filings.toolsCover and table of contents
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Cover and table of contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
Form 10-Q
_______________________________________________
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
Or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to |
Commission File No. 001-16427
_______________________________________________
Fidelity National Information Services, Inc.
(Exact name of registrant as specified in its charter)
| Georgia | 37-1490331 | ||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| 347 Riverside Avenue | |||||||||||
| Jacksonville | Florida | 32202 | |||||||||
| (Address of principal executive offices) | (Zip Code) |
(904) 438-6000
(Registrant’s telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Trading | Name of each exchange | |||||||||||||
| Title of each class | Symbol(s) | on which registered | ||||||||||||
| Common Stock, par value $0.01 per share | FIS | New York Stock Exchange | ||||||||||||
| 1.100% Senior Notes due 2024 | FIS24A | New York Stock Exchange | ||||||||||||
| 0.625% Senior Notes due 2025 | FIS25B | New York Stock Exchange | ||||||||||||
| 1.500% Senior Notes due 2027 | FIS27 | New York Stock Exchange | ||||||||||||
| 1.000% Senior Notes due 2028 | FIS28 | New York Stock Exchange | ||||||||||||
| 2.250% Senior Notes due 2029 | FIS29 | New York Stock Exchange | ||||||||||||
| 2.000% Senior Notes due 2030 | FIS30 | New York Stock Exchange | ||||||||||||
| 3.360% Senior Notes due 2031 | FIS31 | New York Stock Exchange | ||||||||||||
| 2.950% Senior Notes due 2039 | FIS39 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ☐ NO ☒
As of July 31, 2023, 592,465,475 shares of the Registrant’s Common Stock were outstanding.
FORM 10-Q
QUARTERLY REPORT
Quarter Ended June 30, 2023
INDEX
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
| June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,982 | $ | 2,188 | |||||||
| Settlement assets | 4,100 | 5,855 | |||||||||
| Trade receivables, net of allowance for credit losses of $91 and $75, respectively | 3,402 | 3,699 | |||||||||
| Other receivables | 493 | 493 | |||||||||
| Prepaid expenses and other current assets | 673 | 583 | |||||||||
| Total current assets | 10,650 | 12,818 | |||||||||
| Property and equipment, net | 829 | 862 | |||||||||
| Goodwill | 27,681 | 34,276 | |||||||||
| Intangible assets, net | 8,084 | 8,956 | |||||||||
| Software, net | 3,268 | 3,238 | |||||||||
| Other noncurrent assets | 1,938 | 2,048 | |||||||||
| Deferred contract costs, net | 1,124 | 1,080 | |||||||||
| Total assets | $ | 53,574 | $ | 63,278 | |||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable, accrued and other liabilities | $ | 2,646 | $ | 2,754 | |||||||
| Settlement payables | 5,050 | 6,752 | |||||||||
| Deferred revenue | 818 | 788 | |||||||||
| Short-term borrowings | 5,144 | 3,797 | |||||||||
| Current portion of long-term debt | 785 | 2,133 | |||||||||
| Total current liabilities | 14,443 | 16,224 | |||||||||
| Long-term debt, excluding current portion | 13,589 | 14,207 | |||||||||
| Deferred income taxes | 3,376 | 3,550 | |||||||||
| Other noncurrent liabilities | 1,893 | 1,891 | |||||||||
| Total liabilities | 33,301 | 35,872 | |||||||||
| Redeemable noncontrolling interest | — | 180 | |||||||||
| Equity: | |||||||||||
| FIS stockholders’ equity: | |||||||||||
| Preferred stock $0.01 par value; 200 shares authorized, none issued and outstanding as of June 30, 2023, and December 31, 2022 | — | — | |||||||||
| Common stock $0.01 par value, 750 shares authorized, 631 and 630 shares issued as of June 30, 2023, and December 31, 2022, respectively | 6 | 6 | |||||||||
| Additional paid in capital | 46,846 | 46,735 | |||||||||
| (Accumulated deficit) retained earnings | (22,048) | (14,971) | |||||||||
| Accumulated other comprehensive earnings (loss) | (331) | (360) | |||||||||
| Treasury stock, $0.01 par value, 39 and 39 common shares as of June 30, 2023, and December 31, 2022, respectively, at cost | (4,207) | (4,192) | |||||||||
| Total FIS stockholders’ equity | 20,266 | 27,218 | |||||||||
| Noncontrolling interest | 7 | 8 | |||||||||
| Total equity | 20,273 | 27,226 | |||||||||
| Total liabilities, redeemable noncontrolling interest and equity | $ | 53,574 | $ | 63,278 |
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)
(In millions, except per share amounts)
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | 3,746 | $ | 3,719 | $ | 7,256 | $ | 7,210 | |||||||||||||||
| Cost of revenue | 2,188 | 2,234 | 4,356 | 4,475 | |||||||||||||||||||
| Gross profit | 1,558 | 1,485 | 2,900 | 2,735 | |||||||||||||||||||
| Selling, general, and administrative expenses | 1,033 | 1,082 | 2,037 | 2,117 | |||||||||||||||||||
| Asset impairments | 6,841 | 29 | 6,841 | 87 | |||||||||||||||||||
| Operating income (loss) | (6,316) | 374 | (5,978) | 531 | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense, net | (153) | (47) | (291) | (90) | |||||||||||||||||||
| Other income (expense), net | (53) | 30 | (63) | 92 | |||||||||||||||||||
| Total other income (expense), net | (206) | (17) | (354) | 2 | |||||||||||||||||||
| Earnings (loss) before income taxes | (6,522) | 357 | (6,332) | 533 | |||||||||||||||||||
| Provision (benefit) for income taxes | 72 | 77 | 121 | 132 | |||||||||||||||||||
| Net earnings (loss) | (6,594) | 280 | (6,453) | 401 | |||||||||||||||||||
| Net (earnings) loss attributable to noncontrolling interest | (2) | (3) | (3) | (4) | |||||||||||||||||||
| Net earnings (loss) attributable to FIS common stockholders | $ | (6,596) | $ | 277 | $ | (6,456) | $ | 397 | |||||||||||||||
| Net earnings (loss) per share-basic attributable to FIS common stockholders | $ | (11.14) | $ | 0.46 | $ | (10.91) | $ | 0.65 | |||||||||||||||
| Weighted average shares outstanding-basic | 592 | 608 | 592 | 609 | |||||||||||||||||||
| Net earnings (loss) per share-diluted attributable to FIS common stockholders | $ | (11.14) | $ | 0.45 | $ | (10.91) | $ | 0.65 | |||||||||||||||
| Weighted average shares outstanding-diluted | 592 | 611 | 592 | 612 |
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Earnings (Loss)
(In millions)
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net earnings (loss) | $ | (6,594) | $ | 280 | $ | (6,453) | $ | 401 | |||||||||||||||
| Other comprehensive earnings (loss), before tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | $ | 182 | $ | (1,406) | 439 | (1,901) | |||||||||||||||||
| Change in fair value of net investment hedges | (125) | 1,177 | (421) | 1,528 | |||||||||||||||||||
| Excluded components of fair value hedges | (23) | — | (23) | — | |||||||||||||||||||
| Other adjustments | 1 | 1 | 1 | 5 | |||||||||||||||||||
| Other comprehensive earnings (loss), before tax | 35 | (228) | (4) | (368) | |||||||||||||||||||
| Provision for income tax (expense) benefit related to items of other comprehensive earnings (loss) | (2) | (78) | 33 | (84) | |||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | 33 | (306) | 29 | (452) | |||||||||||||||||||
| Comprehensive earnings (loss) | (6,561) | (26) | (6,424) | (51) | |||||||||||||||||||
| Net (earnings) loss attributable to noncontrolling interest | (2) | (3) | (3) | (4) | |||||||||||||||||||
| Comprehensive earnings (loss) attributable to FIS common stockholders | $ | (6,563) | $ | (29) | $ | (6,427) | $ | (55) |
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
Three and six months ended June 30, 2023
(In millions, except per share amounts)
(Unaudited)
| Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIS Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of shares | Additional | other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common | Treasury | Common | paid in | Retained | comprehensive | Treasury | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||
| shares | shares | stock | capital | earnings | earnings (loss) | stock | interest (1) | equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2023 | 631 | (39) | $ | 6 | $ | 46,802 | $ | (15,141) | $ | (364) | $ | (4,206) | $ | 7 | $ | 27,104 | |||||||||||||||||||||||||||||||||||||
| Treasury shares held for taxes due upon exercise of stock awards | — | — | — | — | — | — | (1) | — | (1) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 44 | — | — | — | — | 44 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.52 per share per quarter) and other distributions | — | — | — | — | (311) | — | — | (2) | (313) | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | (6,596) | — | — | 2 | (6,594) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | — | — | 33 | — | — | 33 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2023 | 631 | (39) | $ | 6 | $ | 46,846 | $ | (22,048) | $ | (331) | $ | (4,207) | $ | 7 | $ | 20,273 |
| Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIS Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of shares | Additional | other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common | Treasury | Common | paid in | Retained | comprehensive | Treasury | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||
| shares | shares | stock | capital | earnings | earnings (loss) | stock | interest (1) | equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2022 | 630 | (39) | $ | 6 | $ | 46,735 | $ | (14,971) | $ | (360) | $ | (4,192) | $ | 8 | $ | 27,226 | |||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 1 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | 40 | — | — | — | — | 40 | ||||||||||||||||||||||||||||||||||||||||||||
| Treasury shares held for taxes due upon exercise of stock awards | — | — | — | — | — | — | (15) | — | (15) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 64 | — | — | — | — | 64 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.52 per share per quarter) and other distributions | — | — | — | — | (621) | — | — | (4) | (625) | ||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | 7 | — | — | — | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | (6,456) | — | — | 3 | (6,453) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | — | — | 29 | — | — | 29 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2023 | 631 | (39) | $ | 6 | $ | 46,846 | $ | (22,048) | $ | (331) | $ | (4,207) | $ | 7 | $ | 20,273 |
**(1)**Excludes redeemable noncontrolling interest that is not considered equity.
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
Three and six months ended June 30, 2022
(In millions, except per share amounts)
(Unaudited)
| Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIS Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of shares | Additional | other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common | Treasury | Common | paid in | Retained | comprehensive | Treasury | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||
| shares | shares | stock | capital | earnings | earnings (loss) | stock | interest (1) | equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2022 | 628 | (17) | $ | 6 | $ | 46,536 | $ | 2,721 | $ | 106 | $ | (2,343) | $ | 10 | $ | 47,036 | |||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | 10 | — | — | — | — | 10 | ||||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | — | (3) | — | — | — | — | (300) | — | (300) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 88 | — | — | — | — | 88 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.47 per share per quarter) and other distributions | — | — | — | — | (289) | — | — | (3) | (292) | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | 277 | — | — | 2 | 279 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | — | — | (306) | — | — | (306) | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2022 | 628 | (20) | $ | 6 | $ | 46,634 | $ | 2,709 | $ | (200) | $ | (2,643) | $ | 9 | $ | 46,515 |
| Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIS Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of shares | Additional | other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common | Treasury | Common | paid in | Retained | comprehensive | Treasury | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||
| shares | shares | stock | capital | earnings | earnings (loss) | stock | interest (1) | equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2021 | 625 | (16) | $ | 6 | $ | 46,466 | $ | 2,889 | $ | 252 | $ | (2,266) | $ | 11 | $ | 47,358 | |||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 3 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | 18 | — | — | — | — | 18 | ||||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | — | (3) | — | — | — | — | (300) | — | (300) | ||||||||||||||||||||||||||||||||||||||||||||
| Treasury shares held for taxes due upon exercise of stock awards | — | (1) | — | — | — | — | (77) | — | (77) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 145 | — | — | — | — | 145 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.47 per share per quarter) and other distributions | — | — | — | 5 | (577) | — | — | (5) | (577) | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | 397 | — | — | 3 | 400 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | — | — | (452) | — | — | (452) | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2022 | 628 | (20) | $ | 6 | $ | 46,634 | $ | 2,709 | $ | (200) | $ | (2,643) | $ | 9 | $ | 46,515 |
**(1)**Excludes redeemable noncontrolling interest that is not considered equity.
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
| Six months ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings (loss) | $ | (6,453) | $ | 401 | |||||||
| Adjustment to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 1,782 | 1,988 | |||||||||
| Amortization of debt issuance costs | 15 | 15 | |||||||||
| Asset impairments | 6,841 | 87 | |||||||||
| Loss (gain) on sale of businesses, investments and other | (2) | (5) | |||||||||
| Stock-based compensation | 64 | 145 | |||||||||
| Deferred income taxes | (177) | (386) | |||||||||
| Net changes in assets and liabilities, net of effects from acquisitions and foreign currency: | |||||||||||
| Trade and other receivables | 311 | 114 | |||||||||
| Settlement activity | (242) | (106) | |||||||||
| Prepaid expenses and other assets | (139) | (250) | |||||||||
| Deferred contract costs | (217) | (190) | |||||||||
| Deferred revenue | 5 | (30) | |||||||||
| Accounts payable, accrued liabilities and other liabilities | (69) | 137 | |||||||||
| Net cash provided by operating activities | 1,719 | 1,920 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions to property and equipment | (79) | (173) | |||||||||
| Additions to software | (467) | (579) | |||||||||
| Settlement of net investment hedge cross-currency interest rate swaps | (17) | 645 | |||||||||
| Other investing activities, net | (28) | (22) | |||||||||
| Net cash provided by (used in) investing activities | (591) | (129) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings | 43,750 | 30,789 | |||||||||
| Repayment of borrowings and other financing obligations | (44,541) | (31,358) | |||||||||
| Debt issuance costs | (2) | — | |||||||||
| Net proceeds from stock issued under stock-based compensation plans | 40 | 15 | |||||||||
| Treasury stock activity | (15) | (378) | |||||||||
| Dividends paid | (618) | (574) | |||||||||
| Payments on tax receivable agreement | (128) | (92) | |||||||||
| Purchase of noncontrolling interest | (173) | — | |||||||||
| Other financing activities, net | (10) | (4) | |||||||||
| Net cash provided by (used in) financing activities | (1,697) | (1,602) | |||||||||
| Effect of foreign currency exchange rate changes on cash | 117 | (392) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (452) | (203) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 4,813 | 4,283 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 4,361 | $ | 4,080 | |||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | 396 | $ | 241 | |||||||
| Cash paid for income taxes | $ | 269 | $ | 323 |
See accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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.
(1) Basis of Presentation
The unaudited financial information included in this report includes the accounts of FIS and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
The preparation of these consolidated financial statements in conformity with United States ("U.S.") generally accepted accounting principles ("GAAP") and the related rules and regulations of the U.S. Securities and Exchange Commission ("SEC" or "Commission") requires our management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The inputs into management's critical and significant accounting estimates consider the economic impact of inflation and economic growth rates. These estimates may change as new events occur and additional information is obtained. Future actual results could differ materially from these estimates. To the extent that there are differences between these estimates, judgments and assumptions and actual results, our consolidated financial statements will be affected.
Certain reclassifications have been made in the 2022 consolidated financial statements to conform to the classifications used in 2023. On the consolidated statements of comprehensive earnings, we reclassified the Change in fair value of net investment hedges from Foreign currency translation adjustments into its own classification. On the consolidated statements of cash flows, we reclassified Settlement of net investment hedges cross-currency interest rate swaps from Other investing activities to its own classification and Payments on tax receivable agreement from Other financing activities into its own classification.
FIS reports its financial performance based on the following segments: Banking Solutions, Merchant Solutions, Capital Market Solutions, and Corporate and Other. The Company regularly assesses its portfolio of assets and reclassified certain businesses from Capital Market Solutions to Banking Solutions and to the Corporate and Other segment in the quarter ended March 31, 2023, and recast all prior-period segment information presented. See Note 11 for more information regarding our segments and the related reclassification.
Amounts in tables in the financial statements and accompanying footnotes may not sum or calculate due to rounding.
**(2)**Divestitures
Planned Separation of Worldpay Merchant Solutions Business
On July 5, 2023, FIS signed a definitive agreement to sell a 55% equity interest in its Worldpay Merchant Solutions business to private equity funds managed by GTCR, LLC ("GTCR") in a transaction valuing the business at up to $18.5 billion, including potential consideration of $1.0 billion contingent on the returns realized by GTCR exceeding certain thresholds. We expect our net proceeds at closing from the sale to be approximately $11.7 billion, consisting of (i) $8.4 billion of proceeds from a pre-closing distribution from the Worldpay business (funded by new debt) and (ii) $5.0 billion from the sale of 55% of our ownership interest, net of estimated selling price adjustments, debt restructuring fees, taxes and transaction costs. FIS will retain a non-controlling 45% ownership interest in a new standalone joint venture.
Subsequent to June 30, 2023, the Merchant disposal group has met the accounting criteria to be classified as held for sale and will be presented as such beginning with the third quarter of 2023. The planned disposition of the Worldpay Merchant Solutions business represents a strategic shift that will have a major impact on the Company’s operations and financial results. Accordingly, the Company plans to present the operating results and cash flows of the Worldpay Merchant Solutions business as discontinued operations for all periods presented in the financial statements beginning in the third quarter of 2023.
The transaction is expected to close by the first quarter of 2024, subject to regulatory approvals and other customary closing conditions. Following the closing of this transaction, FIS' ownership interest in Worldpay is expected to be reported as income from minority interest.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(3) Acquisitions
Virtus Acquisition
On January 2, 2020, FIS acquired a majority interest in Virtus Partners ("Virtus"), previously a privately held company that provides high-value managed services and technology to the credit and loan market. The acquisition was accounted for as a business combination. FIS acquired a 70% voting and financial interest in Virtus with 30% interest retained by the founders of Virtus ("Founders"). The agreement between FIS and the Founders provided FIS with a call option to purchase, and the Founders with a put option requiring FIS to purchase, all of the Founders' retained interest in Virtus at a redemption value determined pursuant to performance goals stated in the agreement, exercisable at any time after two years and three years, respectively, following the acquisition date. In January 2023, the Founders exercised their put option, and as a result, FIS paid the $173 million redemption value, recorded as a financing activity in the consolidated statement of cash flows, and now owns 100% of Virtus.
(4) Revenue
Disaggregation of Revenue
In the following tables, revenue is disaggregated by primary geographical market and type of revenue. The tables also include a reconciliation of the disaggregated revenue with the Company's reportable segments. Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 11.
For the three months ended June 30, 2023 (in millions):
| Capital | ||||||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | |||||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | ||||||||||||||||||||||||||||
| Primary Geographical Markets: | ||||||||||||||||||||||||||||||||
| North America | $ | 1,456 | $ | 954 | $ | 424 | $ | 27 | $ | 2,861 | ||||||||||||||||||||||
| All others | 246 | 358 | 248 | 33 | 885 | |||||||||||||||||||||||||||
| Total | $ | 1,702 | $ | 1,312 | $ | 672 | $ | 60 | $ | 3,746 | ||||||||||||||||||||||
| Type of Revenue: | ||||||||||||||||||||||||||||||||
| Recurring revenue: | ||||||||||||||||||||||||||||||||
| Transaction processing and services | $ | 1,279 | $ | 1,284 | $ | 346 | $ | 40 | $ | 2,949 | ||||||||||||||||||||||
| Software maintenance | 91 | 1 | 130 | — | 222 | |||||||||||||||||||||||||||
| Other recurring | 62 | 20 | 20 | 10 | 112 | |||||||||||||||||||||||||||
| Total recurring | 1,432 | 1,305 | 496 | 50 | 3,283 | |||||||||||||||||||||||||||
| Software license | 19 | — | 79 | — | 98 | |||||||||||||||||||||||||||
| Professional services | 156 | — | 97 | 3 | 256 | |||||||||||||||||||||||||||
| Other non-recurring fees | 95 | 7 | — | 7 | 109 | |||||||||||||||||||||||||||
| Total | $ | 1,702 | $ | 1,312 | $ | 672 | $ | 60 | $ | 3,746 |
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the three months ended June 30, 2022 (in millions):
| Capital | ||||||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | |||||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | ||||||||||||||||||||||||||||
| Primary Geographical Markets: | ||||||||||||||||||||||||||||||||
| North America | $ | 1,439 | $ | 955 | $ | 375 | $ | 65 | $ | 2,834 | ||||||||||||||||||||||
| All others | 239 | 347 | 257 | 42 | 885 | |||||||||||||||||||||||||||
| Total | $ | 1,678 | $ | 1,302 | $ | 632 | $ | 107 | $ | 3,719 | ||||||||||||||||||||||
| Type of Revenue: | ||||||||||||||||||||||||||||||||
| Recurring revenue: | ||||||||||||||||||||||||||||||||
| Transaction processing and services | $ | 1,254 | $ | 1,276 | $ | 314 | $ | 83 | $ | 2,927 | ||||||||||||||||||||||
| Software maintenance | 91 | 1 | 123 | — | 215 | |||||||||||||||||||||||||||
| Other recurring | 51 | 23 | 15 | 10 | 99 | |||||||||||||||||||||||||||
| Total recurring | 1,396 | 1,300 | 452 | 93 | 3,241 | |||||||||||||||||||||||||||
| Software license | 23 | 1 | 72 | — | 96 | |||||||||||||||||||||||||||
| Professional services | 154 | — | 106 | 2 | 262 | |||||||||||||||||||||||||||
| Other non-recurring fees | 105 | 1 | 2 | 12 | 120 | |||||||||||||||||||||||||||
| Total | $ | 1,678 | $ | 1,302 | $ | 632 | $ | 107 | $ | 3,719 |
For the six months ended June 30, 2023 (in millions):
| Capital | ||||||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | |||||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | ||||||||||||||||||||||||||||
| Primary Geographical Markets: | ||||||||||||||||||||||||||||||||
| North America | $ | 2,895 | $ | 1,730 | $ | 849 | $ | 54 | $ | 5,528 | ||||||||||||||||||||||
| All others | 492 | 686 | 486 | 64 | 1,728 | |||||||||||||||||||||||||||
| Total | $ | 3,387 | $ | 2,416 | $ | 1,335 | $ | 118 | $ | 7,256 | ||||||||||||||||||||||
| Type of Revenue: | ||||||||||||||||||||||||||||||||
| Recurring revenue: | ||||||||||||||||||||||||||||||||
| Transaction processing and services | $ | 2,578 | $ | 2,365 | $ | 686 | $ | 80 | $ | 5,709 | ||||||||||||||||||||||
| Software maintenance | 181 | 1 | 260 | 1 | 443 | |||||||||||||||||||||||||||
| Other recurring | 116 | 41 | 39 | 20 | 216 | |||||||||||||||||||||||||||
| Total recurring | 2,875 | 2,407 | 985 | 101 | 6,368 | |||||||||||||||||||||||||||
| Software license | 30 | 2 | 152 | — | 184 | |||||||||||||||||||||||||||
| Professional services | 310 | — | 197 | 5 | 512 | |||||||||||||||||||||||||||
| Other non-recurring fees | 172 | 7 | 1 | 12 | 192 | |||||||||||||||||||||||||||
| Total | $ | 3,387 | $ | 2,416 | $ | 1,335 | $ | 118 | $ | 7,256 |
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the six months ended June 30, 2022 (in millions):
| Capital | ||||||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | |||||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | ||||||||||||||||||||||||||||
| Primary Geographical Markets: | ||||||||||||||||||||||||||||||||
| North America | $ | 2,858 | $ | 1,740 | $ | 749 | $ | 115 | $ | 5,462 | ||||||||||||||||||||||
| All others | 479 | 674 | 510 | 85 | 1,748 | |||||||||||||||||||||||||||
| Total | $ | 3,337 | $ | 2,414 | $ | 1,259 | $ | 200 | $ | 7,210 | ||||||||||||||||||||||
| Type of Revenue: | ||||||||||||||||||||||||||||||||
| Recurring revenue: | ||||||||||||||||||||||||||||||||
| Transaction processing and services | $ | 2,508 | $ | 2,364 | $ | 621 | $ | 158 | $ | 5,651 | ||||||||||||||||||||||
| Software maintenance | 183 | 1 | 249 | 1 | 434 | |||||||||||||||||||||||||||
| Other recurring | 103 | 45 | 29 | 19 | 196 | |||||||||||||||||||||||||||
| Total recurring | 2,794 | 2,410 | 899 | 178 | 6,281 | |||||||||||||||||||||||||||
| Software license | 54 | 2 | 145 | — | 201 | |||||||||||||||||||||||||||
| Professional services | 298 | — | 213 | 4 | 515 | |||||||||||||||||||||||||||
| Other non-recurring fees | 191 | 2 | 2 | 18 | 213 | |||||||||||||||||||||||||||
| Total | $ | 3,337 | $ | 2,414 | $ | 1,259 | $ | 200 | $ | 7,210 |
Contract Balances
The Company recognized revenue of $184 million and $189 million during the three months and $502 million and $499 million during the six months ended June 30, 2023 and 2022, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.
Transaction Price Allocated to the Remaining Performance Obligations
As of June 30, 2023, approximately $23.0 billion of revenue is estimated to be recognized in the future primarily from the Banking Solutions and Capital Market Solutions segments' remaining unfulfilled performance obligations, which are primarily comprised of recurring account- and volume-based processing services. This excludes the amount of anticipated recurring renewals not yet contractually obligated. The Company expects to recognize approximately 30% of the Banking Solutions and Capital Market Solutions segments' remaining performance obligations over the next 12 months, approximately another 22% over the next 13 to 24 months, and the balance thereafter.
As permitted by ASC 606, Revenue from Contracts with Customers, the Company has elected to exclude from this disclosure an estimate for the Merchant Solutions segment, as its contracts either have an original duration of one year or less or contain variable consideration that is allocated entirely to the day of performance under its stand-ready performance obligations comprised of a series of distinct daily services. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
(5) Condensed Consolidated Financial Statement Details
Cash and Cash Equivalents
The Company records restricted cash in captions other than Cash and cash equivalents in the consolidated balance sheets. The reconciliation between Cash and cash equivalents in the consolidated balance sheets and Cash, cash equivalents and
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
restricted cash per the consolidated statements of cash flows is as follows (in millions):
| June 30, 2023 | December 31, 2022 | ||||||||||
| Cash and cash equivalents on the consolidated balance sheets | $ | 1,982 | $ | 2,188 | |||||||
| Merchant float (in Settlement assets) | 2,379 | 2,625 | |||||||||
| Total Cash and cash equivalents and restricted cash per the consolidated statements of cash flows | $ | 4,361 | $ | 4,813 |
Settlement Assets
The principal components of the Company's settlement assets on the consolidated balance sheets are as follows (in millions):
| June 30, 2023 | December 31, 2022 | ||||||||||
| Settlement assets | |||||||||||
| Settlement deposits | $ | 443 | $ | 492 | |||||||
| Merchant float | 2,379 | 2,625 | |||||||||
| Settlement receivables | 1,278 | 2,738 | |||||||||
| Total Settlement assets | $ | 4,100 | $ | 5,855 |
Intangible Assets, Software and Property and Equipment
The following table provides details of Intangible assets, Software and Property and equipment as of June 30, 2023, and December 31, 2022 (in millions):
| June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| Cost | Accumulated depreciation and amortization | Net | Cost | Accumulated depreciation and amortization | Net | ||||||||||||||||||||||||||||||
| Intangible assets | $ | 18,464 | $ | 10,380 | $ | 8,084 | $ | 18,260 | $ | 9,304 | $ | 8,956 | |||||||||||||||||||||||
| Software | $ | 6,827 | $ | 3,559 | $ | 3,268 | $ | 6,607 | $ | 3,369 | $ | 3,238 | |||||||||||||||||||||||
| Property and equipment | $ | 2,436 | $ | 1,607 | $ | 829 | $ | 2,381 | $ | 1,519 | $ | 862 |
As of June 30, 2023, Intangible assets, net of amortization, includes $7,894 million of customer relationships and $190 million of trademarks and other intangible assets. Amortization expense with respect to Intangible assets was $499 million and $545 million for the three months and $996 million and $1,102 million for the six months ended June 30, 2023 and 2022, respectively.
Depreciation expense for property and equipment was $56 million and $64 million for the three months and $114 million and $137 million for the six months ended June 30, 2023 and 2022, respectively.
Amortization expense with respect to software was $246 million and $274 million for the three months and $497 million and $561 million for the six months ended June 30, 2023 and 2022, respectively. The Company recorded $11 million and $47 million, during the three months and $27 million and $109 million during the six months ended June 30, 2023 and 2022, respectively, of incremental software amortization expense resulting from the Company's platform modernization. Platform modernization includes sunsetting certain technology platforms, which resulted in shortened estimated useful lives and accelerated amortization methods primarily impacting the associated assets over approximately three years, beginning in the third quarter of 2021.
For the three and six months ended June 30, 2022, the Company recorded $29 million of impairment primarily related to a non-strategic business. For the six months ended June 30, 2022, the Company also recorded $58 million of impairments primarily related to real estate-related assets as a result of office space reductions.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Goodwill
Changes in goodwill during the six months ended June 30, 2023, are summarized below (in millions). Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 11.
| Capital | Corporate | ||||||||||||||||||||||||||||
| Banking | Merchant | Market | And | ||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | Other | Total | |||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 12,536 | $ | 17,460 | $ | 4,260 | $ | 20 | $ | 34,276 | |||||||||||||||||||
| Asset impairments | — | (6,839) | — | — | (6,839) | ||||||||||||||||||||||||
| Foreign currency adjustments | 9 | 206 | 29 | — | 244 | ||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | 12,545 | $ | 10,827 | $ | 4,289 | $ | 20 | $ | 27,681 |
We assess goodwill for impairment on an annual basis during the fourth quarter or more frequently if circumstances indicate potential impairment. We evaluated if events and circumstances as of June 30, 2023, indicated potential impairment of our reporting units.
For our Banking and Capital Markets reporting units, we performed a qualitative assessment by examining factors most likely to affect our reporting units' fair values, including the impact of recent U.S. bank failures. The factors examined involve use of management judgment and included, among others, (1) forecast revenue, growth rates, operating margins, and capital expenditures used to calculate estimated future cash flows, (2) future economic and market conditions and (3) FIS' market capitalization. Based on our interim impairment assessment as of June 30, 2023, we concluded that it remained more likely than not that the fair value continues to exceed the carrying amount for each of these reporting units; therefore, goodwill was not impaired. Given the substantial excess of fair value over carrying amounts, we believe the likelihood of obtaining materially different results based on a change of assumptions to be low.
For our Merchant reporting unit, events and circumstances during the three months ended June 30, 2023, indicated potential goodwill impairment. As recently as December 31, 2022, the Merchant reporting unit’s carrying value was equal to its estimated fair value, creating a possibility of future goodwill impairment as a result of any further decrease in its estimated fair value. Also, as of June 30, 2023, the Company was in negotiations to sell, and expected that it was more likely than not that it would sell, a majority stake in the reporting unit. Accordingly, we performed a quantitative goodwill impairment assessment as of June 30, 2023. To estimate the fair value of the reporting unit, we used a market approach based on the price at which the Company subsequently agreed to sell a majority interest in the Worldpay Merchant Solutions business as further discussed in Note 2 to the consolidated financial statements. Based on this price, inclusive of estimated selling price adjustments and fair value of contingent consideration, the estimated fair value of the reporting unit was less than its carrying value, and we recorded a $6.8 billion impairment charge in the second quarter of 2023. As a result, the Merchant reporting unit's carrying value as of June 30, 2023, is equal to its fair value. The Merchant disposal unit will be evaluated under an asset-held-for-sale accounting model beginning in the third quarter of 2023. Under an asset-held-for-sale model, the disposal unit will be valued at fair value less cost to sell, and the value could be affected by changes in estimated selling price adjustments or fair value of contingent consideration. Additionally, the carrying value will be adjusted to include cumulative translations adjustments. These factors could result in further impairment.
The total carrying amount of goodwill as of June 30, 2023, and December 31, 2022, is net of accumulated impairment charges of $24.5 billion. $24.4 billion of this amount relates to Merchant Solutions stemming from a $6.8 billion impairment recorded in the second quarter of 2023 and $17.6 billion recorded during the fourth quarter of 2022. Additionally, $94 million relates to non-strategic businesses within Corporate and Other.
Visa Europe and Contingent Value Rights
As part of the Worldpay acquisition, the Company acquired certain assets and liabilities related to the June 2016 Worldpay Group plc (Legacy Worldpay) disposal of its ownership interest in Visa Europe to Visa Inc. As part of the disposal, Legacy Worldpay received proceeds from Visa Inc. in the form of cash ("cash consideration") and convertible preferred stock ("preferred stock"), the value of which may be reduced by losses incurred relating to ongoing interchange-related litigation involving Visa Europe. The preferred stock becomes convertible into Visa Inc. Class A common stock ("common stock") in stages as determined by Visa Inc. in accordance with the relevant transaction documents pertaining to the aforementioned disposal of the Visa Europe ownership interest. The preferred stock becomes fully convertible no later than 2028 (subject to a
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
holdback to cover any pending claims). Also in connection with the disposal and pursuant to the terms of an amendment executed on September 17, 2020, the Company will pay the former Legacy Worldpay owners 90% of the net-of-tax proceeds from the disposal, known as contingent value rights, which is recorded as a liability ("CVR liability") on the consolidated balance sheets.
The Company has elected the fair value option under ASC 825, Financial Instruments ("ASC 825"), for measuring its preferred stock asset and CVR liability. The fair value of the preferred stock was $80 million and $55 million at June 30, 2023, and December 31, 2022, respectively, recorded in Other noncurrent assets on the consolidated balance sheets. The fair value of the CVR liability was $361 million and $342 million at June 30, 2023, and December 31, 2022, respectively, recorded in Other noncurrent liabilities on the consolidated balance sheets. Pursuant to ASC 825, the Company remeasures the fair value of the preferred stock and CVR liability each reporting period. The net change in fair value was $9 million and $25 million for the three months and $6 million and $49 million for the six months ended June 30, 2023 and 2022, respectively, recorded in Other income (expense), net on the consolidated statements of earnings (loss).
Equity Security Investments
The Company holds various equity securities without readily determinable fair values that primarily represent strategic investments made by the Company as well as investments obtained through acquisitions. Such investments totaled $365 million and $393 million at June 30, 2023, and December 31, 2022, respectively, and are included within Other noncurrent assets on the consolidated balance sheets. The Company accounts for these investments at cost, less impairment, and adjusts the carrying values for observable price changes from orderly transactions for identical or similar investments of the same issuer. These adjustments are generally considered Level 2-type fair value measurements. The Company records realized and unrealized gains and losses on these investments as well as impairment losses as Other income (expense), net on the consolidated statements of earnings (loss) and recorded net gains (losses) of $(32) million and $6 million for the three months and $(34) million and $47 million for the six months ended June 30, 2023 and 2022, respectively, related to these investments.
(6) Deferred Contract Costs
Origination and fulfillment costs from contracts with customers capitalized as of June 30, 2023, and December 31, 2022, consisted of the following (in millions):
| June 30, 2023 | December 31, 2022 | ||||||||||
| Contract costs on implementations in progress | $ | 209 | $ | 250 | |||||||
| Contract origination costs on completed implementations, net | 645 | 579 | |||||||||
| Contract fulfillment costs on completed implementations, net | 270 | 251 | |||||||||
| Total Deferred contract costs, net | $ | 1,124 | $ | 1,080 |
Amortization of deferred contract costs on completed implementations was $85 million and $92 million during the three months and $176 million and $188 million during the six months ended June 30, 2023 and 2022, respectively.
The Company recorded $2 million and $12 million during the three months and $5 million and $28 million during the six months ended June 30, 2023 and 2022, respectively, of incremental amortization expense related to deferred contract costs resulting from the Company's platform modernization.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(7) Debt
Long-term debt as of June 30, 2023, and December 31, 2022, consisted of the following (in millions):
| June 30, 2023 | ||||||||||||||||||||||||||||||||
| Weighted | ||||||||||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||||||||
| Interest | Interest | June 30, | December 31, | |||||||||||||||||||||||||||||
| Rates | Rate (1) | Maturities | 2023 | 2022 | ||||||||||||||||||||||||||||
| Fixed Rate Notes | ||||||||||||||||||||||||||||||||
| Senior USD Notes | 0.6% - 5.6% | 4.0% | 2024 - 2052 | $ | 8,659 | $ | 9,409 | |||||||||||||||||||||||||
| Senior Euro Notes | 0.6% - 3.0% | 1.9% | 2024 - 2039 | 4,897 | 6,154 | |||||||||||||||||||||||||||
| Senior GBP Notes | 2.3% - 3.4% | 7.1% | 2029 - 2031 | 1,171 | 1,119 | |||||||||||||||||||||||||||
| Revolving Credit Facility (2) | 6.3% | 2026 | 301 | 280 | ||||||||||||||||||||||||||||
| Incremental Revolving Credit Facility (3) | 2023 | — | — | |||||||||||||||||||||||||||||
| Other (4) | (654) | (622) | ||||||||||||||||||||||||||||||
| Total long-term debt, including current portion | 14,374 | 16,340 | ||||||||||||||||||||||||||||||
| Current portion of long-term debt | (785) | (2,133) | ||||||||||||||||||||||||||||||
| Long-term debt, excluding current portion | $ | 13,589 | $ | 14,207 |
(1)The weighted average interest rate includes the impact of interest rate swaps and excludes the impact of cross-currency interest rate swaps (see Note 8).
(2)Through June 30, 2023, interest on the Revolving Credit Facility is generally payable at LIBOR plus an applicable margin of up to 1.625% plus an unused commitment fee of up to 0.225%, each based upon the Company's corporate credit ratings. Effective July 1, 2023, the Adjusted Term SOFR replaced LIBOR as the reference rate and added an additional spread to the interest rate of up to 0.428%. The weighted average interest rate on the Revolving Credit Facility excludes fees.
(3)Interest on the Incremental Revolving Credit Facility is generally payable at a rate, at the option of the Company, equal to the Term SOFR Rate plus 0.10% plus a margin of up to 1.625% or equal to the Base Rate plus a margin of up to 0.625%, in either case plus an unused commitment fee of up to 0.225%.
(4)Other includes financing obligations for certain hardware and software, the fair value of interest rate swaps (see Note 8), unamortized non-cash bond discounts and unamortized debt issuance costs.
Short-term borrowings as of June 30, 2023, and December 31, 2022, consisted of the following (in millions):
| June 30, 2023 | ||||||||||||||||||||||||||
| Weighted | ||||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||
| Interest | June 30, | December 31, | ||||||||||||||||||||||||
| Rate | Maturities | 2023 | 2022 | |||||||||||||||||||||||
| Euro-commercial paper notes ("ECP Notes") | 3.6 | % | Up to 183 days | $ | 2,851 | $ | 2,054 | |||||||||||||||||||
| U.S. commercial paper notes ("USCP Notes") | 5.5 | % | Up to 397 days | 2,293 | 1,701 | |||||||||||||||||||||
| Other | — | 42 | ||||||||||||||||||||||||
| Total Short-term borrowings | $ | 5,144 | $ | 3,797 |
As discussed further in Note 8, the Company is a party to interest rate swaps that convert a portion of its fixed-rate debt to variable-rate debt and fixed-for-fixed cross-currency interest rate swaps under which it agrees to receive interest in foreign currency in exchange for paying interest in U.S. dollars. These interest rate swaps are designated as fair value hedges of its fixed rate debt. The Company has also entered into cross-currency interest rate swaps under which it agrees to receive interest in U.S. dollars in exchange for paying interest in a foreign currency. Although these cross-currency interest rate swaps are entered into as net investment hedges of its investments in certain of its non-U.S. subsidiaries, and not for the purpose of hedging interest rates, the benefit or cost of such hedges is reflected in interest expense in the consolidated statement of earnings. As of June 30, 2023, the weighted average interest rate of the Company's outstanding debt was 4.1%, including the impact of interest rate swaps and cross-currency interest rate swaps designated as fair value hedges but excluding the impact of cross-currency interest rate swaps designated as net investment hedges. Including the impact of the net investment hedge cross-currency interest rate swaps on interest expense, the weighted average interest rate of the Company's outstanding debt was 3.4%.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following summarizes the aggregate maturities of our long-term debt, including other financing obligations for certain hardware and software, based on stated contractual maturities, excluding the fair value of the interest rate swaps (see Note 8) and net unamortized non-cash bond discounts of $(650) million as of June 30, 2023 (in millions):
| Total | ||||||||
| 2023 remaining period | $ | 22 | ||||||
| 2024 | 1,331 | |||||||
| 2025 | 1,448 | |||||||
| 2026 | 1,261 | |||||||
| 2027 | 2,162 | |||||||
| Thereafter | 8,892 | |||||||
| Total principal payments | 15,116 | |||||||
| Debt issuance costs, net of accumulated amortization | (92) | |||||||
| Total long-term debt | $ | 15,024 |
There are no mandatory principal payments on the Revolving Credit Facility or the Incremental Revolving Credit Facility, and any balance outstanding on the Revolving Credit Facility or the Incremental Revolving Credit Facility will be due and payable at each such facility's scheduled maturity date, which occur on March 2, 2026, and December 15, 2023, respectively.
Senior Notes
On May 21, 2023, FIS repaid an aggregate principal amount of €1.3 billion in Senior Euro Notes, on their due date, pursuant to the related indenture.
On March 1, 2023, FIS repaid an aggregate principal amount of $750 million in Senior USD Notes, on their due date, pursuant to the related indenture.
On December 3, 2022, FIS repaid an aggregate principal amount of €1.0 billion in Senior Euro Notes, on their due date, pursuant to the related indenture.
On July 13, 2022, FIS completed the issuance and sale of Senior USD Notes with an aggregate principal amount of $2.5 billion with interest rates ranging from 4.5% to 5.6% and maturities ranging from 2025 to 2052. The proceeds from the debt issuance were used for the repayment of debt under our commercial paper programs in the third quarter of 2022.
Revolving Credit Facilities
On February 28, 2023, FIS entered into a Incremental Revolving Credit Facility which provides credit commitments outstanding of $2.0 billion, with a scheduled maturity date of December 15, 2023. The proceeds of any borrowings under the Incremental Revolving Credit Facility will be used to provide ongoing working capital and for other general corporate purposes of the Company and its subsidiaries, including the repayment of certain existing debt of the Company and its subsidiaries and to backstop the Company’s commercial paper program. The Incremental Revolving Credit Facility contains customary covenants restricting, among other things, the incurrence of indebtedness, certain restricted payments and use of proceeds as well as to maintain certain financial ratios.
As of June 30, 2023, the borrowing capacity under the Revolving Credit Facility and Incremental Revolving Credit Facility was $2,055 million (net of $5,144 million of capacity backstopping our commercial paper notes).
Fair Value of Debt
The fair value of the Company's long-term debt is estimated to be approximately $1,799 million and $1,873 million lower than the carrying value, excluding the fair value of the interest rate swaps and unamortized discounts, as of June 30, 2023, and December 31, 2022, respectively.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(8) Financial Instruments
Fair Value Hedges
The Company holds interest rate swaps with aggregate notional amounts of $1,854 million, £925 million and €500 million at each of June 30, 2023, and December 31, 2022, converting the interest rate exposure on certain of the Company's Senior USD Notes, Senior GBP Notes and Senior Euro Notes, as applicable, from fixed to variable. These swaps are designated as fair value hedges for accounting purposes with a net liability fair value of $616 million and $578 million reflected as a decrease in the long-term debt balance at June 30, 2023, and December 31, 2022, respectively (see Note 7).
During the quarter ended June 30, 2023, the Company entered into an aggregate notional amount of £925 million fixed-for-fixed cross-currency interest rate swaps to hedge its exposure to foreign currency risk associated with its Senior GBP notes. These swaps are designated as fair value hedges for accounting purposes with a net liability fair value of $2 million at June 30, 2023. Changes in the swap fair values attributable to changes in spot foreign currency exchange rates are recorded in Other income (expense), and changes attributable to excluded components, such as changes in fair value due to forward foreign currency exchange rates and cross-currency basis spreads, are recorded in Accumulated other comprehensive earnings (loss). The Company records the impact of the excluded components in earnings through Interest expense using the amortization approach.
Net Investment Hedges
The purpose of the Company's net investment hedges, as discussed below, is to reduce the volatility of FIS' net investment value in its Euro- and Pound Sterling-denominated operations due to changes in foreign currency exchange rates.
The Company recorded net investment hedge aggregate gain (loss) for the change in fair value and related income tax (expense) benefit within Other comprehensive earnings (loss), net of tax, on the consolidated statements of comprehensive earnings (loss) for its designated net investment hedges as follows (in millions). No ineffectiveness has been recorded on the net investment hedges.
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Foreign currency-denominated debt designations | $ | (7) | $ | 492 | $ | (123) | $ | 666 | ||||||||||||||||||
| Cross-currency interest rate swap designations | (84) | 381 | (189) | 468 | ||||||||||||||||||||||
| Total | $ | (91) | $ | 873 | $ | (312) | $ | 1,134 |
Foreign Currency-Denominated Debt Designations
The Company has designated certain foreign currency-denominated debt as net investment hedges of its investment in Euro- and Pound Sterling-denominated operations. As of June 30, 2023, and December 31, 2022, an aggregate €7,100 million and €7,646 million, respectively, was designated as a net investment hedge of the Company's investment in Euro-denominated operations related to Senior Euro Notes with maturities ranging from 2024 to 2039 and ECP Notes. During the quarter ended June 30, 2023, the Company de-designated its Senior GBP notes as net investment hedges due to the new fair value hedges noted above. As of June 30, 2023, no GBP-denominated debt was designated as a net investment hedge. As of December 31, 2022, an aggregate £726 million was designated as a net investment hedge of the Company's Pound Sterling-denominated operations related to the Senior GBP Notes.
Cross-Currency Interest Rate Swap Designations
The Company holds cross-currency interest rate swaps designated as net investment hedges of its investment in Euro- and Pound Sterling-denominated operations.
As of June 30, 2023, and December 31, 2022, aggregate notional amounts of €6,343 million and €6,343 million, respectively, were designated as net investment hedges of the Company's investment in Euro-denominated operations, and aggregate notional amounts of £2,380 million and £2,580 million, respectively, were designated as net investment hedges of the
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Company's Pound Sterling-denominated operations. The cross-currency interest rate swap fair values totaled assets of $178 million and $336 million and liabilities of $(150) million and $(72) million at June 30, 2023, and December 31, 2022, respectively.
During the six months ended June 30, 2023 and 2022, the Company (paid) received net proceeds of approximately $(17) million and $645 million, respectively, for the fair values of the cross-currency interest rate swaps as of the settlement dates. The proceeds were recorded within investing activities on the consolidated statements of cash flows. Following the settlement of the existing cross-currency interest rate swaps during 2022, the Company entered into new cross-currency interest rate swaps at current market terms with similar notional amounts and maturity dates as the settled cross-currency interest rate swaps.
(9) Commitments and Contingencies
Securities and Shareholder Matters
On March 6, 2023, a complaint captioned Palm Bay Police and Firefighters’ Pension Fund v. Fidelity National Information Services, Inc., et al., was filed in the United States District Court for the Middle District of Florida by a shareholder of the Company seeking damages on behalf of a class consisting of all persons who purchased the Company’s common stock between February 9, 2021, and February 10, 2023. This action has been consolidated with a related action that seeks damages on behalf of a class consisting of all persons who purchased the Company’s common stock between May 7, 2020, and February 10, 2023, and the consolidated case is now captioned In re Fidelity National Information Services, Inc. Securities Litigation. This putative class action, which names the Company and certain of its current and former officers as defendants, seeks damages for alleged violations of federal securities laws in connection with our disclosures relating to our Merchant Solutions segment, including with respect to Worldpay’s valuation, integration, and synergies. A lead plaintiff has been appointed, and a consolidated amended complaint is due on August 2, 2023.
On April 27, 2023, a shareholder derivative action captioned Portia McCollum, derivatively on behalf of Fidelity National Information Services, Inc. v. Gary Norcross et al., was filed in the same court by a shareholder of the Company. Plaintiff dismissed the suit without prejudice and sent a demand pursuant to Georgia Code § 14-2-742. Another putative stockholder, City of Hialeah Employees’ Retirement System, sent a similar demand. The demands claim that FIS officers and directors violated federal securities laws and breached fiduciary duties in connection with Worldpay’s valuation, integration, and synergies, and they demand that the Board investigate and commence legal proceedings against officers and directors in connection with the purported wrongdoing.
While we believe the cases and demands are without merit, no assurance can be given as to their ultimate outcome. We intend to contest them vigorously.
Brazilian Tax Authorities Claims
In 2004, Proservvi Empreendimentos e Servicos, Ltda., the predecessor to Fidelity National Servicos de Tratamento de Documentos e Informatica Ltda. ("Servicos"), a subsidiary of Fidelity National Participacoes Ltda., our former item processing and remittance services operation in Brazil, acquired certain assets and employees and leased certain facilities from the Transpev Group ("Transpev") in Brazil. Transpev's remaining assets were later acquired by Prosegur, an unrelated third party. When Transpev discontinued its operations after the asset sale to Prosegur, it had unpaid federal taxes and social contributions owing to the Brazilian tax authorities. The Brazilian tax authorities brought a claim against Transpev and, beginning in 2012, brought claims against Prosegur and Servicos on the grounds that Prosegur and Servicos were successors in interest to Transpev. To date, the Brazilian tax authorities filed 14 claims against Servicos, of which 13 are still active, asserting potential tax liabilities of approximately $13 million. There are potentially 24 additional claims against Transpev/Prosegur for which Servicos is named as a co-defendant or may be named but for which Servicos has not yet been served. These additional claims amount to approximately $36 million, making the total potential exposure for all 38 claims approximately $49 million. We do not believe a liability for these 38 total claims is probable and, therefore, have not recorded a liability for any of these claims.
Tax Receivable Agreement
The Company assumed in the Worldpay acquisition a Tax Receivable Agreement ("TRA") under which the Company agreed to make payments to Fifth Third Bank ("Fifth Third") of 85% of the federal, state, local and foreign income tax benefits realized by the Company as a result of certain tax deductions. In December 2019, the Company entered into a Tax Receivable
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Purchase Addendum (the "Amendment") that provides written call and put options (collectively "the options") to terminate certain estimated obligations under the TRA in exchange for fixed cash payments.
The remaining TRA obligations not subject to the Amendment are based on the cash savings realized by the Company by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been no deductions related to the tax attributes. Under the TRA, in certain specified circumstances, such as certain changes of control, the Company may be required to make payments in excess of such cash savings.
Obligations recorded in our consolidated financial statements pursuant to the TRA are based on estimates of future deductions and future tax rates and, in the case of the obligations subject to the Amendment, reflect management's expectation that the options will be exercised. In January 2023, the Company exercised its third call option pursuant to the Amendment,
which results in fixed cash payments to Fifth Third of $138 million. The timing and/or amount of aggregate payments due under the TRA may vary based on a number of factors, including the exercise of options, the amount and timing of taxable income the Company generates in the future and the tax rate then applicable, the use of loss carryforwards and amortizable basis. Each reporting period, the Company evaluates the assumptions underlying the TRA obligations.
The consolidated balance sheets as of June 30, 2023, and December 31, 2022, include a total liability of $138 million and $266 million, respectively, relating to the TRA.
Chargeback Liability
Through services offered in our Merchant Solutions segment, the Company is exposed to potential losses from merchant-related chargebacks. A chargeback occurs when a dispute between a cardholder and a merchant, including a claim for non-delivery of the product or service by the merchant, is not resolved in favor of the merchant and the transaction is charged back to the merchant resulting in a refund of the purchase price to the cardholder. If the Company is unable to collect this chargeback amount from the merchant due to closure, bankruptcy or other reasons, the Company bears the loss for the refund paid to the cardholder. The risk of chargebacks is typically greater for those merchants that promise future delivery of goods and services rather than delivering goods or rendering services at the time of payment.
Indemnifications and Warranties
The Company generally indemnifies its clients, subject to certain limitations and exceptions, against damages and costs resulting from claims of patent, copyright, or trademark infringement associated solely with its customers' use of the Company's software applications or services. Historically, the Company has not made any material payments under such indemnifications but continues to monitor the conditions that are subject to the indemnifications to identify whether it is probable that a loss has occurred, in which case it would recognize any such losses when they are estimable. In addition, the Company warrants to customers that its software operates substantially in accordance with the software specifications. Historically, no material costs have been incurred related to software warranties, and no accruals for warranty costs have been made.
(10) Net Earnings (Loss) per Share
The basic weighted average shares and common stock equivalents for the three and six months ended June 30, 2023 and 2022, were computed using the treasury stock method.
The following table summarizes net earnings and net earnings per share attributable to FIS common stockholders for the three and six months ended June 30, 2023 and 2022 (in millions, except per share amounts):
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | (6,596) | $ | 277 | $ | (6,456) | $ | 397 | |||||||||||||||
| Weighted average shares outstanding-basic | 592 | 608 | 592 | 609 | |||||||||||||||||||
| Plus: Common stock equivalent shares | — | 3 | — | 3 | |||||||||||||||||||
| Weighted average shares outstanding-diluted | 592 | 611 | 592 | 612 | |||||||||||||||||||
| Net earnings per share-basic attributable to FIS common stockholders | $ | (11.14) | $ | 0.46 | $ | (10.91) | $ | 0.65 | |||||||||||||||
| Net earnings per share-diluted attributable to FIS common stockholders | $ | (11.14) | $ | 0.45 | $ | (10.91) | $ | 0.65 |
The diluted net loss per share for the three and six months ended June 30, 2023, did not include the effect of common stock equivalent shares of 2 million and 1 million, respectively, because the effect would have been anti-dilutive. Options to purchase approximately 9 million and 5 million shares of our common stock for the three months and 9 million and 5 million for the six months ended June 30, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive.
In January 2021, our Board of Directors approved a 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 repurchase program has no expiration date and may be suspended for periods, amended or discontinued at any time. Approximately 64 million shares remained available for repurchase as of June 30, 2023.
(11) Segment Information
FIS reports its financial performance based on the following segments: Banking Solutions, Merchant Solutions, Capital Market Solutions and Corporate and Other. Below is a summary of each segment. The Company regularly assesses its portfolio of assets and reclassified certain businesses from Capital Market Solutions to Banking Solutions and to the Corporate and Other segment in the quarter ended March 31, 2023, and recast all prior-period segment information presented. These operations represented less than 1% of second quarter and year-to-date 2023 revenue.
Banking Solutions ("Banking")
The Banking segment is focused on serving financial institutions of all sizes with core processing software, transaction processing software and complementary applications and services, many of which interact directly with core processing software. We sell these solutions on either a bundled or stand-alone basis. Clients in this segment include global financial institutions, U.S. regional and community banks, credit unions and commercial lenders, as well as government institutions and other commercial organizations. Banking serves clients in approximately 100 countries. We provide our clients integrated solutions characterized by multi-year processing contracts that generate recurring revenue. The predictable nature of cash flows generated from the Banking segment provides opportunities for further investments in innovation, integration, information and security, and compliance in a cost-effective manner.
Merchant Solutions ("Merchant")
The Merchant segment is focused on serving merchants of all sizes globally, enabling them to accept, authorize and settle electronic payment transactions. Merchant includes all aspects of payment processing, including value-added services, such as security, fraud prevention, advanced data analytics, foreign currency management and numerous funding options. Merchant serves clients in over 100 countries. Our Merchant clients are highly-diversified, including global enterprises, national retailers and small- to medium-sized businesses. The Merchant segment utilizes broad and varied distribution channels, including direct sales forces and multiple referral partner relationships that provide us with access to new and existing markets.
On July 5, 2023, we signed a definitive agreement to sell a 55% equity interest in the Worldpay Merchant Solutions business as further discussed in Note 2 to the consolidated financial statements and in Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations."
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Capital Market Solutions ("Capital Markets")
The Capital Markets segment is focused on serving global financial services clients with a broad array of buy- and sell-side solutions. Clients in this segment operate in more than 100 countries and include asset managers, buy- and sell-side securities brokerage and trading firms, insurers, private equity firms, and other commercial organizations. Our buy- and sell-side solutions include a variety of mission-critical applications for recordkeeping, data and analytics, trading, financing and risk management. Capital Markets clients purchase our solutions in various ways including licensing and managing technology "in-house," using consulting and third-party service providers, as well as procuring fully outsourced end-to-end solutions. Our long-established relationships with many of these financial and commercial institutions generate significant recurring revenue. We have made, and continue to make, investments in modern platforms, advanced technologies, open APIs, machine learning and artificial intelligence, and regulatory technology to support our Capital Markets clients.
Corporate and Other
The Corporate and Other segment consists of corporate overhead expense, certain leveraged functions and miscellaneous expenses that are not included in the operating segments, as well as certain non-strategic businesses that we plan to wind down or sell. The overhead and leveraged costs relate to corporate marketing, corporate finance and accounting, human resources, legal, and amortization of acquisition-related intangibles and other costs, such as acquisition, integration and transformation-related expenses, that are not considered when management evaluates revenue-generating segment performance.
In the Corporate and Other segment, the Company recorded acquisition, integration and other costs comprised of the following (in millions):
| Three months ended | Six months ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Acquisition and integration | $ | 9 | $ | 30 | $ | 16 | $ | 75 | ||||||||||||||||||
| Enterprise transformation, including Future Forward and platform modernization | 78 | 80 | 153 | 160 | ||||||||||||||||||||||
| Severance and other termination expenses, including those associated with enterprise cost control initiatives and changes in senior management | 23 | 36 | 51 | 47 | ||||||||||||||||||||||
| Planned separation of the Worldpay Merchant Solutions business | 20 | — | 31 | — | ||||||||||||||||||||||
| Stock-based compensation, primarily from certain performance-based awards | 6 | 41 | 6 | 65 | ||||||||||||||||||||||
| Other, including divestiture-related expenses and enterprise cost control and other initiatives | 4 | 34 | 8 | 63 | ||||||||||||||||||||||
| Total acquisition, integration and other costs | $ | 140 | $ | 221 | $ | 265 | $ | 410 |
Amounts in table may not sum due to rounding.
Other costs in Corporate and Other also included incremental amortization expense associated with shortened estimated useful lives and accelerated amortization methods for certain software and deferred contract cost assets resulting from the Company's platform modernization totaling $13 million and $42 million for the three months and $32 million and $94 million for the six months ended June 30, 2023 and 2022, respectively, which is recorded in depreciation and amortization in the statement of operations. For the three and six months ended June 30, 2023, the Company recorded a $6.8 billion impairment of goodwill related to the Merchant Solutions reporting unit due to its estimated fair value being less than its carrying value. Additionally, the Company recorded $29 million of asset impairments primarily related to the impairment of a non-strategic business during the three and six months ended June 30, 2022 and $58 million of impairments primarily related to real estate-related assets resulting from office space reductions during the six months ended June 30, 2022.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Adjusted EBITDA
Adjusted EBITDA is a measure of segment profit or loss that 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 FASB ASC Topic 280, Segment Reporting. Adjusted EBITDA is defined as net earnings (loss) before net interest expense, net other income (expense), income tax provision (benefit) and depreciation and amortization, and excludes certain costs and other transactions that management deems non-operational in nature or that otherwise improve the comparability of operating results across reporting periods by their exclusion. The items affecting the segment profit measure generally include the purchase price amortization of acquired intangible assets as well as acquisition, integration and certain other costs and asset impairments. 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.
Summarized financial information for the Company's segments is shown in the following tables. The Company does not evaluate performance or allocate resources based on segment asset data; therefore, such information is not presented.
For the three months ended June 30, 2023 (in millions):
| Capital | |||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | ||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | |||||||||||||||||||||||||
| Revenue | $ | 1,702 | $ | 1,312 | $ | 672 | $ | 60 | $ | 3,746 | |||||||||||||||||||
| Operating expenses | (1,132) | (776) | (423) | (7,731) | (10,062) | ||||||||||||||||||||||||
| Depreciation and amortization (including purchase accounting amortization) | 154 | 97 | 88 | 547 | 886 | ||||||||||||||||||||||||
| Acquisition, integration and other costs | — | — | — | 140 | 140 | ||||||||||||||||||||||||
| Asset impairments | — | — | — | 6,841 | 6,841 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 724 | $ | 633 | $ | 337 | $ | (143) | $ | 1,551 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,551 | |||||||||||||||||||||||||||
| Depreciation and amortization | (338) | ||||||||||||||||||||||||||||
| Purchase accounting amortization | (548) | ||||||||||||||||||||||||||||
| Acquisition, integration and other costs | (140) | ||||||||||||||||||||||||||||
| Asset impairments | (6,841) | ||||||||||||||||||||||||||||
| Interest expense, net | (153) | ||||||||||||||||||||||||||||
| Other income (expense), net | (53) | ||||||||||||||||||||||||||||
| (Provision) benefit for income taxes | (72) | ||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interest | (2) | ||||||||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | (6,596) | |||||||||||||||||||||||||||
| Capital expenditures (1) | $ | 97 | $ | 103 | $ | 64 | $ | 23 | $ | 287 |
(1) Capital expenditures include $20 million in other financing obligations for certain hardware.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the three months ended June 30, 2022 (in millions):
| Capital | |||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | ||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | |||||||||||||||||||||||||
| Revenue | $ | 1,678 | $ | 1,302 | $ | 632 | $ | 107 | $ | 3,719 | |||||||||||||||||||
| Operating expenses | (1,081) | (778) | (405) | (1,081) | (3,345) | ||||||||||||||||||||||||
| Depreciation and amortization (including purchase accounting amortization) | 149 | 89 | 84 | 653 | 975 | ||||||||||||||||||||||||
| Acquisition, integration and other costs | — | — | — | 221 | 221 | ||||||||||||||||||||||||
| Asset impairments | — | — | — | 29 | 29 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 746 | $ | 613 | $ | 311 | $ | (71) | $ | 1,599 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,599 | |||||||||||||||||||||||||||
| Depreciation and amortization | (347) | ||||||||||||||||||||||||||||
| Purchase accounting amortization | (628) | ||||||||||||||||||||||||||||
| Acquisition, integration and other costs | (221) | ||||||||||||||||||||||||||||
| Asset impairments | (29) | ||||||||||||||||||||||||||||
| Interest expense, net | (47) | ||||||||||||||||||||||||||||
| Other income (expense), net | 30 | ||||||||||||||||||||||||||||
| (Provision) benefit for income taxes | (77) | ||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interest | (3) | ||||||||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | 277 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 120 | $ | 109 | $ | 60 | $ | 51 | $ | 340 |
For the six months ended June 30, 2023 (in millions):
| Capital | |||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | ||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | |||||||||||||||||||||||||
| Revenue | $ | 3,387 | $ | 2,416 | $ | 1,335 | $ | 118 | $ | 7,256 | |||||||||||||||||||
| Operating expenses | (2,296) | (1,495) | (859) | (8,584) | (13,234) | ||||||||||||||||||||||||
| Depreciation and amortization (including purchase accounting amortization) | 309 | 193 | 181 | 1,099 | 1,782 | ||||||||||||||||||||||||
| Acquisition, integration and other costs | — | — | — | 265 | 265 | ||||||||||||||||||||||||
| Asset impairments | — | — | — | 6,841 | 6,841 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,400 | $ | 1,114 | $ | 657 | $ | (261) | $ | 2,910 | |||||||||||||||||||
| Adjusted EBITDA | $ | 2,910 | |||||||||||||||||||||||||||
| Depreciation and amortization | (686) | ||||||||||||||||||||||||||||
| Purchase accounting amortization | (1,096) | ||||||||||||||||||||||||||||
| Acquisition, integration and other costs | (265) | ||||||||||||||||||||||||||||
| Asset impairments | (6,841) | ||||||||||||||||||||||||||||
| Interest expense | (291) | ||||||||||||||||||||||||||||
| Other income (expense), net | (63) | ||||||||||||||||||||||||||||
| (Provision) benefit for income taxes | (121) | ||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interest | (3) | ||||||||||||||||||||||||||||
| Net earnings (loss) attributable to FIS common stockholders | $ | (6,456) | |||||||||||||||||||||||||||
| Capital expenditures (1) | $ | 195 | $ | 205 | $ | 127 | $ | 39 | $ | 566 |
(1) Capital expenditures include $20 million in other financing obligations for certain hardware.
FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the six months ended June 30, 2022 (in millions):
| Capital | |||||||||||||||||||||||||||||
| Banking | Merchant | Market | Corporate | ||||||||||||||||||||||||||
| Solutions | Solutions | Solutions | and Other | Total | |||||||||||||||||||||||||
| Revenue | $ | 3,337 | $ | 2,414 | $ | 1,259 | $ | 200 | $ | 7,210 | |||||||||||||||||||
| Operating expenses | (2,185) | (1,459) | (818) | (2,217) | (6,679) | ||||||||||||||||||||||||
| Depreciation and amortization (including purchase accounting amortization) | 302 | 181 | 170 | 1,335 | 1,988 | ||||||||||||||||||||||||
| Acquisition, integration and other costs | — | — | — | 410 | 410 | ||||||||||||||||||||||||
| Asset impairments | — | — | — | 87 | 87 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,454 | $ | 1,136 | $ | 611 | $ | (185) | $ | 3,016 | |||||||||||||||||||
| Adjusted EBITDA | $ | 3,016 | |||||||||||||||||||||||||||
| Depreciation and amortization | (710) | ||||||||||||||||||||||||||||
| Purchase accounting amortization | (1,278) | ||||||||||||||||||||||||||||
| Acquisition, integration and other costs | (410) | ||||||||||||||||||||||||||||
| Asset impairments | (87) | ||||||||||||||||||||||||||||
| Interest expense, net | (90) | ||||||||||||||||||||||||||||
| Other income (expense), net | 92 | ||||||||||||||||||||||||||||
| (Provision) benefit for income taxes | (132) | ||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interest | (4) | ||||||||||||||||||||||||||||
| Net earnings attributable to FIS common stockholders | $ | 397 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 278 | $ | 252 | $ | 144 | $ | 78 | $ | 752 |
(12) Subsequent Event
On July 5, 2023, we signed a definitive agreement to sell a 55% equity interest in the Worldpay Merchant Solutions business as further discussed in Note 2 to the consolidated financial statements and in Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Next: Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations