

Peter Gunnlaugsson, 904.438.6603
Senior Vice President
FIS
Investor Relations
[email protected]

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