Fidelity National Information Services(US:FIS)2025-08-05 20:16Part I: FINANCIAL INFORMATION This section details the company's unaudited financial performance, management's operational analysis, market risk exposures, and internal control effectiveness Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q2 2025 reflect a net loss from continuing operations, primarily due to the Worldpay equity investment, and detail ongoing strategic transactions Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets and an increase in total liabilities as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $33,373 | $33,784 | | Cash and cash equivalents | $581 | $834 | | Goodwill | $17,577 | $17,260 | | Equity method investment | $3,873 | $3,858 | | Total Liabilities | $19,201 | $18,084 | | Short-term borrowings | $1,719 | $636 | | Long-term debt | $11,186 | $10,654 | | Total Equity | $14,172 | $15,700 | - Total assets slightly decreased to $33.4 billion as of June 30, 2025, from $33.8 billion at the end of 2024. Total liabilities increased to $19.2 billion from $18.1 billion, primarily due to a rise in short-term borrowings and current portion of long-term debt11 Condensed Consolidated Statements of Earnings (Loss) The statements show a net loss from continuing operations in Q2 2025, contrasting with net earnings in the prior year, largely due to the Worldpay equity investment Q2 2025 vs Q2 2024 Performance (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $2,616 | $2,490 | | Gross Profit | $952 | $944 | | Operating Income | $408 | $371 | | Net Earnings (Loss) from Continuing Operations | $(469) | $238 | | Net Earnings (Loss) Attributable to FIS | $(470) | $238 | | Diluted EPS from Continuing Operations | $(0.90) | $0.43 | - The company reported a net loss from continuing operations of $469 million in Q2 2025, compared to net earnings of $238 million in Q2 2024. This was primarily due to a significant loss from its equity method investment in Worldpay, which amounted to $(598) million in the quarter13 Condensed Consolidated Statements of Cash Flows Cash flow from operations increased for the six months ended June 30, 2025, while investing activities shifted to a net use of cash due to the Worldpay sale impact Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities (continuing) | $839 | $752 | | Net cash provided by (used in) investing activities (continuing) | $(2,126) | $9,168 | | Net cash provided by (used in) financing activities (continuing) | $(350) | $(10,845) | | Net cash provided by (used in) discontinued operations | $208 | $(449) | | Net (decrease) in cash, cash equivalents and restricted cash | $(1,365) | $(1,419) | - For the six months ended June 30, 2025, cash from operations increased to $839 million from $752 million year-over-year. Investing activities used $2.1 billion, a significant shift from the $9.2 billion provided in the prior year, which included proceeds from the Worldpay sale. Financing activities used $350 million, primarily for dividends and share repurchases25 Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of significant accounting policies, strategic transactions, revenue recognition, and debt obligations impacting the financial statements - On January 31, 2024, FIS completed the sale of a 55% equity interest in its Worldpay Merchant Solutions business, retaining a 45% non-controlling interest accounted for via the equity method. The results of the Worldpay business prior to the sale are reported as discontinued operations2930 - On April 17, 2025, FIS agreed to acquire the Issuer Solutions business from Global Payments for $12.0 billion (net) and sell its remaining 45% stake in Worldpay to Global Payments for $6.6 billion. The transaction is expected to close by the first half of 202632 - As of June 30, 2025, the company estimates approximately $22.5 billion of revenue to be recognized in the future from remaining unfulfilled performance obligations, with about 33% expected in the next 12 months58 - Total debt, including short-term borrowings, was approximately $12.9 billion as of June 30, 2025. The company has secured an $8 billion term loan facility to fund the pending Issuer Solutions Acquisition727584 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic transition post-Worldpay sale, highlighting Q2 2025 revenue growth, operating income increase, and plans for the Issuer Solutions acquisition, while maintaining strong liquidity Business Trends and Strategic Transactions This section outlines the company's strategic divestitures and acquisitions, including the Worldpay sale and the pending Issuer Solutions acquisition, and their financial implications - FIS completed the sale of a 55% stake in its Worldpay business on January 31, 2024, retaining a 45% equity interest. The company received over $12 billion in net cash proceeds, which were primarily used to retire debt and repurchase shares135139 - The company has entered into a definitive agreement to acquire Global Payments' Issuer Solutions business for a net purchase price of $12.0 billion and sell its remaining Worldpay interest for $6.6 billion. The deal is expected to close in the first half of 2026 and will be funded with new debt and proceeds from the Worldpay sale136 - Management notes relatively stable sales cycles and client activity. While high interest rates negatively impact interest expense, the company has reduced debt using proceeds from the Worldpay sale. However, it anticipates incurring approximately $8.0 billion in new debt for the Issuer Solutions acquisition138 Consolidated Results of Operations This section details the company's consolidated financial performance for Q2 2025, highlighting revenue growth, operating income changes, and factors impacting net earnings Consolidated Results of Operations (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $2,616 | $2,490 | 5% | | Gross Profit | $952 | $944 | 1% | | Operating Income | $408 | $371 | 10% | | Operating Margin | 16% | 15% | +100 bps | - Q2 2025 revenue increased 5% YoY, driven by recurring revenue growth in Banking and Capital Markets. This was partially offset by a decrease in the Corporate and Other segment due to a divestiture155 - Selling, general and administrative (SG&A) expenses decreased 6% YoY for Q2 2025, primarily due to lower advisory fees related to the Worldpay sale and transformation activities, partially offset by increased severance costs157 - The loss from the Worldpay equity method investment in Q2 2025 included a $539 million tax expense related to an increase in the deferred tax liability arising from the agreement to sell the remaining interest in Worldpay168144 Segment Results of Operations This section provides a breakdown of financial performance by business segment, including revenue, Adjusted EBITDA, and margins for Banking and Capital Markets Solutions Q2 2025 Segment Performance (in millions) | Segment | Revenue | % Change (YoY) | Adjusted EBITDA | % Change (YoY) | Adj. EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | Banking Solutions | $1,808 | 6% | $789 | 4% | 43.6% | | Capital Market Solutions | $765 | 6% | $385 | 5% | 50.3% | | Corporate and Other | $43 | (25)% | $(133) | 0% | N/A | - Banking Solutions revenue grew 6% in Q2, driven by broad-based recurring revenue growth in commercial services, cards, money movement, and digital finance. Adjusted EBITDA margin decreased slightly to 43.6% due to higher bad debt expense173174 - Capital Markets revenue increased 6% in Q2, driven by new sales implementations and higher software license sales. Adjusted EBITDA margin was 50.3%178179 Liquidity and Capital Resources This section details the company's financial flexibility, including available liquidity, debt structure, share repurchase activities, and dividend declarations - As of June 30, 2025, the company had $3.3 billion of available liquidity, comprising $0.6 billion in cash and $2.8 billion in available revolving credit capacity188 - Total debt outstanding was $12.9 billion with a weighted average interest rate of 2.9%. The company intends to maintain investment-grade debt ratings188189 - The company repurchased $246 million of its shares in Q2 2025. Approximately $2.4 billion remained available under the share repurchase program as of June 30, 2025192 - A regular quarterly dividend of $0.40 per common share was declared, payable in September 2025191 Item 3. Quantitative and Qualitative Disclosure About Market Risks The company is primarily exposed to market risks from changes in interest rates and foreign currency exchange rates. As of June 30, 2025, 86% of its debt was fixed-rate, mitigating interest rate volatility. A hypothetical 100 basis-point increase in rates on its variable-rate debt would increase annual interest expense by $17 million. Foreign currency risk arises from non-U.S. operations, with a hypothetical 10% adverse movement in key currencies estimated to impact quarterly revenue by approximately $26 million. FIS uses derivative instruments, such as swaps and forward contracts, to manage these risks but not for speculative purposes - As of June 30, 2025, 86% of the company's debt was fixed-rate. A 100 basis-point increase in the interest rate on its variable-rate debt would increase annual interest expense by an estimated $17 million204 - The company is exposed to foreign currency risk, primarily from the British Pound Sterling and the Euro. A simultaneous 10% adverse change in major foreign currency exchange rates would have resulted in a $26 million change in reported revenue for Q2 2025206 - FIS utilizes derivative instruments, including interest rate swaps, cross-currency swaps, and foreign currency forward contracts, to manage its interest rate and foreign currency risks201207 Item 4. Controls and Procedures Based on an evaluation conducted as of the end of the period, the company's principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective. There were no material changes in internal control over financial reporting during the most recent fiscal quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025208 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting209 Part II: OTHER INFORMATION This section provides additional information including updated risk factors, details on equity security sales, other significant disclosures, and a list of filed exhibits Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in the risk factors affecting the Company from those detailed in the Annual Report on Form 10-K for the year ended December 31, 2024210 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2025, FIS repurchased approximately 3.2 million shares of its common stock for a total cost of $246.4 million. As of June 30, 2025, approximately $2.4 billion remained available for repurchase under the existing share repurchase program authorized in August 2024 Share Repurchases for Q2 2025 | Period | Total Shares Purchased (millions) | Average Price Paid per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | April 2025 | 0.7 | $73.98 | $52.6 | | May 2025 | 1.5 | $77.99 | $113.0 | | June 2025 | 1.0 | $80.57 | $80.8 | | Total Q2 | 3.2 | N/A | $246.4 | - As of June 30, 2025, approximately $2.4 billion remained available for repurchase under the $3.0 billion share repurchase program approved in August 2024211 Item 5. Other Information During the quarter, an executive officer, Caroline Tsai (Chief Legal & Corporate Affairs Officer), adopted a Rule 10b5-1 trading plan on May 29, 2025. The plan provides for the sale of up to $500,000 of FIS common stock and will expire within one year - On May 29, 2025, executive officer Caroline Tsai adopted a Rule 10b5-1 trading plan for the sale of up to $500,000 of FIS common stock, expiring by May 29, 2026212 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Transaction Agreement related to the Issuer Solutions acquisition and Worldpay sale, the Term Loan Credit Agreement for acquisition financing, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include the Transaction Agreement dated April 17, 2025, and the Term Loan Credit Agreement dated May 1, 2025213214 - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits214