FIS Reports Third Quarter 2020 Results.
Increased revenue 13% on a reported basis and 1% on an organic basis to
Achieved annual run-rate revenue synergies of approximately
Realized Diluted EPS of
Generated net cash provided by operating activities of
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
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
'COVID-19 has greatly influenced how businesses must interact with their customers in order to survive and thrive,' said
Segment Information
Merchant Solutions:
Third quarter revenue increased 44% to
Banking Solutions:
Third quarter revenue increased 4% to
Capital Market Solutions:
Third quarter revenue increased 2% to
Corporate and Other:
Third quarter revenue decreased 24% to
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
Expense synergies exceeding
Balance Sheet and Cash Flows
As of
Third quarter net cash provided by operating activities was
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
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
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
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
Adjusted EBITDA margin reflects adjusted EBITDA, as defined above, divided by revenue.
Adjusted net earningsexcludes 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
Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties to which forward-looking statements are subject include the following, without limitation:
the outbreak of the novel coronavirus ('COVID-19') and measures to reduce its spread, including the impact of governmental or voluntary actions such as business shutdowns and stay-at-home orders;
the duration, 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 risk that the Worldpay transaction will not provide the expected benefits or that we will not be able to achieve the cost or revenue synergies anticipated;
the risk that the integration of FIS and Worldpay will be more difficult, time-consuming or expensive than anticipated;
the risk that other acquired businesses will not be integrated successfully or that the integration will be more costly or more time-consuming and complex than anticipated;
the risk that cost savings and other synergies anticipated to be realized from other acquisitions may not be fully realized or may take longer to realize than expected;
the risks of doing business internationally;
the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy and cybersecurity laws and regulations;
the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in, or new laws or regulations affecting, the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;
changes in the growth rates of the markets for our solutions;
failures to adapt our solutions to changes in technology or in the marketplace;
internal or external security breaches of our systems, including those relating to unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our software or platforms, and the reactions of customers, card associations, government regulators and others to any such events;
the risk that implementation of software (including software updates) for customers or at customer locations or employee error in monitoring our software and platforms may result in the corruption or loss of data or customer information, interruption of business operations, outages, exposure to liability claims or loss of customers;
the reaction of current and potential customers to communications from us or regulators regarding information security, risk management, internal audit or other matters;
competitive pressures on pricing related to the decreasing number of community banks in the
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 card schemes 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
Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.
For more information
Chief Marketing Officer
Ellyn.Raftery@fisglobal.com
Executive Vice President
FIS Corporate Finance and Investor Relations
Nathan.Rozof@fisglobal.com
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