Yahoo Finance Fidelity National (FIS) Q4 Earnings Beat on Banking Business
Fidelity National Information Services, Inc. FIS reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.71, which outpaced the Zacks Consensus Estimate by a whisker. However, the bottom line declined 11% year over year.
Revenues inched up 1% year over year to $3,714 million. The top line beat the consensus mark by a whisker. The organic revenue growth came in at 4% in the quarter under review.
The quarterly results benefited on the back of well-performing Banking and Capital Markets businesses. However, the upside was partly offset by the strain exerted on revenues and margins of the Merchant Solutions business from elevated recessionary impacts in the United Kingdom and the transition of consumer spending from goods to services across the United States.
Q4 Performance
The cost of revenues of $2,196 million slipped 2.4% year over year. Selling, general and administrative expenses escalated 6.1% year over year to $1,025 million in the fourth quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of Fidelity National fell 6% year over year to $1,605 million. The adjusted EBITDA margin of 43.2% deteriorated 320 basis points (bps) year over year.
On a GAAP basis, FIS reported a net loss attributable to common shareholders of $17,365 million or a loss of $29.28 per share. Notably, earnings of $291 million or 47 cents per share were reported in the prior-year quarter.
Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise
Fidelity National Information Services, Inc. price-consensus-eps-surprise-chart | Fidelity National Information Services, Inc. Quote
Segmental Performance
Revenues from Banking Solutions improved 3% year over year to $1,717 million in the fourth quarter, higher than the consensus mark of $1,710 million. The organic revenue growth stood at 4%. Adjusted EBITDA margin of 40.7% deteriorated 400 bps year over year due to lower-margin revenue mix and cost inflation.
Merchant Solutions’ revenues were recorded at $1,178 million, which dipped 1% year over year and lagged the consensus mark of $1,206 million. The organic revenue growth came in at 1%. Adjusted EBITDA margin deteriorated 450 bps year over year to 47.8% as a result of lower-margin revenue mix and cost inflation.
Revenues from Capital Market Solutions advanced 8% year over year to $771 million in the quarter under review, beating the consensus mark of $728 million. The organic revenue growth was reported at 10%. Adjusted EBITDA margin of 54.4% improved 220 bps year over year on the back of solid software sales, expense management and operating leverage.
The Corporate and Other segment’s revenues of $48 million plunged 50% year over year and beat the consensus mark of $46 million.
Balance Sheet & Cash Flow
Fidelity National exited the fourth quarter with cash and cash equivalents of $2,188 million, which rose 8.9% from the 2021-end level. Total assets of $63.3 billion dropped 23.7% from the figure in 2021 end.
Long-term debt, excluding the current portion, came in at $14,207 million at the fourth-quarter end. The figure tumbled 4.2% from the level as of Dec 31, 2022. The current portion of long-term debt was at $2,133 million while short-term borrowings were at $3,797 million.
Total stockholders’ equity of $27,218 million plunged 42.5% from the 2021-end level.
In 2022, net cash provided by operations fell 18.1% from the figure in 2021 end to $3,939 million. FIS generated a free cash flow of $643 million in the fourth quarter, which decreased 23.9% year over year.
Capital Deployment
Fidelity National rewarded $788 million to its shareholders via share buybacks of $508 and dividends worth $280 million in the quarter under review.
On Jan 26, 2023, management approved a quarterly dividend hike. The increased dividend amounting to 52 cents per share will be paid out on Mar 24, 2023, to shareholders of record as of Mar 10, 2023.
Divestiture of Merchant Solutions Business Announced
Concurrent with the fourth-quarter earnings release, FIS unveiled that it intends to opt for a tax-free spin-off of its Merchant Solutions business that is likely to be closed within a year.
Update on Enterprise Transformation Program
Fidelity National is enhancing the target of cash savings that it expects to derive from the Enterprise Transformation Program, which was announced in 2022 and is now named Future Forward. The previous announcement was to receive more than $500 million in cash savings but the same is now anticipated to be $1.25 billion by 2024-end.
1Q23 View
Revenues are forecasted to remain between $3,375 million and $3,425 million, while adjusted EPS is estimated to stay in the $1.17-$1.23 band.
2023 Guidance
Management anticipates net revenues to lie between $14,200 million and $14,450 million, the mid-point of which indicates a 1.4% decline from the 2022 reported figure of $14,528 million.
Adjusted EPS is forecasted within $5.70-$6.00 for 2023, the mid-point of which suggests a 12% fall from the 2022 figure of $6.65.
Zacks Rank
Fidelity National currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the Business Services sector players that have already released fourth-quarter results so far, the bottom-line results of Omnicom Group Inc. OMC, IQVIA Holdings Inc. IQV and Equifax Inc. EFX beat the respective Zacks Consensus Estimate.
Omnicom reported fourth-quarter 2022 earnings of $2.09 per share beating the consensus mark by 7.7% and increased 7.2% year over year. Total revenues of $3.9 billion surpassed the consensus estimate by 4.9% and increased slightly year over year. OMC’s EBITA in the quarter was $662.7 million, up 3.1% year over year. The EBITA margin was 17.1%, up 40 basis points (bps) year over year. Operating profit of $642.7 million increased 3.2% year over year.
IQVIA’s fourth-quarter 2022 adjusted EPS of $2.78 beat the Zacks Consensus Estimate by 1.1% and improved 9% on a year-over-year basis. Total revenues of $3.74 billion outpaced the Zacks Consensus Estimate by 0.9% and increased 2.8% year over year on a reported basis and 7% on a constant-currency basis. Revenues from Technology & Analytics Solutions totaled $1.5 billion, up 0.2% on a reported basis and 4.7% on a constant-currency basis. The adjusted EBITDA of IQV was $920 million, up 11.1% year over year.
Equifax reported fourth-quarter 2022 adjusted earnings of $1.52 per share, which beat the Zacks Consensus Estimate by 2.7% but decreased 17.4% on a year-over-year basis. Revenues of $1.2 billion beat the Zacks Consensus Estimate by 1.5% but decreased 4.4% year over year on a reported basis and 2% on a local-currency basis. Revenues in the USIS division of EFX were $405.9 million, down 6% from the year-ago quarter’s level.
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