UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

Form 10-Q

_______________________________________________

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2018

Or

o	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	(I.R.S. Employer Identification No.)
of incorporation or organization)
601 Riverside Avenue
Jacksonville, Florida	32204
(Address of principal executive offices)	(Zip Code)

(904) 438-6000

(Registrant’s telephone number, including area code)

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 x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o NO x

As of April 30, 2018, 331,014,452 shares of the Registrant’s Common Stock were outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended March 31, 2018

INDEX

	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
A. Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	2
B. Condensed Consolidated Statements of Earnings for the three months ended March 31, 2018 and 2017	3
C. Condensed Consolidated Statements of Comprehensive Earnings for the three months ended March 31, 2018 and 2017	4
D. Condensed Consolidated Statement of Equity for the three months ended March 31, 2018	5
E. Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	6
F. Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosure About Market Risks	37
Item 4. Controls and Procedures	38
Part II: OTHER INFORMATION
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6. Exhibits	40
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

1

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In millions, except per share amounts)

(Unaudited)

	March 31, 2018			December 31, 2017
				As Adjusted *
ASSETS
Current assets:
Cash and cash equivalents	$	725		$	665
Settlement deposits	590			677
Trade receivables, net of allowance for doubtful accounts of $57 and $63 as of March 31, 2018 and December 31, 2017, respectively	1,562			1,624
Contract assets	107			108
Settlement receivables	346			291
Other receivables	96			70
Prepaid expenses and other current assets	309			253
Total current assets	3,735			3,688
Property and equipment, net	581			610
Goodwill	13,747			13,730
Intangible assets, net	3,707			3,885
Computer software, net	1,739			1,728
Deferred contract costs, net	392			354
Other noncurrent assets	504			531
Total assets	$	24,405		$	24,526
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,018		$	1,241
Settlement payables	920			949
Deferred revenues	842			776
Current portion of long-term debt	1,036			1,045
Total current liabilities	3,816			4,011
Long-term debt, excluding current portion	8,040			7,718
Deferred income taxes	1,443			1,468
Deferred revenues	105			106
Other long-term liabilities	390			403
Total liabilities	13,794			13,706
Equity:
FIS stockholders’ equity:
Preferred stock, $0.01 par value, 200 shares authorized, none issued and outstanding as of March 31, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 600 shares authorized, 432 and 432 shares issued as of March 31, 2018 and December 31, 2017	4			4
Additional paid in capital	10,585			10,534
Retained earnings	4,186			4,109
Accumulated other comprehensive earnings (loss)	(318		)	(332		)
Treasury stock, 102 and 99 shares as of March 31, 2018 and December 31, 2017, respectively, at cost	(3,962		)	(3,604		)
Total FIS stockholders’ equity	10,495			10,711
Noncontrolling interest	116			109
Total equity	10,611			10,820
Total liabilities and equity	$	24,405		$	24,526

See accompanying notes to unaudited condensed consolidated financial statements.

* See Note 3.

2

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In millions, except per share data)

(Unaudited)

	Three months ended March 31,
	2018			2017
				As Adjusted *
Revenues	$	2,066		$	2,148
Cost of revenues	1,414			1,491
Gross profit	652			657
Selling, general, and administrative expenses	358			411
Operating income	294			246
Other income (expense):
Interest expense, net	(72		)	(93		)
Other income (expense), net	3			56
Total other income (expense), net	(69		)	(37		)
Earnings before income taxes and equity method investment earnings	225			209
Provision for income taxes	34			74
Equity method investment earnings	(1		)	—
Net earnings	190			135
Net (earnings) loss attributable to noncontrolling interest	(8		)	(6		)
Net earnings attributable to FIS common stockholders	$	182		$	129
Net earnings per share — basic attributable to FIS common stockholders	$	0.55		$	0.39
Weighted average shares outstanding — basic	330			328
Net earnings per share — diluted attributable to FIS common stockholders	$	0.54		$	0.39
Weighted average shares outstanding — diluted	334			333
Cash dividends paid per share	$	0.32		$	0.29

See accompanying notes to unaudited condensed consolidated financial statements.

* See Note 3.

3

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings

(In millions)

(Unaudited)

	Three months ended March 31,
	2018					2017
						As Adjusted *
Net earnings			$	190				$	135
Other comprehensive earnings, before tax:
Unrealized gain (loss) on investments and derivatives	$	—				$	—
Reclassification adjustment for gains (losses) included in net earnings	—					—
Unrealized gain (loss) on investments and derivatives, net	—					—
Foreign currency translation adjustments	14					36
Minimum pension liability adjustment	—					—
Other comprehensive earnings (loss), before tax:	14					36
Provision for income tax expense (benefit) related to items of other comprehensive earnings	—					—
Other comprehensive earnings (loss), net of tax	$	14	14			$	36	36
Comprehensive earnings (loss):			204					171
Net (earnings) loss attributable to noncontrolling interest			(8		)			(6		)
Other comprehensive (earnings) losses attributable to noncontrolling interest			—					(3		)
Comprehensive earnings (loss) attributable to FIS common stockholders			$	196				$	162

See accompanying notes to unaudited condensed consolidated financial statements.

* See Note 3.

4

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

Three months ended March 31, 2018

(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			stock			interest			equity
Balances, December 31, 2017, as adjusted *	432	(99	)	$	4	$	10,534		$	4,109		$	(332	)	$	(3,604	)	$	109		$	10,820
Exercise of stock options	—	1		—		32			—			—			60			—			92
Treasury shares held for taxes due upon exercise of stock options	—	—		—		(1		)	—			—			(17		)	—			(18		)
Purchases of treasury stock	—	(4	)	—		—			—			—			(401		)	—			(401		)
Stock-based compensation	—	—		—		20			—			—			—			—			20
Cash dividends paid ($0.32 per share per quarter) and other distributions	—	—		—		—			(105		)	—			—			(1		)	(106		)
Net earnings	—	—		—		—			182			—			—			8			190
Other comprehensive earnings, net of tax	—	—		—		—			—			14			—			—			14
Balances, March 31, 2018	432	(102	)	$	4	$	10,585		$	4,186		$	(318	)	$	(3,962	)	$	116		$	10,611

See accompanying notes to unaudited condensed consolidated financial statements.

* See Note 3.

5

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Three months ended March 31,
	2018			2017
Cash flows from operating activities:				As Adjusted *
Net earnings	$	190		$	135
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	352			332
Amortization of debt issue costs	5			12
Gain on sale of businesses	(7		)	(85		)
Stock-based compensation	20			26
Deferred income taxes	(14		)	(152		)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
Trade receivables	44			11
Contract assets	2			57
Settlement activity	2			(36		)
Prepaid expenses and other assets	(43		)	(50		)
Deferred contract costs	(65		)	(36		)
Deferred revenue	69			96
Accounts payable, accrued liabilities, and other liabilities	(201		)	144
Net cash provided by operating activities	354			454
Cash flows from investing activities:
Additions to property and equipment	(54		)	(44		)
Additions to computer software	(118		)	(111		)
Proceeds from sale of business	49			827
Other investing activities, net	(4		)	(1		)
Net cash provided by (used in) investing activities	(127		)	671
Cash flows from financing activities:
Borrowings	1,971			1,381
Repayment of borrowings	(1,711		)	(2,443		)
Proceeds from exercise of stock options	98			64
Treasury stock activity	(424		)	(17		)
Dividends paid	(106		)	(95		)
Other financing activities, net	(1		)	(4		)
Net cash used in financing activities	(173		)	(1,114		)
Effect of foreign currency exchange rate changes on cash	6			11
Net increase in cash and cash equivalents	60			22
Cash and cash equivalents, beginning of period	665			683
Cash and cash equivalents, end of period	$	725		$	705
Supplemental cash flow information:
Cash paid for interest	$	46		$	59
Cash paid for income taxes	$	138		$	55

See accompanying notes to unaudited condensed consolidated financial statements.

* See Note 3.

6

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,” 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, 2017. The preparation of these Condensed Consolidated Financial Statements (Unaudited) in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements (Unaudited) and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. Certain reclassifications have been made in the 2017 Condensed Consolidated Financial Statements (Unaudited) to conform to the classifications used in 2018. Amounts in tables in the financial statements and accompanying footnotes may not sum due to rounding.

The Company adopted Topic 606, Revenue from Contracts with Customers, with a date of initial application of January 1, 2018. As a result, all 2017 financial information has been adjusted for the implementation of Topic 606.

We report the results of our operations in three reporting segments: Integrated Financial Solutions (“IFS”), Global Financial Solutions (“GFS”) and Corporate and Other (Note 13).

(2) Summary of Significant Accounting Policies

(a) Revenue Recognition

The Company generates revenues in a number of ways, including from the delivery of account or transaction based processing, professional services, software licensing, software as a service ("SaaS"), business process as a service ("BPaaS"), cloud revenue and software related services.

The Company enters into arrangements with customers to provide services, software and software-related services such as maintenance and implementation and training either individually or as part of an integrated offering of multiple services. At contract inception, the Company assesses the solutions and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a solution or service (or bundle of solutions or services) that is distinct - i.e., if a solution or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. To identify its performance obligations, the Company considers all of the solutions or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company recognizes revenue when or as it satisfies a performance obligation by transferring control of a solution or service to a customer.

Revenue is measured based on the consideration that the Company expects to receive in a contract with a customer. The Company’s contracts with its customers frequently contain variable consideration. Variable consideration exists when the amount which the Company expects to receive in a contract is based on the occurrence or non-occurrence of future events, such as processing services performed under usage-based pricing arrangements or professional services billed on a time and materials basis. Variable consideration is also present in certain transactions in the form of discounts, credits, price concessions, penalties, and similar items. If the amount of a discount or rebate in a contract is fixed and not contingent, that discount or rebate is not variable consideration. The Company estimates variable consideration in its contracts primarily using the expected value method. In some contracts, the Company applies the most likely amount method by considering the single most likely amount in a limited range of possible consideration amounts. The Company develops estimates of variable consideration on the

7

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

basis of both historical information and current trends. Variable consideration included in the transaction price is constrained such that a significant revenue reversal is not probable.

Taxes collected from customers and remitted to governmental authorities are not included in revenue. Postage costs associated with print and mail services are accounted for as a fulfillment cost and are included in cost of revenues.

Technology or service components from third parties are frequently embedded in or combined with our applications or service offerings. We are often responsible for billing the client in these arrangements and transmitting the applicable fees to the third party. The Company determines whether it is responsible for providing the actual solution or service as a principal, or for arranging for the solution or service to be provided by the third party as an agent. Judgment is applied to determine whether we are the principal or the agent by evaluating whether the Company has control of the solution or service prior to it being transferred to the customer. The principal versus agent assessment is performed at the performance obligation level. Indicators that the Company considers in determining if it has control include whether the Company is primarily responsible for fulfilling the promise to provide the specified solution or service to the customer, the Company has inventory risk and the Company has discretion in establishing the price the customer ultimately pays for the solution or service. Depending upon the level of our contractual responsibilities and obligations for delivering solutions to end customers, we have arrangements where we are the principal and recognize the gross amount billed to the customer and other arrangements where we are the agent and recognize the net amount retained.

Once the Company has determined the transaction price, the total transaction price is allocated to each performance obligation in a manner depicting the amount of consideration to which the Company expects to be entitled in exchange for transferring the solution(s) or service(s) to the customer (the “allocation objective”). If the allocation objective is met at contractual prices, no allocations are made. Otherwise, the Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis, except when the criteria are met for allocating variable consideration or a discount to one or more, but not all performance obligations in the contract. The Company allocates variable consideration to one or more, but not all performance obligations when the terms of the variable payment relate specifically to the Company’s efforts to satisfy the performance obligation (or transfer the distinct solution or service) and when such allocation is consistent with the allocation objective when considering all performance obligations in the contract. Determining whether the criteria for allocating variable consideration to one or more, but not all, performance obligations in the contract requires significant judgment and may affect the timing and amount of revenue recognized. The Company does not typically meet the requirements to allocate discounts to one or more, but not all, performance obligations in a contract.

In order to determine the standalone selling price of its promised solutions or services, the Company conducts a regular analysis to determine whether various solutions or services have an observable standalone selling price. If the Company does not have an observable standalone selling price for a particular solution or service, then standalone selling price for that particular solution or service is estimated using all information that is reasonably available and maximizing observable inputs with approaches including historical pricing, cost plus a margin, adjusted market assessment, and residual approach.

The following describes the nature of the Company’s primary types of revenues and the revenue recognition policies and significant payment terms as they pertain to the types of transactions the Company enters into with its customers.

Processing Services Revenues

Processing services are primarily comprised of data processing and application management, including our SaaS, BPaaS, and cloud offerings. Revenues from processing services are typically volume- or activity-based depending on factors such as the number of accounts processed, transactions or trades processed, users, number of hours of services or computer resources used. The payment terms may include tiered pricing structures with the base tier representing a minimum monthly usage fee. Pricing within the tiers typically resets on a monthly basis and minimum monthly volumes are generally met or exceeded. Contract lengths for processing services typically span multiple years. Payment is generally due in advance or in arrears on a monthly or quarterly basis and may include fixed or variable payment amounts depending on the specific payment terms and activity in the period.

For processing services revenues, the nature of the Company’s promise to the customer is to stand ready to provide continuous access to the Company’s processing platforms and perform an unspecified quantity of outsourced and transaction-processing services for a specified term or terms. Accordingly, processing services are generally viewed as a stand-ready performance obligation comprised of a series of distinct daily services. The Company typically satisfies its processing services

8

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

performance obligations over time as the services are provided. A time-elapsed output method is used to measure progress because the Company’s efforts are expended evenly throughout the period given the nature of the promise is a stand-ready service. The Company has evaluated its variable payment terms related to its processing services revenues accounted for as a series of distinct days of service and concluded that they generally meet the criteria for allocating variable consideration entirely to one or more, but not all, performance obligations in a contract. Accordingly, when the criteria are met, variable amounts based on the number and type of services performed during a period are allocated to and recognized on the day in which the Company performs the related services. Fixed fees for processing services are generally recognized ratably over the contract period.

Professional Services Revenues

Professional services revenues are comprised of implementation, conversion, and programming services associated with the Company’s data processing and application management agreements, implementation or installation services related to licensed software, and other consulting services. A significant portion of our professional services revenues are derived from contracts for dedicated personnel resources who are often working full-time at a client site and under the client's direction. These revenues generally re-occur as contracts are renewed. Payment terms for professional services may be based on an upfront fixed fee, fixed upon the achievement of milestones, or on a time and materials basis.

In assessing whether implementation services provided on data processing, application management or software agreements are a distinct performance obligation, the Company considers whether the services are both capable of being distinct (i.e., can the customer benefit from the services alone or in combination with other resources that are readily available to the customer) and distinct within the context of the contract (i.e., separately identifiable from the other performance obligations in the contract). Implementation services and other professional services are typically considered distinct performance obligations. However, when these services involve significant customization or modification of an underlying solution or offering, or if the services are complex and not available from a third-party provider and must be completed prior to a customer having the ability to benefit from a solution or offering, then such services and the underlying solution or offering will be accounted for as a combined performance obligation.

The Company’s professional services that are accounted for as distinct performance obligations and that are billed on a fixed fee basis are typically satisfied as services are rendered; thus the Company uses a cost-based input method, such as cost-to-cost or efforts expended (labor hours), to provide a faithful depiction of the transfer of those services. For professional services that are distinct and billed on a time and materials basis, revenue is generally recognized using an output method that corresponds with the time and materials billed and delivered, which is reflective of the transfer of the services to the customer. Professional services that are not distinct from an associated solution or offering are recognized over the common measure of progress for the overall performance obligation (typically a time-elapsed output measure that corresponds to the period over which the solution or offering is made available to the customer).

License and Software Related Revenues

The Company’s software licenses generally have significant stand-alone functionality to the customer upon delivery and are considered to be functional intellectual property (“IP”). Additionally, the nature of the Company’s promise in granting these software licenses to a customer is typically to provide the customer a right to use the Company’s intellectual property. The Company’s software licenses are generally considered distinct performance obligations, and revenue allocated to the software license is typically recognized at a point in time upon delivery of the license.

In conjunction with software licenses, the Company commonly provides the customer with additional services such as maintenance as well as associated implementation and other professional services related to the software license. Payments for maintenance are typically due annually, quarterly, or monthly in advance. Maintenance is typically comprised of technical support and unspecified updates and upgrades. The Company generally satisfies these performance obligations evenly using a time-elapsed output method over the contract term given there is no discernible pattern of performance. When a software license contract also includes professional services that provide significant modification or customization of the software license, the Company combines the software license and professional services into a single performance obligation, and revenue for the combined performance obligation is recognized as the professional services are provided consistent with the methods described above for professional services revenues.

9

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company has contracts where the licensed software is offered in conjunction with hosting services. The licensed software may be considered a separate performance obligation from the hosting services if the customer can take possession of the software during the contractual term without incurring a significant penalty and if it is feasible for the customer to run the software on its own infrastructure or hire a third party to host the software. If the licensed software and hosting services are separately identifiable, license revenues are recognized when the hosting services commence and it is within the customer's control to obtain a copy of the software, and hosting revenues are recognized using the time-elapsed output method as the service is provided. If the software license is not separately identifiable from the hosting service, then the related revenues for the combined performance obligation are recognized ratably over the hosting period.

Occasionally, the Company offers extended payment terms on its license transactions and evaluates whether any potential significant financing components exist. For certain of its business units, the Company will provide a software license through a rental model for customers who would prefer a periodic fee instead of a larger up-front payment. Revenue recognition under these arrangements follow the same recognition pattern as the arrangements outlined above; however, the customer generally pays for the software license and maintenance in monthly or quarterly installments as opposed to an upfront software license fee. Judgment is required to determine whether these arrangements contain a significant financing component. The Company evaluates whether there is a significant difference between the amount of promised consideration over the rental term and the cash selling price of the software license, and the overall impact of the time value of money on the transaction. Rental software license arrangements that include a significant financing component are adjusted for the time value of money at the Company’s incremental borrowing rate by recording a contract asset and interest income. The Company does not adjust the promised amount of consideration for the effects of the time value of money if it is expected, at contract inception, that the period between when the Company transfers a promised solution or service to a customer and when the customer pays for that solution or service will be one year or less.

Hardware and Other Revenues

Hardware and other miscellaneous revenues are generally recognized at a point in time upon delivery. The Company typically does not stock in inventory the hardware solutions sold but arranges for delivery of hardware from third-party suppliers. The Company determines whether hardware delivered from third-party suppliers should be recognized on a gross or net basis by evaluating whether the Company has control of the solution or service prior to it being transferred to the customer.

Material Rights

Some of the Company’s contracts with customers include options for the customer to acquire additional solutions or services in the future, including options to renew existing services. Options may represent a material right to acquire solutions or services if the discount is incremental to the range of discounts typically given for those solutions or services to that class of customer in that geographical area or market, and the customer would not have obtained the option without entering into the contract. If deemed to be a material right, the Company will account for the material right as a separate performance obligation and determine the standalone selling price based on directly observable prices when available. If the standalone selling price is not directly observable, then the Company estimates the standalone selling price to be equal to the discount that the customer would obtain by exercising the option, as adjusted for any discount that the customer would receive without exercising the option and for the likelihood that the option will be exercised.

(b) Deferred Contract Costs

The Company incurs costs as a result of both the origination and fulfillment of our contracts with customers. Origination costs relate primarily to the payment of sales commissions that are directly related to sales transactions. Fulfillment costs include the cost of implementation services related to SaaS and other cloud-based arrangements when the implementation service is not distinct from the ongoing service. When origination costs and fulfillment costs that will be used to satisfy future performance obligations are directly related to the execution of our contracts with customers, and the costs are recoverable under the contract, the costs are capitalized as a deferred contract cost.

Origination costs for contracts that contain a distinct software license recognized at a point in time are allocated between the license and all other performance obligations of the contract and amortized according to the pattern of performance for the respective obligations. Otherwise, origination costs are capitalized as a single asset for each contract and amortized using an appropriate single measure of performance considering all of the performance obligations in the contract. The Company amortizes origination costs over the expected benefit period to which the deferred contract cost relates. Origination costs related

10

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

to initial contracts with a customer are amortized over the lesser of the useful life of the solution or the expected customer relationship period. Commissions paid on renewals are amortized over the renewal period. Capitalized fulfillment costs are amortized over the lesser of the useful life of the solution or the expected customer relationship period.

(3) Changes in Accounting Policies

The Company adopted Topic 606, Revenue from Contracts with Customers, with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition. The details of the significant changes and quantitative impact of the changes are disclosed below.

The Company applied Topic 606 retrospectively using certain practical expedients in paragraph 606-10-65-1(f). For completed contracts that have variable consideration, the Company uses the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods. Further, the Company does not disclose the amount of consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue for the 2016 and 2015 reporting periods presented before the date of the initial application. Lastly, the Company did not retrospectively restate contracts modified before the beginning of the earliest reporting period presented but reflects the aggregate effect of all modifications that occurred before the beginning of the earliest period presented.

Principal vs. Agent Considerations

In customer transactions that also involve third parties, the Company determines whether it is responsible for providing the ultimate solution or service as a principal, or whether it is merely arranging for the solution or service to be provided by the third party as an agent. When the Company is acting as a principal in a transaction, the Company recognizes the gross amounts billed as revenue. When the Company is acting as an agent in a transaction, the Company recognizes the net amount retained as revenue. Previously, the Company followed the guidance of Topic 605, which lists eight specific indicators that are determinative in evaluating whether a contract is recorded on a gross or a net basis. Under Topic 606, the determination is based on whether an entity obtains control of goods or services prior to transfer to a customer. The Company determined interchange and third-party network fees associated with certain parts of the payment processing business were significantly impacted by the adoption of Topic 606. Previously, gross accounting applied to certain types of these transactions, depending on the specific facts and circumstances. However, under Topic 606 revenues from these arrangements will be presented on a net basis because the Company has concluded that it is acting as an agent in the transaction.

Software License Rentals

The Company previously recognized revenue for initial license fees only when a contract existed, the fee was fixed or determinable, software delivery had occurred, collection was deemed probable, and vendor specific objective evidence of fair value had been established for any undelivered elements in the arrangement. If those criteria were not met, the initial license revenue was either deferred or recognized over time depending on the specific facts and circumstances. Software license rentals typically include payments that are delayed for a period of time, causing the Company to conclude that some portion of the license fee was not fixed or determinable. In these arrangements, license revenue would be deferred until payments become due and payable. Under Topic 606, the Company’s software licenses are generally considered distinct performance obligations, and revenue allocated to the software license is typically recognized at a point in time upon delivery of the license. Software license revenue is also typically recognized at a point in time upon delivery of the license under Topic 606 even if it is sold in a rental model or with extended payment terms, provided collectability is probable. Accordingly, a larger portion of software license revenue is recognized upfront for such transactions under Topic 606 than under Topic 605.

Term License Early Renewals

The Company previously recognized revenue for term software license renewals upon execution of a license renewal contract, provided all other revenue recognition requirements were met. Under Topic 606, revenue attributable to software term license renewals is now recognized at a later date than it would have been recognized under the previous accounting policy.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Impacts on Financial Statements

The following tables summarize the impacts of Topic 606 adoption on the Company’s Condensed Consolidated Financial Statements (Unaudited).

Condensed Consolidated Balance Sheet (Unaudited) as of December 31, 2017:

	As Previously
	Reported			Adjustments			As Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	665		$	—		$	665
Settlement deposits	677			—			677
Trade receivables, net	1,650			(26		)	1,624
Contract assets	—			108			108
Settlement receivables	291			—			291
Other receivables	70			—			70
Prepaid expenses and other current assets	253			—			253
Total current assets	3,606			82			3,688
Property and equipment, net	610			—			610
Goodwill	13,730			—			13,730
Intangible assets, net	3,950			(65		)	3,885
Computer software, net	1,728			—			1,728
Deferred contract costs, net	362			(8		)	354
Other noncurrent assets	531			—			531
Total assets	$	24,517		$	9		$	24,526
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,241		$	—		$	1,241
Settlement payables	949			—			949
Deferred revenues	688			88			776
Current portion of long-term debt	1,045			—			1,045
Total current liabilities	3,923			88			4,011
Long-term debt, excluding current portion	7,718			—			7,718
Deferred income taxes	1,508			(40		)	1,468
Deferred revenues	21			85			106
Other long-term liabilities	403			—			403
Total liabilities	13,573			133			13,706
Equity:
FIS stockholders’ equity:
Preferred stock	—			—			—
Common stock	4			—			4
Additional paid in capital	10,534			—			10,534
Retained earnings	4,233			(124		)	4,109
Accumulated other comprehensive earnings	(332		)	—			(332		)
Treasury stock, at cost	(3,604		)	—			(3,604		)
Total FIS stockholders’ equity	10,835			(124		)	10,711
Noncontrolling interest	109			—			109
Total equity	10,944			(124		)	10,820
Total liabilities and equity	$	24,517		$	9		$	24,526

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statement of Earnings (Unaudited) for the three months ended March 31, 2017:

	As previously
	Reported			Adjustments			As Adjusted
Revenues	$	2,255		$	(107	)	$	2,148
Cost of revenues	1,582			(91		)	1,491
Gross profit	673			(16		)	657
Selling, general, and administrative expenses	413			(2		)	411
Operating income	260			(14		)	246
Other income (expense):
Interest income (expense), net	(93		)	—			(93		)
Other income (expense), net	56			—			56
Total other income (expense)	(37		)	—			(37		)
Earnings before income taxes and equity method investment earnings	223			(14		)	209
Provision (benefit) for income taxes	79			(5		)	74
Equity method investment earnings	—			—			—
Net earnings	144			(9		)	135
Net earnings attributable to noncontrolling interest	(6		)	—			(6		)
Net earnings attributable to FIS common stockholders	$	138		$	(9	)	$	129
Net earnings per share — basic attributable to FIS common stockholders *	$	0.42		$	(0.03	)	$	0.39
Weighted average shares outstanding — basic	328			328			328
Net earnings per share — diluted attributable to FIS common stockholders *	$	0.41		$	(0.03	)	$	0.39
Weighted average shares outstanding — diluted	333			333			333

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AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statement of Comprehensive Earnings (Unaudited) for the three months ended March 31, 2017:

	As Previously
	Reported					Adjustments					As Adjusted
Net earnings			$	144				$	(9	)			$	135
Other comprehensive earnings, before tax:
Unrealized gain (loss) on investments and derivatives	$	—				$	—				$	—
Reclassification adjustment for gains (losses) included in net earnings	—					—					—
Unrealized gain (loss) on investments and derivatives, net	—					—					—
Foreign currency translation adjustments	36					—					36
Minimum pension liability adjustments	—					—					—
Other comprehensive earnings (loss), before tax	36					—					36
Provision for income tax expense (benefit) related to items of other comprehensive earnings	—					—					—
Other comprehensive earnings (loss), net of tax	$	36	36			$	—	—			$	36	36
Comprehensive earnings			180					(9		)			171
Net (earnings) loss attributable to noncontrolling interest			(6		)			—					(6		)
Other comprehensive (earnings) losses attributable to noncontrolling interest			(3		)			—					(3		)
Comprehensive earnings attributable to FIS common stockholders			$	171				$	(9	)			$	162

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statement of Cash Flows (Unaudited) for the three months ended March 31, 2017:

	As Previously
	Reported			Adjustments			As Adjusted
Cash flows from operating activities:
Net earnings	$	144		$	(9	)	$	135
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	339			(7		)	332
Amortization of debt issue costs	12			—			12
Gain on sale of assets	(85		)	—			(85		)
Stock-based compensation	26			—			26
Deferred income taxes	(150		)	(2		)	(152		)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
Trade receivables	67			(56		)	11
Contract assets	—			57			57
Settlement activity	(36		)	—			(36		)
Prepaid expenses and other assets	(50		)	—			(50		)
Deferred contract costs	(37		)	1			(36		)
Deferred revenue	77			19			96
Accounts payable, accrued liabilities, and other liabilities	147			(3		)	144
Net cash provided by operating activities	454			—			454
Cash flows from investing activities:
Additions to property and equipment	(44		)	—			(44		)
Additions to computer software	(111		)	—			(111		)
Net proceeds from sale of assets	827			—			827
Other investing activities, net	(1		)	—			(1		)
Net cash provided by (used in) investing activities	671			—			671
Cash flows from financing activities:
Borrowings	1,381			—			1,381
Repayment of borrowings and capital lease obligations	(2,443		)	—			(2,443		)
Proceeds from exercise of stock options	64			—			64
Treasury stock activity	(17		)	—			(17		)
Dividends paid	(95		)	—			(95		)
Other financing activities, net	(4		)	—			(4		)
Net cash (used in) provided by financing activities	(1,114		)	—			(1,114		)
Effect of foreign currency exchange rate changes on cash	11			—			11
Net increase (decrease) in cash and cash equivalents	22			—			22
Cash and cash equivalents, beginning of year	683			—			683
Cash and cash equivalents, end of year	$	705		$	—		$	705
Supplemental cash flow information:
Cash paid for interest	$	59		$	—		$	59
Cash paid for income taxes	$	55		$	—		$	55

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(4) Revenue

Disaggregation of Revenue

In the following tables, revenue is disaggregated by primary geographical market, type of revenue, and recurring nature of revenue recognized. The tables also include a reconciliation of the disaggregated revenue with the Company’s reportable segments.

For the three months ended March 31, 2018 (in millions):

	Reportable Segments
					Corporate
	IFS		GFS		and Other		Total
Primary Geographical Markets:
North America	$	1,017	$	453	$	64	$	1,534
All others	44		474		14		532
Total	$	1,061	$	927	$	78	$	2,066
Type of Revenue:
Processing and services	$	896	$	542	$	75	$	1,513
License and software related	86		247		—		333
Professional services	37		138		2		177
Hardware and other	42		—		1		43
Total	$	1,061	$	927	$	78	$	2,066
Recurring Nature of Revenue Recognition:
Recurring fees	$	951	$	699	$	75	$	1,725
Non-recurring fees	110		228		3		341
Total	$	1,061	$	927	$	78	$	2,066

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the three months ended March 31, 2017 (in millions):

	Reportable Segments
	As Adjusted
					Corporate
	IFS		GFS		and Other		Total
Primary Geographical Markets:
North America	$	999	$	490	$	95	$	1,584
All others	38		513		13		564
Total	$	1,037	$	1,003	$	108	$	2,148
Type of Revenue:
Processing and services	$	850	$	550	$	87	$	1,487
License and software related	94		201		12		307
Professional services	48		252		6		306
Hardware and other	45		—		3		48
Total	$	1,037	$	1,003	$	108	$	2,148
Recurring Nature of Revenue Recognition:
Recurring fees	$	913	$	699	$	96	$	1,708
Non-recurring fees	124		304		12		440
Total	$	1,037	$	1,003	$	108	$	2,148

Contract Balances

The following table provides information about trade receivables, contract assets, and deferred revenues from contracts with customers (in millions).

	As of
	March 31,		December 31,
	2018		2017
			As adjusted
Trade receivables	$	1,562	$	1,624
Contract assets (current)	107		108
Contract assets (non-current), included in other noncurrent assets	111		118
Deferred revenue (current)	842		776
Deferred revenue (non-current)	105		106

The payment terms and conditions in our customer contracts may vary. In some cases, customers pay in advance of our delivery of solutions or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services. Differences in timing between revenue recognition and invoicing result in accrued trade receivables, contract assets, or deferred revenue on our Condensed Consolidated Balance Sheet. Receivables are accrued when revenue is recognized prior to invoicing but the right to payment is unconditional (i.e., only the passage of time is required). This occurs most commonly when software term licenses recognized at a point in time are paid for periodically over the license term. Contract assets result when amounts allocated to distinct performance obligations are recognized when or as control of a solution or service is transferred to the customer but invoicing is contingent on performance of other performance obligations or

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

on completion of contractual milestones. Contract assets are transferred to receivables when the rights become unconditional, typically upon invoicing of the related performance obligations in the contract or upon achieving the requisite project milestone. Deferred revenue results from customer payments in advance of our satisfaction of the associated performance obligation(s) and relates primarily to prepaid maintenance or other recurring services. Deferred revenues are relieved as revenue is recognized. Contract assets and deferred revenues are reported on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and deferred revenue balances during the three months ended March 31, 2018 were not materially impacted by any factors other than those described above.

During the three months ended March 31, 2018 and 2017, the Company recognized revenue of $282 million and $244 million, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

During the three months ended March 31, 2018 and 2017, amounts recognized from performance obligations satisfied (or partially satisfied) in prior periods were insignificant.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2018, approximately $19.5 billion of revenue is estimated to be recognized in the future from the Company’s 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 35% of our remaining performance obligations over the next 12 months, approximately another 25% over the next 13 to 24 months, and the balance thereafter.

(5) Condensed Consolidated Financial Statement Details

The following table shows the Company’s Condensed Consolidated Financial Statement details as of March 31, 2018 and December 31, 2017 (in millions):

	March 31, 2018						December 31, 2017, As adjusted
	Cost		Accumulated depreciation and amortization		Net		Cost		Accumulated depreciation and amortization		Net
Property and equipment	$	1,672	$	1,091	$	581	$	1,657	$	1,047	$	610
Intangible assets	$	6,356	$	2,649	$	3,707	$	6,369	$	2,484	$	3,885
Computer software	$	2,929	$	1,190	$	1,739	$	2,862	$	1,134	$	1,728

The Company entered into capital lease obligations of $0 million and $74 million during the three months ended March 31, 2018 and 2017, respectively. The assets are included in property and equipment and computer software and the remaining capital lease obligations are classified as long-term debt on our Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2018 and December 31, 2017. Periodic payments are included in repayment of borrowings on the Condensed Consolidated Statements of Cash Flows (Unaudited).

Changes in goodwill during the three months ended March 31, 2018 are summarized as follows (in millions):

	Total
Balance, December 31, 2017	$	13,730
Goodwill distributed through sale of assets	(24		)
Foreign currency adjustments	41
Balance, March 31, 2018	$	13,747

As of March 31, 2018, intangible assets, net of amortization, includes $3,618 million of customer relationships and $40 million of finite-lived trademarks, as well as $49 million of non-amortizable assets consisting mainly of indefinite-lived trademarks.  Amortization expense for the quarter with respect to these intangible assets was $167 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Settlement Activity

We manage certain integrated electronic payment services and programs and wealth management processes for our clients that require us to hold and manage client cash balances used to fund their daily settlement activity. Settlement deposits represent funds we hold that were drawn from our clients to facilitate settlement activities. Settlement receivables represent amounts funded by us. Settlement payables consist of settlement deposits from clients, settlement payables to third parties, and outstanding checks related to our settlement activities for which the right of offset does not exist or we do not intend to exercise our right of offset. Our accounting policy for such outstanding checks is to include them in settlement payables on the Condensed Consolidated Balance Sheets (Unaudited) and operating cash flows on the Condensed Consolidated Statements of Cash Flows (Unaudited).

(6) Deferred Contract Costs

Origination and fulfillment costs from contracts with customers capitalized as of March 31, 2018 and December 31, 2017 consisted of the following (in millions):

	March 31, 2018		December 31, 2017
Installations and conversions in progress	115		104
Incremental contract origination costs completed, net	150		127
Costs to fulfill a contract, net	127		123
Total deferred contract costs, net	$	392	$	354

For the three months ended March 31, 2018 and 2017, amortization of deferred contract costs was $29 million and $21 million, respectively, and there were no impairment losses in relation to the costs capitalized for periods presented.

(7) Long-Term Debt

Long-term debt as of March 31, 2018 and December 31, 2017, consisted of the following (in millions):

	March 31, 2018			December 31, 2017
Senior Notes due April 2018, interest payable semi-annually at 2.000% (1)	250			250
Senior Notes due October 2018, interest payable semi-annually at 2.850%	750			750
Senior Notes due October 2020, interest payable semi-annually at 3.625%	1,150			1,150
Senior Euro Notes due January 2021, interest payable annually at 0.400%	616			599
Senior Notes due August 2021, interest payable semi-annually at 2.250%	750			750
Senior GBP Notes due June 2022, interest payable annually at 1.700%	420			405
Senior Notes due October 2022, interest payable semi-annually at 4.500%	300			300
Senior Notes due April 2023, interest payable semi-annually at 3.500%	700			700
Senior Notes due June 2024, interest payable semi-annually at 3.875%	400			400
Senior Euro Notes due July 2024, interest payable annually at 1.100%	616			599
Senior Notes due October 2025, interest payable semi-annually at 5.000%	900			900
Senior Notes due August 2026, interest payable semi-annually at 3.000%	1,250			1,250
Senior Notes due August 2046, interest payable semi-annually at 4.500%	500			500
Revolving Loan (2)	475			195
Other	(1		)	15
	9,076			8,763
Current portion	(1,036		)	(1,045		)
Long-term debt, excluding current portion	$	8,040		$	7,718

(1) These Senior Notes were paid off on April 13, 2018 with borrowings on the Revolving Loan.

(2) Interest on the Revolving Loan is generally payable at LIBOR plus an applicable margin of up to 1.75% plus an unused commitment fee of up to 0.25%, each based upon the Company's corporate credit ratings. As of March 31, 2018, the weighted average interest rate on the Revolving Loan, excluding fees, was 2.73%.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

FIS has a syndicated credit agreement (the "FIS Credit Agreement") that provides total committed capital of $3,000 million in the form of a revolving credit facility (the "Revolving Loan") maturing on August 10, 2021. As of March 31, 2018, the outstanding principal balance of the Revolving Loan was $475 million, with $2,519 million of borrowing capacity remaining thereunder (net of $6 million in outstanding letters of credit issued under the Revolving Loan).

The obligations of FIS under the FIS Credit Agreement and under all of its outstanding senior notes rank equal in priority and are unsecured. The FIS Credit Agreement and the senior notes are subject to customary covenants, including, among others, limitations under the FIS Credit Agreement on the payment of dividends by FIS, and customary events of default.

On March 15, 2017, FIS redeemed 100% of the outstanding aggregate principal amount of its $700 million5.000% Senior Notes due March 2022 (the "Notes"). On February 1, 2017, the Company also paid down the outstanding balance on the syndicated term loan agreement ("2018 Term Loans"). The Notes and 2018 Term Loans were funded by borrowings under the Company’s Revolving Loan and cash proceeds from the sale of the Public Sector and Education ("PS&E") business. As a result of the redemption of the Notes and the pay down of the 2018 Term Loans, FIS incurred a pre-tax charge of approximately $25 million consisting of the call premium on the Notes and the write-off of previously capitalized debt issuance costs.

On July 10, 2017, FIS issued €1,000 million and £300 million principal amount of new senior notes in an inaugural European bond offering. The new senior notes include €500 million of Senior Notes due in 2021 (the “2021 Euro Notes”) that bear interest at 0.400%, £300 million of Senior Notes due in 2022 (the “2022 GBP Notes”) that bear interest at 1.700% and €500 million of Senior Notes due in 2024 (the “2024 Euro Notes”) that bear interest at 1.100%. Net proceeds from the offering, after deducting discounts and underwriting fees, were $1,491 million using a conversion rate of 1.12 EUR/USD and 1.27 GBP/USD. The new senior notes include covenants and events of default customary for similar debt obligations.

On July 25, 2017, pursuant to cash tender offers ("Tender Offers"), FIS repurchased approximately $2,000 million in aggregate principal of debt securities with a weighted average coupon of approximately 4%. The following approximate amounts of FIS's debt securities were repurchased: $600 million of its 3.625% notes due 2020, $600 million of its 5.000% notes due 2025, $200 million of its 4.500% notes due 2022, $300 million of its 3.875% due 2024 and $300 million of its 3.500% notes due 2023. The Company funded the Tender Offers with proceeds from the European bond offering and borrowings on its Revolving Loan, approximately $469 million of which were almost immediately repaid with proceeds from the sale of a majority ownership stake in the Capco consulting business and risk and compliance consulting business, which was completed on July 31, 2017 (see Note 12).

The following summarizes the aggregate maturities of our debt and capital leases on stated contractual maturities, excluding unamortized non-cash bond premiums and discounts, net of $29 million, as of March 31, 2018 (in millions).

	Total
2018	$	1,031
2019	39
2020	1,157
2021	1,842
2022	720
Thereafter	4,366
Total principal payments	9,155
Debt issuance costs, net of accumulated amortization	(50		)
Total long-term debt	$	9,105

There are no mandatory principal payments on the Revolving Loan and any balance outstanding on the Revolving Loan will be due and payable at its scheduled maturity date, which occurs at August 10, 2021.

FIS may redeem the 2018 Notes, 2020 Notes, 2021 Notes, 2021 Euro Notes, 2022 Notes, 2022 GBP Notes, 2023 Notes, 2024 Notes, 2024 Euro Notes, 2025 Notes, 2026 Notes, and 2046 Notes at its option in whole or in part, at any time and from

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

time to time, at a redemption price equal to the greater of 100% of the principal amount to be redeemed and a make-whole amount calculated as described in the related indenture in each case plus accrued and unpaid interest to, but excluding, the date of redemption, provided no make-whole amount will be paid for redemptions of the 2020 Notes, the 2021 Notes, the 2021 Euro Notes and the 2022 GBP Notes during the one month prior to their maturity, the 2022 Notes during the two months prior to their maturity, the 2023 Notes, the 2024 Notes, the 2024 Euro Notes, the 2025 Notes, and the 2026 Notes during the three months prior to their maturity, and the 2046 Notes during the six months prior to their maturity.

Debt issuance costs of $50 million, net of accumulated amortization, remain capitalized as of March 31, 2018, related to all of the above outstanding debt.

We monitor the financial stability of our counterparties on an ongoing basis. The lender commitments under the undrawn portions of the Revolving Loan are comprised of a diversified set of financial institutions, both domestic and international. The failure of any single lender to perform its obligations under the Revolving Loan would not adversely impact our ability to fund operations.

The fair value of the Company’s long-term debt is estimated to be approximately $14 million lower than the carrying value as of March 31, 2018. This estimate is based on quoted prices of our senior notes and trades of our other debt in close proximity to March 31, 2018, which are considered Level 2-type measurements. This estimate is subjective in nature and involves uncertainties and significant judgment in the interpretation of current market data. Therefore, the values presented are not necessarily indicative of amounts the Company could realize or settle currently.

(8) Financial Instruments

As of March 31, 2018, we had no outstanding interest rate swap transactions and no significant forward contracts.

Net Investment Hedges

In June 2017, the Company entered into two Euro-denominated foreign currency exchange forward contracts totaling €999 million and a GBP-denominated foreign currency exchange forward contract of £298 million, which were designated as a net investment hedge of its investment in Euro and GBP denominated operations, respectively, in order to reduce the volatility in the income statement caused by the changes in foreign currency exchange rates of the Euro and GBP with respect to the U.S. dollar.

In July 2017, the forward contracts above were terminated and the Company designated its Euro-denominated Senior Notes due 2021 (€500 million) and Senior Notes due 2024 (€500 million) and GBP-denominated Senior Notes due 2022 (£300 million) as a net investment hedge of its investment in Euro and GBP denominated operations, respectively, in order to reduce the volatility in the income statement caused by the changes in foreign currency exchange rates of the Euro and GBP with respect to the U.S. dollar.

The change in fair value of the net investment hedges due to remeasurement of the effective portion is recorded in other comprehensive income (loss). The ineffective portion of the hedging instruments impacts net income when the ineffectiveness occurs. During the first quarter of 2018, net investment hedge combined losses of $38 million, net of tax, respectively, were recognized in other comprehensive income as a component of foreign currency translation adjustments. No ineffectiveness was recorded on the net investment hedges above.

(9) Commitments and Contingencies

Reliance Trust Claims

Reliance Trust Company, the Company’s subsidiary, is named as a defendant in a class action arising out of its provision of services as the discretionary trustee for a 401(k) Plan for one of its customers. Plaintiffs in the action seek damages and attorneys’ fees, as well as equitable relief, for alleged breaches of fiduciary duty and prohibited transactions under the Employee Retirement Income Security Act of 1974. The action also makes claims against the Plan's sponsor and record-keeper. Reliance Trust Company is vigorously defending the action and believes that it has meritorious defenses. While we believe that the ultimate resolution of the matter will not have a material impact on our financial condition, we are unable at

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

this time to make an estimate of potential losses arising from the action because the matter is still in pre-trial proceedings and involves unresolved questions of fact and law.

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 11 claims against Servicos asserting potential tax liabilities of approximately $15 million. There are potentially 25 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 $56 million making the total potential exposure for all 36 claims approximately $71 million. We do not believe a liability for these 36 total claims is probable and, therefore, have not recorded a liability for any of these claims.

Acquired Contingencies (SunGard)

The Company became responsible for certain contingencies which were assumed in the SunGard acquisition. The Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2018 includes a liability of $77 million mostly related to unclaimed property examinations and tax compliance matters.

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, and 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) Related Party Transactions

Cardinal Holdings

On July 31, 2017, FIS closed on the sale of a majority ownership stake in the Capco consulting business and risk and compliance consulting business to Clayton, Dubilier & Rice L.P., by and through certain funds that it manages ("CD&R"). CD&R acquired a 60% interest in the entity (Cardinal Holdings, L.P. ("Cardinal")) and FIS obtained the remaining 40% interest, in each case before equity issued to management (Note 12). Cardinal became a related party effective July 31, 2017.

Upon closing on the sale of the Capco consulting business and risk and compliance consulting business, FIS and Cardinal entered into a short-term Transition Services Agreement ("TSA"), whereby FIS provides various agreed upon services to Cardinal. FIS also provides ongoing management consulting services and other services to Cardinal. Amounts transacted through these agreements were not significant to the 2018 and 2017 periods presented.

Capco continues to provide Banco Bradesco S.A. ("Banco Bradesco") with consulting services. Capco revenue and related party receivables from Banco Bradesco through the July 31, 2017 closing is included below under Brazilian Venture revenue from Banco Bradesco.

Brazilian Venture

The Company operates a joint venture ("Brazilian Venture") with Banco Bradesco, in which we own a 51% controlling interest, to provide comprehensive, fully-outsourced transaction processing, call center, cardholder support and collection

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services to multiple card issuing clients in Brazil, including Banco Bradesco. The original accounting for this transaction resulted in the establishment of a contract intangible asset and a liability for amounts payable to the original partner banks upon final migration of their respective card portfolios and achieving targeted volumes. The unamortized contract intangible asset balance as of March 31, 2018 was $61 million. The carrying value of the noncontrolling interest as of March 31, 2018 was $109 million.

The Company recorded revenues of $87 million and $80 million during the three months ended March 31, 2018 and 2017, respectively, from Banco Bradesco. Revenues from Banco Bradesco included $3 million of unfavorable currency impact during the three months ended March 31, 2018, resulting from foreign currency exchange rate fluctuations between the U.S. Dollar and Brazilian Real.

A summary of the Company’s related party receivables and payables is as follows (in millions):

		March 31,		December 31,
Related Party	Balance sheet location	2018		2017
Banco Bradesco	Trade receivables	$	45	$	47
Banco Bradesco	Contract assets	6		5
Banco Bradesco	Accounts payable and accrued liabilities	10		10
Banco Bradesco	Other long-term liabilities	18		17

(11) Net Earnings per Share

The basic weighted average shares and common stock equivalents for the three months ended March 31, 2018 and 2017 are computed using the treasury stock method.

The following table summarizes the earnings per share attributable to FIS common stockholders for the three months ended March 31, 2018 and 2017 (in millions, except per share amounts):

	Three months ended March 31,
	2018		2017
Net earnings attributable to FIS common stockholders	$	182	$	129
Weighted average shares outstanding — basic	330		328
Plus: Common stock equivalent shares	4		5
Weighted average shares outstanding — diluted	334		333
Net earnings per share — basic attributable to FIS common stockholders	$	0.55	$	0.39
Net earnings per share — diluted attributable to FIS common stockholders	$	0.54	$	0.39

Options to purchase less than 1 million and 1 million shares of our common stock for the three months ended March 31, 2018 and 2017, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive.

On July 20, 2017 our Board of Directors approved a plan authorizing repurchases of up to $4.0 billion of our outstanding common stock in the open market at prevailing market prices or in privately negotiated transactions through December 31, 2020.  This share repurchase authorization replaced any existing share repurchase authorization.

(12) Divestitures

On July 31, 2017, FIS closed on the sale of a majority ownership stake in its Capco consulting business and risk and compliance consulting business to CD&R for cash proceeds of approximately $469 million, resulting in a pre-tax loss of approximately $41 million. The divestiture is consistent with our strategy to focus on our IP-led businesses. CD&R acquired preferred units convertible into 60% of the common units of Cardinal and FIS obtained common units representing the

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remaining 40%, in each case before equity is issued to management. The preferred units are entitled to a quarterly dividend at an annual rate of 12%, payable in cash (if available) or additional preferred units at FIS' option. The businesses sold were included within the GFS and IFS segments. The sale did not meet the standard necessary to be reported as discontinued operations; therefore, the pre-tax loss and related prior period earnings remain reported within earnings. Prior to the sale, the Capco consulting business and risk and compliance consulting business' pre-tax earnings, excluding certain unallocated corporate costs, for the period ended March 31, 2017 was $4 million.

FIS' 40% ownership in Cardinal was initially valued at $172 million and was recorded as an equity method investment included within other noncurrent assets on the Condensed Consolidated Balance Sheet (Unaudited). After the sale on July 31, 2017, FIS began to recognize after-tax equity method investment earnings outside of operating income and segment Adjusted EBITDA. For periods prior to July 31, 2017, the Capco consulting business and risk and compliance consulting business were included within operating income and segment Adjusted EBITDA.

On February 1, 2017, the Company closed on the sale of the SunGard Public Sector and Education ("PS&E") business for $850 million, resulting in a pre-tax gain of $85 million. The transaction included all PS&E solutions, which provided a comprehensive set of technology solutions to address public safety and public administration needs of government entities as well as the needs of K-12 school districts. The divestiture is consistent with our strategy to serve the financial services markets. Cash proceeds were used to reduce outstanding debt (see Note 7). Net cash proceeds, after payment of taxes and transaction-related expenses, were approximately $500 million. The PS&E business was included in the Corporate and Other segment. The sale did not meet the standard necessary to be reported as discontinued operations; therefore, the gain and related prior period earnings remain reported within earnings. Prior to the sale, PS&E's pre-tax earnings, excluding certain unallocated corporate costs, for the period ended March 31, 2017 was $3 million.

(13) Segment Information

Integrated Financial Solutions ("IFS")

The IFS segment is focused primarily on serving North American clients for transaction and account processing, payment solutions, channel solutions, lending and wealth and retirement solutions, corporate liquidity, digital channels, risk and compliance solutions, and services, capitalizing on the continuing trend to outsource these solutions. Clients in this segment include regional and community banks, credit unions and commercial lenders, as well as government institutions, merchants and other commercial organizations. IFS’ primary software applications function as the underlying infrastructure of a financial institution's processing environment. These applications include core bank processing software, which banks use to maintain the primary records of their customer accounts, and complementary applications and services that interact directly with the core processing applications. This market is primarily served through integrated solutions and characterized by multi-year processing contracts that generate highly recurring revenues. The predictable nature of cash flows generated from this segment provides opportunities for further investments in innovation, integration, information and security, and compliance in a cost effective manner. The business solutions in this segment included the risk and compliance consulting business through its divestiture on July 31, 2017 (Note 12).

Global Financial Solutions ("GFS")

The GFS segment is focused on serving the largest global financial institutions and/or international financial institutions with a broad array of capital markets and asset management and insurance solutions, as well as banking and payments solutions.

GFS clients include the largest global financial institutions, including those headquartered in the United States, as well as all international financial institutions we serve as clients in more than 130 countries. These institutions face unique business and regulatory challenges and account for the majority of financial institution information technology spend globally. The purchasing patterns of GFS clients vary from those of IFS clients who typically purchase solutions on an outsourced basis. GFS clients purchase our solutions and services in various ways including licensing and managing technology “in-house”, fully outsourced end-to-end solutions, and using consulting and third-party service providers. We have long-established relationships with many of these financial institutions that generate significant recurring revenue. GFS clients also include asset managers, buy- and sell-side securities and trading firms, insurers and private equity firms. This segment also includes the Company's consolidated Brazilian Venture (Note 10). The business solutions in this segment included the Capco consulting business through its divestiture on July 31, 2017 (Note 12).

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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. The business solutions in this segment included the PS&E business through its divestiture on February 1, 2017 (Note 12), commercial services and retail check processing. The overhead and leveraged costs relate to marketing, corporate finance and accounting, human resources, legal, and amortization of acquisition-related intangibles and other costs that are not considered when management evaluates revenue-generating segment performance, such as acquisition integration and severance costs. The Corporate and Other segment also includes the impact on revenue for 2018 and 2017 of adjusting SunGard's deferred revenue to fair value.

During the three months ended March 31, 2018 and 2017, the Company recorded certain costs relating to integration and severance activity primarily from the SunGard acquisition of $57 million and $80 million, respectively.

Adjusted EBITDA

This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, Adjusted EBITDA, as it relates to our segments, is presented in conformity with Accounting Standards Codification Topic 280, "Segment Reporting". Adjusted EBITDA is defined as EBITDA (defined as net income (loss) before net interest expense, income tax provision (benefit) and depreciation and amortization, including amortization of purchased intangibles), plus certain non-operating items. The non-operating items affecting the segment profit measure generally include acquisition accounting adjustments, acquisition, integration and severance costs, and restructuring expenses. For consolidated reporting purposes, 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.

As of and for the three months ended March 31, 2018 (in millions):

	IFS		GFS		Corporate and Other			Total
Revenues	$	1,061	$	927	$	78		$	2,066
Operating expenses	695		689		388			1,772
Depreciation and amortization	85		67		17			169
Purchase accounting amortization	—		—		183			183
EBITDA	451		305		(110		)	646
Acquisition deferred revenue adjustment	—		—		2			2
Acquisition, integration and severance costs	—		—		57			57
Adjusted EBITDA	$	451	$	305	$	(51	)	705
EBITDA								$	646
Interest expense, net								72
Depreciation and amortization								169
Purchase accounting amortization								183
Other income (expense) unallocated								2
Provision for income taxes								34
Net earnings attributable to noncontrolling interest								8
Net earnings attributable to FIS common stockholders								$	182
Capital expenditures	$	99	$	71	$	2		$	172
Total assets (1)	$	10,667	$	8,449	$	5,288		$	24,404
Goodwill	$	7,662	$	5,915	$	170		$	13,747

(1) Total assets as of March 31, 2018 exclude $1 million related to discontinued operations.

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As of and for the three months ended March 31, 2017 (in millions):

	IFS		GFS		Corporate and Other			Total
Revenues	$	1,037	$	1,003	$	108		$	2,148
Operating expenses	671		801		430			1,902
Depreciation and amortization	73		63		16			152
Purchase accounting amortization	—		—		180			180
EBITDA	439		265		(126		)	578
Acquisition deferred revenue adjustment	—		—		3			3
Acquisition, integration and severance costs	—		—		80			80
Adjusted EBITDA	$	439	$	265	$	(43	)	$	661
EBITDA								$	578
Interest expense, net								93
Depreciation and amortization								152
Purchase accounting amortization								180
Other income (expense) unallocated								56
Provision for income taxes								74
Net earnings attributable to noncontrolling interest								6
Net earnings attributable to FIS common stockholders								$	129
Capital expenditures (1)	$	126	$	94	$	9		$	229
Total assets (2)	$	10,300	$	9,187	$	5,597		$	25,084
Goodwill	$	7,676	$	6,338	$	170		$	14,184

(1) Capital expenditures for the three months ended March 31, 2017 include $74 million of capital leases.

(2) Total assets as of March 31, 2017 exclude $1 million related to discontinued operations.

Clients in Brazil, the United Kingdom, Germany, India, Australia, France and Switzerland accounted for the majority of the revenues from clients based outside of the North America for all periods presented. Long-term assets, excluding goodwill and other intangible assets, located outside of the United States total $577 million and $535 million as of March 31, 2018 and 2017, respectively. These assets are predominantly located in Brazil, India, Germany and the United Kingdom.

(14)    Share Repurchase Program

Our Board of Directors has approved a series of plans authorizing repurchases of our common stock in the open market at prevailing market prices or in privately negotiated transactions, the most current of which on July 20, 2017, authorized repurchases of up to $4.0 billion through December 31, 2020. This share repurchase authorization replaced any existing share repurchase authorization plan. Approximately $3.5 billion of plan capacity remained available for repurchases as of March 31, 2018.

The table below summarizes annual share repurchase activity under these plans (in millions, except per share amounts):

				Total cost of shares
				purchased as part of
	Total number of	Average price		publicly announced
Three months ended	shares purchased	paid per share		plans or programs
March 31, 2018	4.1	$	97.70	$	401
December 31, 2017	1.1	$	93.24	$	105

During April 2018, we repurchased an additional 2.1 million shares of our common stock for $200 million at an average price of $95.83 per share.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless stated otherwise or the context otherwise requires, all references to “FIS,” “we,” the “Company” or the “registrant” are to Fidelity National Information Services, Inc., a Georgia corporation, and its subsidiaries.

The following discussion should be read in conjunction with Item 1: Condensed Consolidated Financial Statements (Unaudited) and the Notes thereto included elsewhere in this report. The statements contained in this Form 10-Q or in our other documents or in oral presentations or other statements made by our management that are not purely historical are forward-looking statements within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about anticipated financial outcomes, including any earnings guidance of the Company, business and market conditions, outlook, foreign currency exchange rates, expected dividends and share repurchases, the Company’s sales pipeline and anticipated profitability and growth, as well as other statements about our expectations, beliefs, intentions, or strategies regarding the future are forward-looking statements. These statements relate to future events and our future results and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms and other comparable terminology.

Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include, without limitation:

• the risk that acquired businesses will not be integrated successfully, or that the integration will be more costly or more time-consuming and complex than anticipated;

• the risk that cost savings and other synergies anticipated to be realized from acquisitions may not be fully realized or may take longer to realize than expected;

• the risk of doing business internationally;

• changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, changes in either or both the United States and international lending, capital and financial markets and currency fluctuations;

• the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy and cybersecurity laws and regulations;

• the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in, or new laws or regulations affecting, the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;

• changes in the growth rates of the markets for our solutions;

• failures to adapt our solutions to changes in technology or in the marketplace;

• internal or external security breaches of our systems, including those relating to unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our software or platforms, and the reactions of customers, card associations, government regulators and others to any such events;

• the risk that implementation of software (including software updates) for customers or at customer locations may result in the corruption or loss of data or customer information, interruption of business operations, exposure to liability claims or loss of customers;

• the reaction of current and potential customers to communications from us or regulators regarding information security, risk management, internal audit or other matters;

• competitive pressures on pricing related to the decreasing number of community banks in the U.S., the development of new disruptive technologies competing with one or more of our solutions, increasing presence of international competitors in the U.S. market and the entry into the market by global banks and global companies with respect to certain competitive solutions, each of which may have the impact of unbundling individual solutions from a comprehensive suite of solutions we provide to many of our customers;

•