Fidelity National Information Services Inc. (
reported second-quarter 2014 earnings from continuing operations of
75 cents per share, up 5.4% from the year-ago quarter. Earnings per
share (EPS) beat the Zacks Consensus Estimate by 11 cents.
Revenues increased 5.7% year over year (5% organic growth) to
approximately $1.60 billion, slightly higher than the Zacks
Consensus Estimate. The year-over-year increase was primarily
driven by strong performance from the International Solutions
International Solutions revenues grew 14.2% year over year (12%
organic growth) to $346.8 million, driven by growth across all
Revenues from Financial Solutions increased 7.2% year over year to
$629 million (6% organic growth), driven by strong growth in
consulting, professional and digital delivery solutions.
Payment Solutions revenues remained almost flat on a year-over-year
basis to $623.6 million, driven by growth in network solutions,
bill payment services, image and output solutions, offset by lower
Gross margin contracted 100 basis points (bps) to 35% due to
unfavorable business mix.
Selling, general & administrative expense (SG&A), as a
percentage of revenues, decreased 20 bps from the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) margin declined 60 bps on a year-over-year
basis to 29.2% in the quarter. Segment-wise, International
Solutions EBITDA margin decreased 90 bps and Payment Solutions
contracted 160 bps, while Financial Solutions climbed 20 bps on a
Operating margin contracted 80 bps on a year-over-year basis to
22.7%. Higher margin financial solutions operating margin increased
60 bps. Payment and International Solutions operating margins
contracted 170 bps and 70 bps, respectively.
Net income was $217.4 million or 75 cents per share as compared
with $209.8 million or 71 cents per share in the year-ago
Fidelity National Information Services, Inc -
Earnings Surprise | FindTheBest
Balance Sheet & Cash Flow
Fidelity's balance sheet remained highly leveraged at the end of
the second-quarter 2014. As of Jun 30, 2014, cash and cash
equivalents were $793.7 million compared with $737.7 million in the
previous quarter. Total debt (including the current portion) at the
end of the quarter was $4.92 billion compared with $4.78 billion in
the previous quarter.
Fidelity generated $245 million in cash from operations versus
approximately $23 million in the previous quarter. Free cash flow
decreased to $149 million from $158 million in the previous
The company repurchased 2.8 million shares for $151 million during
For 2014, Fidelity expects organic revenues to grow in the range of
4.5% to 6.5%. The company expects 2014 earnings in the range of
$3.05 to $3.16, an increase of 8% to 12% over 2013. This is higher
than the Zacks Consensus Estimate of $2.59.
EBITDA is projected to grow in the 4.5% to 6.5% range for the full
year. Free cash flow is expected to approximate adjusted net
earnings for the year.
We believe that Fidelity's commanding position in the financial
services market, increasing international exposure, recurring
revenue model, diversified product portfolio, cost synergies from
acquisitions and a loyal customer base are significant positives.
Moreover, strong demand for its solutions is expected to boost
top-line growth in the near term. The company continues to win
contracts from banks and financial institutions internationally,
which will further drive its market share.
Fidelity's licensing agreement with Visa (
) and MasterCard (
) to offer EMV enabled debit cards to its NYCE partners is a key
growth catalyst. We believe that increasing EMV adoption in the
U.S. will drive Fidelity's top-line growth in 2014.
However, increasing consolidation in the banking sector,
challenging environment for the Payments Solutions business and
uncertain regulatory environment are the primary headwinds, in our
view. Moreover, intensifying competition from the likes of Fiserv (
) is a major concern in the near term.
Currently, Fidelity has a Zacks Rank #3 (Hold).
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