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FIDELITY NATIONAL INFORMATION SERVICES, INC.

(FIS)
  Report
Real-time Estimate Cboe BZX  -  09:59 2022-09-26 am EDT
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07:51aBarclays Adjusts Price Target on Fidelity National Information Services to $110 From $130, Reiterates Overweight Rating
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09/23Goldman Sachs Cuts Price Target on Fidelity National Information Services to $110 From $121, Reiterates Buy Rating
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09/23Credit Suisse Lowers Fidelity National Information Services' PT to $120 from $130, Updates Model to Account for Macroeconomic Factors; Maintains Outperform Rating
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FIDELITY NATIONAL INFORMATION SERVICES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/04/2022 | 04:46pm EDT

Unless stated otherwise or the context otherwise requires, all references to "FIS," "we," "our," "us," the "Company" or the "registrant" are to Fidelity National Information Services, Inc., a Georgia corporation, and its subsidiaries.


The following discussion should be read in conjunction with Item 1. Condensed
Consolidated Financial Statements (Unaudited) and the Notes thereto included
elsewhere in this report. The statements contained in this Form 10-Q or in our
other documents or in oral presentations or other management statements that are
not purely historical are 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. In many cases, forward-looking
statements can be identified by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "potential,"
or "continue," or the negative of these terms and other comparable terminology.
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 and any related variants
("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 in certain geographies;
•the duration, including any recurrence, of the COVID-19 pandemic and its
impacts, including reductions in consumer and business spending, and instability
of the financial markets in heavily impacted areas 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, a recession, intensified
international hostilities, acts of terrorism, increased rates of inflation,
changes in either or both the U.S. and international lending, capital and
financial markets or currency fluctuations;
•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 synergies anticipated to be realized from
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 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;
•the amount, declaration and payment of future dividends is at the discretion of
our Board of Directors and depends on, among other things, our investment
opportunities, results of operations, financial condition, cash requirements,
future prospects, the duration and impact of the COVID-19 pandemic, and other
factors that may be considered relevant by our Board of Directors, including
legal and contractual restrictions;
•the amount and timing of any future share repurchases is subject to, among
other things, our share price, our other investment opportunities and cash
requirements, our results of operations and financial condition, our future
prospects and other factors that may be considered relevant by our Board of
Directors and management;
•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;
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•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 policies and resulting actions of the current administration in
the U.S. may result in additional regulations and executive orders, as well as
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 elsewhere in the Risk Factors and other sections of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2021, 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 our 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 our forward-looking statements, whether as a result of new
information, future events or otherwise.

Overview


FIS is a leading provider of technology solutions for financial institutions and
businesses of all sizes and across any industry globally. We enable the movement
of commerce by unlocking the financial technology that powers the world's
economy. Our employees are dedicated to advancing the way the world pays, banks
and invests through our trusted innovation, system performance and flexible
architecture. 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 member of the
Fortune 500® and the Standard & Poor's 500® Index.

We have grown both organically and through acquisitions. Organic growth has been
driven by a number of factors, including growth of our customers' businesses,
our internal development of new solutions that enhance our client offerings, and
our sales and marketing efforts to expand our customer base and addressable
markets. Acquisitions have contributed additional solutions and services that
complement or enhance our offerings, diversify our client base, expand our
geographic coverage, and provide entry into new and attractive adjacent markets
that align with our strategic objectives. We continue to strategically allocate
resources to both organic and inorganic growth initiatives to enhance the
long-term value of our business.

FIS reports its financial performance based on the following segments: Merchant
Solutions ("Merchant"), Banking Solutions ("Banking"), Capital Market Solutions
("Capital Markets") and Corporate and Other. A description of our segments is
included in Note 12 to the consolidated financial statements. Revenue by segment
and the Adjusted EBITDA of our segments are discussed below in Segment Results
of Operations. Amounts in tables below may not sum or calculate due to rounding.

Business Trends and Conditions


Our revenue is primarily derived from a combination of technology and processing
services, transaction fees, professional services and software license fees.
While we are a global company and do business around the world, the majority of
our revenue is generated by clients in the U.S. The majority of our
international revenue is generated by clients in the U.K., Germany, Australia,
Brazil, India, and Canada. In addition, the majority of our revenue has
historically been recurring and has been provided under multi-year Banking and
Capital Markets contracts that contribute relative stability to our revenue
stream. These services, in general, are considered critical to our clients'
operations. Although Merchant has a lesser percentage of multi-year contracts,
substantially all of our Merchant revenue is recurring, derived from transaction
processing fees that fluctuate with the number or value of transactions
processed, among other variable measures associated with consumer activity.
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Professional services revenue is typically non-recurring, though recognition
often occurs over time rather than at a point in time. Sales of software
licenses are typically non-recurring with point-in-time recognition and are less
predictable.

The U.S. and Europe, the two largest geographic areas for our businesses, are
experiencing higher rates of inflation and slower growth than in recent years.
In the first six months of 2022, we experienced higher growth in wages and
benefits than in 2021, which management believes is in part due to inflation and
in part due to competitive job markets for the skilled employees who support our
businesses. Given the nature of our varied businesses, the future effects of
inflation and slower growth are difficult to predict, although they have the
potential to adversely affect our results of operations. In 2022, the
strengthening of the U.S. dollar has had, and is expected to continue to have, a
negative impact on our revenue and earnings, and rising interest rates have also
had, and are expected to continue to have, a negative impact on our earnings. We
have not yet observed any other material impacts of the current macroeconomic
environment on our business.

The distribution of vaccines against COVID-19 curtailed the impact of the
pandemic in 2021 in many of the larger countries in which we do business, but
the timing of a complete recovery remains uncertain as new variants of COVID-19
continue to impact consumer spending. In the fourth quarter of 2021, some
governmental restrictions were re-imposed based upon a resurgence of variants of
COVID-19 in many areas of the U.S. and Europe, which resulted in an adverse
impact on payment volumes and transactions over those anticipated following the
easing of restrictions in the prior two quarters. These changes in spending
affected our business, results of operations and financial condition throughout
2021; however, the impact has lessened substantially in the first six months of
2022. The magnitude and duration of any further impacts is not possible to
predict.

We continue to assist financial institutions in migrating to outsourced
integrated technology solutions to improve their profitability and address
increasing and ongoing regulatory requirements. As a provider of outsourced
solutions, we benefit from multi-year recurring revenue streams, which help
moderate the effects of broader year-to-year economic and market changes that
otherwise might have a larger impact on our results of operations. We believe
our integrated solutions and outsourced services are well-positioned to address
this outsourcing trend across the markets we serve.

Over the last five years, we have moved over 80% of our server compute,
primarily in North America, to our FIS cloud located in our strategic data
centers. This allows us to further enhance security for our clients' data and
increases the flexibility and speed with which we can provide solutions and
services to our clients, at lesser cost. We have also completed our data center
consolidation program in 2021.

Following the successful modernization of our IT infrastructure and
consolidation of our data centers, we are now accelerating the modernization of
our strategic applications and sunsetting of our redundant platforms. Our
multi-year platform modernization initiative is designed to create a
componentized, cloud-native set of capabilities that can be consumed by clients
as end-to-end business applications or as individual components. Although our
platform modernization will result in additional near-term costs, we expect it
will result in improvements in our operational efficiencies over time.

We continue to invest in modernization, innovation and integrated solutions and
services to meet the demands of the markets we serve and compete with global
banks, financial and other technology providers, and emerging technology
innovators. We invest both organically and through investment opportunities in
companies building complementary technologies in the financial services space.
Our internal efforts in research and development activities have related
primarily to the modernization of our proprietary core systems in each of our
segments, design and development of next-generation digital and innovative
solutions and development of processing systems and related software
applications and risk management platforms. We expect to continue our practice
of investing an appropriate level of resources to maintain, enhance and extend
the functionality of our proprietary systems and existing software applications,
to develop new and innovative software applications and systems to address
emerging technology trends in response to the needs of our clients, and to
enhance the capabilities of our outsourcing infrastructure.

In addition, we are investing in the development of new solutions and venture
opportunities through FIS Impact Ventures. This group prioritizes development
of, and investment in, next-generation technology and innovation.

Since the beginning of the pandemic, the Company has taken several actions
related to the health and safety of its employees while maintaining business
continuity, including implementing its comprehensive Pandemic Plan. The Pandemic
Plan includes site-specific plans as well as travel restrictions, medical
response protocols, work-from-home strategies and enhanced cleaning within our
locations and a comprehensive internal and external communication strategy.

Consumer preference continues to shift from traditional branch banking services
to digital banking solutions, and our clients seek to provide a single
integrated banking experience through their branch, mobile, internet and voice
banking channels. The COVID-19 pandemic has resulted in accelerating
digitization of banking and payment services by requiring, in
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many cases, banks and bank customers to transact through digital channels. We
have been providing our large regional banking customers in the U.S. with
Digital One, an integrated digital banking platform, and are now adding
functionality and offering Digital One to our community bank clients to provide
a consistent, omnichannel experience for consumers of banking services across
self-service channels like mobile banking and online banking, as well as
supporting channels for bank staff operating in bank branches and contact
centers. The uniform customer experience extends to support a broad range of
financial services including opening new accounts, servicing of existing
accounts, money movement, and personal financial management, as well as other
consumer, small business and commercial banking capabilities. Digital One is
integrated into several of the core banking platforms offered by FIS and is also
offered to customers of non-FIS core banking systems.

We anticipate consolidation within the banking industry will continue, primarily
in the form of merger and acquisition activity among financial institutions,
which we believe would broadly be detrimental to the profitability of the
financial technology industry. However, consolidation resulting from specific
merger and acquisition transactions may be beneficial to our business. When
consolidations of financial institutions occur, merger partners often operate
systems obtained from competing service providers. The newly formed entity
generally makes a determination to migrate its core and payments systems to a
single platform. When a financial institution processing client is involved in a
consolidation, we may benefit by their expanding the use of our services if such
services are chosen to survive the consolidation and to support the newly
combined entity. Conversely, we may lose revenue if we are providing services to
both entities, or if a client of ours is involved in a consolidation and our
services are not chosen to support the newly combined entity. It is also
possible that larger financial institutions resulting from consolidation may
have greater leverage in negotiating terms or could decide to perform in-house
some or all of the services that we currently provide or could provide. We seek
to mitigate the risks of consolidations by offering other competitive services
to take advantage of specific opportunities at the surviving company.

We continue to see demand in the payments market for innovative solutions that
will deliver faster, more convenient payment options in mobile channels,
internet applications, in-store cards, and the growing area of cryptocurrencies.
The payment processing industry is adopting new technologies, developing new
solutions and services, evolving new business models, and being affected by new
market entrants and by an evolving regulatory environment. As merchants and
financial institutions respond to these changes by seeking services to help them
enhance their own offerings to consumers, including the ability to accept
card-not-present ("CNP") payments in eCommerce and mobile environments as well
as contactless cards and mobile wallets at the point of sale, FIS believes that
payment processors will seek to develop additional capabilities in order to
serve clients' evolving needs. To facilitate this expansion, we believe that
payment processors will need to enhance their technology platforms so they can
deliver these capabilities and differentiate their offerings from other
providers.

We believe that these market changes present both an opportunity and a risk for
us, and we cannot predict which emerging technologies or solutions will be
successful. However, FIS believes that payment processors, like FIS, that have
scalable, integrated business models, provide solutions across the payment
processing value chain and utilize broad distribution capabilities will be best
positioned to enable emerging alternative electronic payment technologies.
Further, FIS believes that its depth of capabilities and breadth of distribution
will enhance its position as emerging payment technologies are adopted by
merchants and other businesses. FIS' ability to partner with non-financial
institution enterprises, such as mobile payment providers and internet, retail
and social media companies, continues to create attractive growth opportunities
as these new entrants seek to become more active participants in the development
of alternative electronic payment technologies and to facilitate the convergence
of retail, online, mobile and social commerce applications.

Globally, attacks on information technology systems continue to grow in
frequency, complexity and sophistication. This is a trend we expect to continue.
Such attacks have become a point of focus for individuals, businesses and
governmental entities. The objectives of these attacks include, among other
things, gaining unauthorized access to systems to facilitate financial fraud,
disrupt operations, cause denial of service events, corrupt data, and steal
non-public information. These circumstances present both a threat and an
opportunity for FIS. As part of our business, we electronically receive,
process, store and transmit a wide range of confidential information, including
sensitive customer information and personal consumer data. We also operate
payment, cash access and prepaid card systems.

FIS remains focused on making strategic investments in information security to
protect our clients and our information systems. These investments include both
capital expenditures and operating expense related to hardware, software,
personnel and consulting services. We also participate in industry and
governmental initiatives to improve information security for our clients.
Through the expertise we have gained with this ongoing focus and involvement, we
have developed fraud, security, risk management and compliance solutions to
target this growth opportunity in the financial services industry.


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Critical Accounting Policies and Estimates


There have been no significant changes to our critical accounting policies as
disclosed in our Annual Report on Form 10-K for the year ended December 31,
2021. For discussion regarding the impact of the COVID-19 pandemic on our
critical and significant accounting estimates subject to risk and uncertainties,
see Notes 1, 4 and 8 to the consolidated financial statements.

Related-Party Transactions

We are a party to certain historical related party agreements as discussed in Note 10 to the consolidated financial statements.

Consolidated Results of Operations - Comparisons of three- and six-month periods ended June 30, 2022 and 2021

                                                     Three months ended June 30,                                                  Six months ended June 30,
                                                                             $                  %                                                      $                %
                                    2022                   2021            Change            Change               2022               2021           Change            Change
                                                  (In millions)                                                               (In millions)
Revenue                        $    3,719               $ 3,475          $   244                   7  %       $   7,210           $ 6,699          $  511                  8  %
Cost of revenue                    (2,234)               (2,135)             (99)                  5             (4,475)           (4,253)           (222)                 5
Gross profit                        1,485                 1,340              145                  11              2,735             2,446             289                 12
Gross profit margin                    40   %                39  %                                                   38   %            37  %
Selling, general and
administrative expenses            (1,082)                 (977)            (105)                 11             (2,117)           (1,983)           (134)                 7
Asset impairments                     (29)                    -              (29)              NM                   (87)                -             (87)              NM
Operating income               $      374               $   363               11                   3          $     531           $   463              68                 15
Operating margin                       10   %                10  %                                                    7   %             7  %



NM = Not meaningful

Revenue

Revenue for the three and six months ended June 30, 2022, increased primarily
due to increased Merchant volumes, the ramp up of recent new client wins in
Banking and strong new sales in Capital Markets driving recurring revenue
growth. Revenue was negatively impacted by unfavorable foreign currency
movements, primarily related to a stronger U.S. Dollar versus the the British
Pound Sterling and Euro. See Segment Results of Operations below for more
detailed explanation.

Cost of Revenue, Gross Profit and Gross Profit Margin


Cost of revenue for the three and six months ended June 30, 2022, increased
primarily due to the revenue variances noted above. Gross profit and gross
profit margin for the three and six months ended June 30, 2022, increased
primarily due to revenue growth in the Merchant segment. These increases for the
three and six months ended June 30, 2022, were partially offset by $59 million
and $137 million, respectively, of incremental amortization expense associated
with shortened estimated useful lives and accelerated amortization methods for
certain software and deferred contract cost assets driven by the Company's
platform modernization initiatives.

Selling, General and Administrative Expenses


Selling, general and administrative expenses for the three and six months ended
June 30, 2022, increased primarily due to higher compensation and incremental
Payrix-related expenses. The 2021 six-month period included accelerated stock
compensation expense recorded associated with the establishment of the Qualified
Retirement Equity Program that modified our existing stock compensation plans as
described in Note 9 to the consolidated financial statements.

Asset Impairments


For the three and six months ended June 30, 2022, the Company recorded $29
million primarily related to impairment of a non-strategic business. For the six
months ended June 30, 2022, the Company also recorded $58 million of impairments
primarily relate to real estate-related assets as a result of office space
reductions.

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Operating Income and Operating Margin


The change in operating income for the three and six months ended June 30, 2022,
resulted from the revenue and cost variances noted above. The operating margin
for the three and six months ended June 30, 2022, benefited from a positive
shift in revenue mix as compared to prior-year period. This benefit was offset
by the asset impairments discussed above resulting in no change to the operating
margin percentage.

Total Other Income (Expense), Net

                                           Three months ended June 30,                                              Six months ended June 30,
                                                                $                  %                                                    $                 %
                            2022              2021            Change            Change               2022             2021            Change            Change
Other income (expense):                 (In millions)                                                            (In millions)
Interest expense, net   $      (47)         $  (48)         $     1                  (2) %       $     (90)         $ (122)         $    32                (26) %
Other income (expense),
net                             30             324             (294)              NM                    92            (170)             262               NM
Total other income
(expense), net          $      (17)         $  276             (293)              NM             $       2          $ (292)             294               NM



NM = Not meaningful

The decrease in interest expense, net is primarily due to lower outstanding debt throughout the three and six months ended June 30, 2022, offset in part by higher interest rates on our variable-rate debt.


Other income (expense), net for the three and six months ended June 30, 2022,
includes net gains on equity security investments without readily determinable
fair values of $6 million and $47 million, respectively (see Note 4 to the
consolidated financial statements). Other income (expense), net for the three
and six months ended June 30, 2021, includes gain on the sale of our equity
ownership interest in Cardinal Holdings of approximately $225 million. Other
income (expense), net for the six months ended June 30, 2021, also includes loss
on extinguishment of debt of approximately $528 million relating to tender
premiums, make-whole amounts, and fees; the write-off of unamortized bond
discounts and debt issuance costs; and losses on related derivative instruments.
The foregoing loss resulted from the debt refinancing activity we undertook in
the first quarter of 2021 (see Note 6 to the consolidated financial statements),
which substantially reduces our ongoing interest expense. This loss was
partially offset by fair value adjustments on certain non-operating assets and
liabilities and foreign currency transaction remeasurement gains.

Provision (Benefit) for Income Taxes

                                        Three months ended June 30,                                             Six months ended June 30,
                                                            $                 %                                                     $                 %
                         2022             2021           Change             Change               2022             2021           Change            Change
                                     (In millions)                                                          (In millions)
Provision (benefit)
for income taxes      $    77           $  302          $ (225)               NM             $    132           $  205          $  (73)              NM
Effective tax rate         22   %           47  %                                                  25   %          120  %



NM = Not meaningful

The decrease in the effective tax rate for the three and six months ended June
30, 2022, is primarily due to the one-time net
remeasurement of certain deferred tax liabilities during the second quarter of
2021 due to the increase in the U.K. corporate statutory tax rate from 19% to
25% effective April 1, 2023, enacted on June 10, 2021.

Segment Results of Operations - Comparisons of three- and six-month periods ended June 30, 2022 and 2021


FIS reports its financial performance based on the following segments: Merchant
Solutions, Banking Solutions, Capital
Market Solutions, and Corporate and Other.

Adjusted EBITDA is defined as net earnings (loss) before net interest expense,
net other income (expense), income tax provision (benefit), equity method
investment earnings (loss), depreciation and amortization, and excludes certain
costs and other transactions that management deems non-operational in nature.
This measure is reported to the chief operating decision
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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 FASB ASC Topic 280,
Segment Reporting. The non-operational items affecting the segment profit
measure generally include purchase price amortization of acquired intangible
assets as well as acquisition, integration and certain other costs and asset
impairments. Adjusted EBITDA also excludes incremental and direct costs
resulting from the COVID-19 pandemic. These costs and adjustments are recorded
in the Corporate and Other segment for the periods discussed below. Adjusted
EBITDA for the respective segments excludes the foregoing costs and adjustments.
Financial information, including details of Adjusted EBITDA, for each of our
segments is set forth in Note 12 to the consolidated financial statements.

Merchant Solutions
                                               Three months ended June 30,                                                  Six months ended June 30,
                                                                       $                  %                                                      $                %
                              2022                   2021            Change            Change               2022               2021           Change            Change
                                            (In millions)                                                               (In millions)
Revenue                  $    1,302               $ 1,177          $   125                  11  %       $   2,414           $ 2,143          $  271                 13  %
Adjusted EBITDA          $      613               $   587               26                   4          $   1,136           $ 1,038              98                  9
Adjusted EBITDA margin         47.1   %              49.9  %                                                 47.0   %          48.4  %
Adjusted EBITDA margin
basis points change            (280)                                                                         (140)


Three months ended June 30:


Revenue increased primarily due to the continued global economic recovery from
the COVID-19 pandemic, with higher card-present volumes contributing 7% to
growth and card-not-present volumes, including those related to our recent
Payrix acquisition, contributing 7% to growth. Revenue was negatively impacted
by unfavorable foreign currency movements, contributing (3%) to growth primarily
related to a stronger U.S. Dollar versus the British Pound Sterling.

Adjusted EBITDA increased primarily due to the revenue impacts noted above. Adjusted EBITDA margin decreased primarily due to accelerated investment in e-commerce and Payrix sales channels to capitalize on developing secular growth trends.


Six months ended June 30:

Revenue increased primarily due to the continued global economic recovery from
the COVID-19 pandemic, with higher card-present volumes contributing 8% to
growth and card-not-present volumes, including those related to our recent
Payrix acquisition, contributing 7% to growth. Revenue was negatively impacted
by unfavorable foreign currency movements, contributing (2%) to growth primarily
related to a stronger U.S. Dollar versus the British Pound Sterling.

Adjusted EBITDA increased primarily due to the revenue impacts noted above.
Adjusted EBITDA margin decreased primarily due to accelerated investment in
e-commerce and Payrix sales channels to capitalize on developing secular growth
trends.

Banking Solutions
                                                Three months ended June 30,                                                  Six months ended June 30,
                                                                        $                  %                                                      $                %
                              2022                    2021            Change            Change               2022               2021           Change            Change
                                             (In millions)                                                               (In millions)
Revenue                  $    1,663                $ 1,578          $    85                   5  %       $   3,308           $ 3,119          $  189                  6  %
Adjusted EBITDA          $      737                $   720               17                   2          $   1,434           $ 1,387          $   47                  3
Adjusted EBITDA margin         44.3   %               45.6  %                                                 43.4   %          44.5  %
Adjusted EBITDA margin
basis points change            (130)                                                                          (110)




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Three months ended June 30:


Revenue increased primarily due to recurring revenue contributing 6% to growth,
primarily driven by the recent ramp up of several large contracts. Revenue was
negatively impacted by unfavorable foreign currency movements, contributing (1%)
to growth primarily related to a stronger U.S. Dollar versus the Euro and the
British Pound Sterling.

Adjusted EBITDA increased primarily due to the revenue impacts noted above. Adjusted EBITDA margin decreased primarily due to wage inflation and a reduction in non-recurring and stimulus-related revenue as compared to the prior-year period, and recent onboarding of several large outsourcing contracts.

Six months ended June 30:

Revenue increased primarily due to recurring revenue contributing 6% to growth, primarily driven by the recent ramp up of several large contracts.


Adjusted EBITDA increased primarily due to the revenue impacts noted above.
Adjusted EBITDA margin decreased primarily due to wage inflation, a reduction in
non-recurring and stimulus-related revenue as compared to the prior-year period,
and recent onboarding of several large outsourcing contracts.

Capital Market Solutions
                                            Three months ended June 30,                                                Six months ended June 30,
                                                                 $                  %                                                       $                 %
                             2022              2021            Change            Change                2022               2021            Change            Change
                                         (In millions)                                                             (In millions)
Revenue                  $     663           $  630          $    33                   5  %       $    1,321           $ 1,255          $    66                  5  %
Adjusted EBITDA          $     317           $  292               25                   8          $      625           $   581               44                  8
Adjusted EBITDA margin        47.8   %         46.4  %                                                  47.3   %          46.3  %
Adjusted EBITDA margin
basis points change            140                                                                       100


Three months ended June 30:


Revenue increased primarily due to recurring revenue contributing 7% to growth
from strong new sales momentum. Revenue was negatively impacted by unfavorable
foreign currency movements, contributing (2%) to growth primarily related to a
stronger U.S. Dollar versus the British Pound Sterling and the Swedish Krona.

Adjusted EBITDA increased primarily due to the revenue impacts noted above. Adjusted EBITDA margin increased primarily due to continued expense management and operating leverage.


Six months ended June 30:

Revenue increased primarily due to recurring revenue contributing 6% to growth
from strong new sales momentum. Revenue was negatively impacted by unfavorable
foreign currency movements, contributing (1%) to growth primarily related to a
stronger U.S. Dollar versus the British Pound Sterling and the Swedish Krona.

Adjusted EBITDA increased primarily due to the revenue impacts noted above.
Adjusted EBITDA margin increased primarily due to continued expense management
and operating leverage.

Corporate and Other
                                            Three months ended June 30,                                              Six months ended June 30,
                                                                 $                  %                                                    $                %
                             2022              2021            Change            Change               2022             2021           Change            Change
                                         (In millions)                                                           (In millions)
Revenue                  $       91          $   90          $     1                   1  %       $     167          $  182          $  (15)                (8) %
Adjusted EBITDA          $      (68)         $  (79)              11                 (14)         $    (179)         $ (179)              -                  -



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The Corporate and Other segment results consist of selling, general and administrative expenses and depreciation and intangible asset amortization not otherwise allocated to the reportable segments. Corporate and Other also includes operations from certain non-strategic businesses.

Three months ended June 30:

Revenue remained flat as compared to the prior year.


Adjusted EBITDA increased primarily due to foreign currency movements impacting
corporate and infrastructure expenses, related to a stronger U.S. Dollar versus
the British Pound Sterling and Indian Rupee.

Six months ended June 30:

Revenue decreased primarily due to client attrition in our non-strategic businesses.


Adjusted EBITDA remained flat as compared to prior year, due to foreign currency
movements related to a stronger U.S. Dollar versus the British Pound Sterling
and Indian Rupee offsetting higher corporate expenses.

Liquidity and Capital Resources

Cash Requirements


Our ongoing cash requirements include operating expenses, income taxes, tax
receivable obligations, mandatory debt service payments, capital expenditures,
stockholder dividends, regulatory requirements, working capital and timing
differences in settlement-related assets and liabilities, and may include
discretionary debt repayments, share repurchases and business acquisitions. Our
principal sources of funds are cash generated by operations and borrowings,
including the capacity under our Revolving Credit Facility, the U.S. commercial
paper program and the Euro-commercial paper program discussed in Note 6 to the
consolidated financial statements.

As of June 30, 2022, the Company had $3,247 million of available liquidity,
including $1,688 million of cash and cash equivalents and $1,559 million of
capacity available under its Revolving Credit Facility. Approximately $1,017
million of cash and cash equivalents is held by our foreign entities, including
amounts related to regulatory requirements. The majority of our domestic cash
and cash equivalents relates to settlement payables and net deposits-in-transit,
which are typically settled within a few business days. Debt outstanding totaled
$18.5 billion, with an effective weighted average interest rate of 1.2%.

We believe that our current level of cash and cash equivalents plus cash flows
from operations will be sufficient to fund our operating cash requirements,
capital expenditures and mandatory debt service payments for the next 12 months
and the foreseeable future.

We currently expect to continue to pay quarterly dividends. In January 2022, the
Board of Directors approved a quarterly dividend increase of 21% to $0.47 per
share beginning with the first quarter of 2022. Consistent with our capital
allocation strategy, we plan to increase our annual dividend approximately 20%
per year over the next several years, as compared to approximately 10% per year
increases in recent years, to gradually increase our dividend payout ratio
beginning with the quarterly dividend payable in March 2022. However, the
amount, declaration and payment of future dividends is at the discretion of the
Board of Directors and depends on, among other things, our investment
opportunities (including potential mergers and acquisitions), results of
operations, financial condition, cash requirements, future prospects, the
duration and impact of the COVID-19 pandemic, and other factors that may be
considered relevant by our Board of Directors, including legal and contractual
restrictions. Additionally, the payment of cash dividends may be limited by
covenants in certain debt agreements. A regular quarterly dividend of $0.47 per
common share is payable on September 30, 2022, to shareholders of record as of
the close of business on September 16, 2022.

In January 2021, our Board of Directors approved a new share repurchase program
under which it authorized the Company to repurchase up to 100 million shares of
our common stock at management's discretion from time to time on the open market
or in privately negotiated transactions and through Rule 10b5-1 plans. The new
share repurchase program has no expiration date and may be suspended for
periods, amended or discontinued at any time. Under the new share repurchase
program, approximately 83 million shares remain available for repurchase as of
June 30, 2022.

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We currently expect to utilize free cash flow through the end of 2023 primarily
to return capital to shareholders. During 2022, we expect to repurchase shares
worth approximately $3 billion, including approximately $300 million of share
repurchased in the six months ended June 30, 2022.

Cash Flows from Operations


Cash flows from operations were $1,920 million and $1,864 million for the
six-month periods ended June 30, 2022 and 2021, respectively. Our net cash
provided by operating activities consists primarily of net earnings, adjusted to
add back depreciation and amortization and other non-cash items. Cash flows from
operations increased $56 million in the 2022 six-month period primarily due to
working capital timing.

Capital Expenditures and Other Investing Activities


Our principal capital expenditures are for software (purchased and internally
developed) and additions to property and equipment. We invested approximately
$752 million and $613 million in capital expenditures (excluding other financing
obligations for certain hardware and software) during the six-month periods
ended June 30, 2022 and 2021, respectively. We expect to continue investing in
property and equipment, purchased software and internally developed software to
support our business.

During the six-month period ended June 30, 2022, we received approximately $645
million of net cash reflected as investing activities due to the settlement of
existing cross-currency interest rate swaps. See Note 7 to the consolidated
financial statements.

Financing

For more information regarding the Company's debt and financing activity see Note 6 to the consolidated financial statements.

Contractual Obligations


There were no material changes in our contractual obligations through the six
months ended June 30, 2022, in comparison to the table included in our Annual
Report on Form 10-K for the year ended December 31, 2021, except as disclosed in
Note 6 to the consolidated financial statements.

Recent Accounting Pronouncements

No new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

© Edgar Online, source Glimpses

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