10-Q 1 fis-10xq06x30x2018.htm 10-Q Document

 
 
 
 
 
 
 
 
 
 
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 June 30, 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 July 30, 2018, 328,820,674 shares of the Registrant’s Common Stock were outstanding.
 
 
 
 
 
 
 
 
 
 



FORM 10-Q
QUARTERLY REPORT
Quarter Ended June 30, 2018
INDEX
 
Page
 
 
 
EX-10.1
 
EX-10.2
 
EX-10.3
 
 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)
 
June 30, 2018
 
December 31, 2017
 
 
 
As Adjusted *
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
683

 
$
665

Settlement deposits
522

 
677

Trade receivables, net of allowance for doubtful accounts of $28 and $63 as of
June 30, 2018 and December 31, 2017, respectively
1,408

 
1,624

Contract assets
109

 
108

Settlement receivables
279

 
291

Other receivables
199

 
70

Prepaid expenses and other current assets
294

 
253

Total current assets
3,494

 
3,688

Property and equipment, net
557

 
610

Goodwill
13,666

 
13,730

Intangible assets, net
3,524

 
3,885

Computer software, net
1,723

 
1,728

Deferred contract costs, net
412

 
354

Other noncurrent assets
492

 
531

Total assets
$
23,868

 
$
24,526

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
934

 
$
1,241

Settlement payables
796

 
949

Deferred revenues
766

 
776

Current portion of long-term debt
38

 
1,045

Total current liabilities
2,534

 
4,011

Long-term debt, excluding current portion
8,854

 
7,718

Deferred income taxes
1,455

 
1,468

Deferred revenues
103

 
106

Other long-term liabilities
378

 
403

Total liabilities
13,324

 
13,706

Equity:
 
 
 
FIS stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 200 shares authorized, none issued and outstanding as of June 30, 2018 and December 31, 2017

 

Common stock, $0.01 par value, 600 shares authorized, 433 and 432 shares issued as of June 30, 2018 and December 31, 2017
4

 
4

Additional paid in capital
10,659

 
10,534

Retained earnings
4,291

 
4,109

Accumulated other comprehensive earnings (loss)
(403
)
 
(332
)
Treasury stock, 102 and 99 shares as of June 30, 2018 and December 31, 2017, respectively, at cost
(4,112
)
 
(3,604
)
Total FIS stockholders’ equity
10,439

 
10,711

Noncontrolling interest
105

 
109

Total equity
10,544

 
10,820

Total liabilities and equity
$
23,868

 
$
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
June 30,
 
Six months ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
As Adjusted *
 
 
 
As Adjusted *
Revenues
$
2,106

 
$
2,258

 
$
4,172

 
$
4,406

Cost of revenues
1,414

 
1,520

 
2,828

 
3,011

Gross profit
692

 
738

 
1,344

 
1,395

Selling, general, and administrative expenses
339

 
368

 
697

 
779

Operating income
353

 
370

 
647

 
616

Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(73
)
 
(91
)
 
(144
)
 
(183
)
Other income (expense), net
(4
)
 
4

 
(2
)
 
60

Total other income (expense), net
(77
)
 
(87
)
 
(146
)
 
(123
)
Earnings before income taxes and equity method investment earnings (loss)
276

 
283

 
501

 
493

Provision (benefit) for income taxes
51

 
136

 
85

 
210

Equity method investment earnings (loss)
(7
)
 

 
(8
)
 

Net earnings
218

 
147

 
408

 
283

Net (earnings) loss attributable to noncontrolling interest
(6
)
 
(8
)
 
(14
)
 
(14
)
Net earnings attributable to FIS common stockholders
$
212

 
$
139

 
$
394

 
$
269

 
 
 
 
 
 
 
 
Net earnings per share — basic attributable to FIS common stockholders
$
0.64

 
$
0.42

 
$
1.20

 
$
0.82

Weighted average shares outstanding — basic
329

 
330

 
329

 
329

Net earnings per share — diluted attributable to FIS common stockholders
$
0.64

 
$
0.42

 
$
1.18

 
$
0.81

Weighted average shares outstanding — diluted
333

 
334

 
334

 
334

Cash dividends paid per share
$
0.32

 
$
0.29

 
$
0.64

 
$
0.58

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 June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
As Adjusted *
 
 
 
 
 
As Adjusted *
Net earnings
 
 
$
218

 
 
 
$
147

 
 
 
$
408

 
 
 
$
283

Other comprehensive earnings, before tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on investments and derivatives
$

 
 
 
$
(33
)
 
 
 
$

 
 
 
$
(33
)
 
 
Reclassification adjustment for gain (loss) included in net earnings

 
 
 

 
 
 

 
 
 

 
 
Unrealized gain (loss) on investments and derivatives, net

 
 
 
(33
)
 
 
 

 
 
 
(33
)
 
 
Foreign currency translation adjustments
(102
)
 
 
 
(62
)
 
 
 
(88
)
 
 
 
(26
)
 
 
Minimum pension liability adjustment

 
 
 
(10
)
 
 
 

 
 
 
(10
)
 
 
Other comprehensive earnings (loss), before tax:
(102
)
 
 
 
(105
)
 
 
 
(88
)
 
 
 
(69
)
 
 
Provision for income tax expense (benefit) related to items of other comprehensive earnings

 
 
 
(13
)
 
 
 

 
 
 
(13
)
 
 
Other comprehensive earnings (loss), net of tax
$
(102
)
 
(102
)
 
$
(92
)
 
(92
)
 
$
(88
)
 
(88
)
 
$
(56
)
 
(56
)
Comprehensive earnings:
 
 
116

 
 
 
55

 
 
 
320

 
 
 
227

Net (earnings) loss attributable to noncontrolling interest
 
 
(6
)
 
 
 
(8
)
 
 
 
(14
)
 
 
 
(14
)
Other comprehensive (earnings) loss attributable to noncontrolling interest
 
 
17

 
 
 
5

 
 
 
17

 
 
 
2

Comprehensive earnings attributable to FIS common stockholders
 
 
$
127

 
 
 
$
52

 
 
 
$
323

 
 
 
$
215

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
Six months ended June 30, 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

Issuance of restricted stock
1

 

 

 

 

 

 

 

 

Exercise of stock options

 
3

 

 
91

 

 

 
113

 

 
204

Treasury shares held for taxes due upon exercise of stock options

 

 

 
(11
)
 

 

 
(20
)
 

 
(31
)
Purchases of treasury stock

 
(6
)
 

 

 

 

 
(601
)
 

 
(601
)
Stock-based compensation

 

 

 
45

 

 

 

 

 
45

Cash dividends paid ($0.32 per share per quarter) and other distributions

 

 

 

 
(212
)
 

 

 
(1
)
 
(213
)
Net earnings

 

 

 

 
394

 

 

 
14

 
408

Other comprehensive earnings, net of tax

 

 

 

 

 
(71
)
 

 
(17
)
 
(88
)
Balances, June 30, 2018
433

 
(102
)
 
$
4

 
$
10,659

 
$
4,291

 
$
(403
)
 
$
(4,112
)
 
$
105

 
$
10,544

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)
 
Six months ended
June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
As Adjusted *
Net earnings
$
408

 
$
283

Adjustment to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
706

 
673

Amortization of debt issue costs
9

 
17

Gain on sale of businesses
(6
)
 
(88
)
Loss on extinguishment of debt
1

 

Stock-based compensation
45

 
61

Deferred income taxes
(24
)
 
(130
)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
 
 
 
Trade receivables
189

 
(5
)
Contract assets
(3
)
 
51

Settlement activity
13

 
(19
)
Prepaid expenses and other assets
(11
)
 
(52
)
Deferred contract costs
(119
)
 
(64
)
Deferred revenues
(2
)
 
18

Accounts payable, accrued liabilities, and other liabilities
(383
)
 
(217
)
Net cash provided by operating activities
823

 
528

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property and equipment
(83
)
 
(69
)
Additions to computer software
(233
)
 
(228
)
Proceeds from sale of business
49

 
846

Other investing activities, net
(6
)
 
(3
)
Net cash provided by (used in) investing activities
(273
)
 
546

 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings
5,703

 
3,698

Repayment of borrowings
(5,521
)
 
(4,557
)
Debt issuance costs
(24
)
 

Proceeds from exercise of stock options
203

 
109

Treasury stock activity
(637
)
 
(43
)
Dividends paid
(211
)
 
(192
)
Other financing activities, net
(2
)
 
(5
)
Net cash provided by (used in) financing activities
(489
)
 
(990
)
Effect of foreign currency exchange rate changes on cash
(43
)
 
19

Net increase (decrease) in cash and cash equivalents
18

 
103

Cash and cash equivalents, beginning of period
665

 
683

Cash and cash equivalents, end of period
$
683

 
$
786

 
 
 
 
Supplemental cash flow information:
 
 
 
Cash paid for interest
$
146

 
$
195

Cash paid for income taxes
$
353

 
$
452

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 Accounting Standards Codification 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, software as a service ("SaaS"), business process as a service ("BPaaS"), cloud offerings, software licensing, software related services, and professional services.

The Company enters into arrangements with customers to provide services, software and software-related services such as maintenance, 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

7

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


consideration on the 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.

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.

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 follows 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.

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

9

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


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).

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 to initial contracts with a customer are amortized over the lesser of the useful life of the solution or the expected

10

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


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 used the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods. Further, the Company did 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 2017 interim 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.


11

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
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 (in millions):

 
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



12

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Condensed Consolidated Statement of Earnings (Unaudited) for the three months ended June 30, 2017 (in millions):
 
As previously
 
 
 
 
 
Reported
 
Adjustments
 
As Adjusted
Revenues
$
2,341

 
$
(83
)
 
$
2,258

Cost of revenues
1,612

 
(92
)
 
1,520

Gross profit
729

 
9

 
738

Selling, general, and administrative expenses
370

 
(2
)
 
368

Operating income
359

 
11

 
370

Other income (expense):
 
 
 
 
 
Interest income (expense), net
(91
)
 

 
(91
)
Other income (expense), net
4

 

 
4

Total other income (expense), net
(87
)
 

 
(87
)
Earnings before income taxes and equity method investment earnings (loss)
272

 
11

 
283

Provision (benefit) for income taxes
132

 
4

 
136

Equity method investment earnings (loss)

 

 

Net earnings
140

 
7

 
147

Net (earnings) loss attributable to noncontrolling interest
(8
)
 

 
(8
)
Net earnings attributable to FIS common stockholders
$
132

 
$
7

 
$
139

 
 
 
 
 
 
Net earnings per share — basic attributable to FIS common stockholders
$
0.40

 
$
0.02

 
$
0.42

Weighted average shares outstanding — basic
330

 
330

 
330

Net earnings per share — diluted attributable to FIS common stockholders
$
0.40

 
$
0.02

 
$
0.42

Weighted average shares outstanding — diluted
334

 
334

 
334



13

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Condensed Consolidated Statement of Earnings (Unaudited) for the six months ended June 30, 2017 (in millions):
 
As previously
 
 
 
 
 
Reported
 
Adjustments
 
As Adjusted
Revenues
$
4,596

 
$
(190
)
 
$
4,406

Cost of revenues
3,195

 
(184
)
 
3,011

Gross profit
1,401

 
(6
)
 
1,395

Selling, general, and administrative expenses
783

 
(4
)
 
779

Operating income
618

 
(2
)
 
616

Other income (expense):
 
 
 
 
 
Interest income (expense), net
(183
)
 

 
(183
)
Other income (expense), net
60

 

 
60

Total other income (expense), net
(123
)
 

 
(123
)
Earnings before income taxes and equity method investment earnings (loss)
495

 
(2
)
 
493

Provision (benefit) for income taxes
211

 
(1
)
 
210

Equity method investment earnings (loss)

 

 

Net earnings
284

 
(1
)
 
283

Net (earnings) loss attributable to noncontrolling interest
(14
)
 

 
(14
)
Net earnings attributable to FIS common stockholders
$
270

 
$
(1
)
 
$
269

 
 
 
 
 
 
Net earnings per share — basic attributable to FIS common stockholders
$
0.82

 
$

 
$
0.82

Weighted average shares outstanding — basic
329

 
329

 
329

Net earnings per share — diluted attributable to FIS common stockholders
$
0.81

 
$

 
$
0.81

Weighted average shares outstanding — diluted
334

 
334

 
334



14

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Condensed Consolidated Statement of Comprehensive Earnings (Unaudited) for the three months ended June 30, 2017 (in millions):
 
As Previously
 
 
 
 
 
Reported
 
Adjustments
 
As Adjusted
Net earnings
 
 
$
140

 
 
 
$
7

 
 
 
$
147

Other comprehensive earnings, before tax:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on investments and derivatives
$
(33
)
 
 
 
$

 
 
 
$
(33
)
 
 
Reclassification adjustment for gain (loss) included in net earnings

 
 
 

 
 
 

 
 
Unrealized gain (loss) on investments and derivatives, net
(33
)
 
 
 

 
 
 
(33
)
 
 
Foreign currency translation adjustments
(62
)
 
 
 

 
 
 
(62
)
 
 
Minimum pension liability adjustments
(10
)
 
 
 

 
 
 
(10
)
 
 
Other comprehensive earnings (loss), before tax
(105
)
 
 
 

 
 
 
(105
)
 
 
Provision for income tax expense (benefit) related to items of other comprehensive earnings
(13
)
 
 
 

 
 
 
(13
)
 
 
Other comprehensive earnings (loss), net of tax
$
(92
)
 
(92
)
 
$

 

 
$
(92
)
 
(92
)
Comprehensive earnings:
 
 
48

 
 
 
7

 
 
 
55

Net (earnings) loss attributable to noncontrolling interest
 
 
(8
)
 
 
 

 
 
 
(8
)
Other comprehensive (earnings) loss attributable to noncontrolling interest
 
 
5

 
 
 

 
 
 
5

Comprehensive earnings attributable to FIS common stockholders
 
 
$
45

 
 
 
$
7

 
 
 
$
52



15

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Condensed Consolidated Statement of Comprehensive Earnings (Unaudited) for the six months ended June 30, 2017 (in millions):
 
As Previously
 
 
 
 
 
Reported
 
Adjustments
 
As Adjusted
Net earnings
 
 
$
284

 
 
 
$
(1
)
 
 
 
$
283

Other comprehensive earnings, before tax:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on investments and derivatives
$
(33
)
 
 
 
$

 
 
 
$
(33
)
 
 
Reclassification adjustment for gain (loss) included in net earnings

 
 
 

 
 
 

 
 
Unrealized gain (loss) on investments and derivatives, net
(33
)
 
 
 

 
 
 
(33
)
 
 
Foreign currency translation adjustments
(26
)
 
 
 

 
 
 
(26
)
 
 
Minimum pension liability adjustments
(10
)
 
 
 

 
 
 
(10
)
 
 
Other comprehensive earnings (loss), before tax
(69
)
 
 
 

 
 
 
(69
)
 
 
Provision for income tax expense (benefit) related to items of other comprehensive earnings
(13
)
 
 
 

 
 
 
(13
)
 
 
Other comprehensive earnings (loss), net of tax
$
(56
)
 
(56
)
 
$

 

 
$
(56
)
 
(56
)
Comprehensive earnings:
 
 
228

 
 
 
(1
)
 
 
 
227

Net (earnings) loss attributable to noncontrolling interest
 
 
(14
)
 
 
 

 
 
 
(14
)
Other comprehensive (earnings) loss attributable to noncontrolling interest
 
 
2

 
 
 

 
 
 
2

Comprehensive earnings attributable to FIS common stockholders
 
 
$
216

 
 
 
$
(1
)
 
 
 
$
215



16

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Condensed Consolidated Statement of Cash Flows (Unaudited) for the six months ended June 30, 2017 (in millions):
 
As Previously
 
 
 
 
 
Reported
 
Adjustments
 
As Adjusted
Cash flows from operating activities:
 
 
 
 
 
Net earnings
$
284

 
$
(1
)
 
$
283

Adjustment to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
685

 
(12
)
 
673

Amortization of debt issue costs
17

 

 
17

Gain on sale of assets
(88
)
 

 
(88
)
Stock-based compensation
61

 

 
61

Deferred income taxes
(132
)
 
2

 
(130
)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
 
 
 
 
 
Trade receivables
45

 
(50
)
 
(5
)
Contract assets

 
51

 
51

Settlement activity
(19
)
 

 
(19
)
Prepaid expenses and other assets
(52
)
 

 
(52
)
Deferred contract costs
(70
)
 
6

 
(64
)
Deferred revenues
9

 
9

 
18

Accounts payable, accrued liabilities, and other liabilities
(212
)
 
(5
)
 
(217
)
Net cash provided by operating activities
528

 

 
528

 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
Additions to property and equipment
(69
)
 

 
(69
)
Additions to computer software
(228
)
 

 
(228
)
Net proceeds from sale of assets
846

 

 
846

Other investing activities, net
(3
)
 

 
(3
)
Net cash provided by (used in) investing activities
546

 

 
546

 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
Borrowings
3,698

 

 
3,698

Repayment of borrowings and capital lease obligations
(4,557
)
 

 
(4,557
)
Proceeds from exercise of stock options
109

 

 
109

Treasury stock activity
(43
)
 

 
(43
)
Dividends paid
(192
)
 

 
(192
)
Other financing activities, net
(5
)
 

 
(5
)
Net cash provided by (used in) financing activities
(990
)
 

 
(990
)
Effect of foreign currency exchange rate changes on cash
19

 

 
19

Net increase (decrease) in cash and cash equivalents
103

 

 
103

Cash and cash equivalents, beginning of year
683

 

 
683

Cash and cash equivalents, end of year
$
786

 
$

 
$
786

 
 
 
 
 
 
Supplemental cash flow information:
 
 
 
 
 
Cash paid for interest
$
195

 
$

 
$
195

Cash paid for income taxes
$
452

 
$

 
$
452



17

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
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 June 30, 2018 (in millions):

 
 
Reportable Segments
 
 
 
 
 
 
Corporate
 
 
 
 
IFS
 
GFS
 
and Other
 
Total
Primary Geographical Markets:
 
 
 
 
 
 
 
 
North America
 
$
1,079

 
$
434

 
$
71

 
$
1,584

All others
 
45

 
465

 
12

 
522

Total
 
$
1,124

 
$
899

 
$
83

 
$
2,106

 
 
 
 
 
 
 
 
 
Type of Revenue:
 
 
 
 
 
 
 
 
Processing and services
 
$
936

 
$
521

 
$
73

 
$
1,530

License and software related
 
92

 
228

 

 
320

Professional services
 
43

 
150

 
2

 
195

Hardware and other
 
53

 

 
8

 
61

Total
 
$
1,124

 
$
899

 
$
83

 
$
2,106

 
 
 
 
 
 
 
 
 
Recurring Nature of Revenue Recognition:
 
 
 
 
 
 
 
 
Recurring fees
 
$
991

 
$
680

 
$
73

 
$
1,744

Non-recurring fees
 
133

 
219

 
10

 
362

Total
 
$
1,124

 
$
899

 
$
83

 
$
2,106



18

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


For the six months ended June 30, 2018 (in millions):

 
 
Reportable Segments
 
 
 
 
 
 
Corporate
 
 
 
 
IFS
 
GFS
 
and Other
 
Total
Primary Geographical Markets:
 
 
 
 
 
 
 
 
North America
 
$
2,096

 
$
886

 
$
135

 
$
3,117

All others
 
89

 
940

 
26

 
1,055

Total
 
$
2,185

 
$
1,826

 
$
161

 
$
4,172

 
 
 
 
 
 
 
 
 
Type of Revenue:
 
 
 
 
 
 
 
 
Processing and services
 
$
1,831

 
$
1,064

 
$
147

 
$
3,042

License and software related
 
178

 
475

 
1

 
654

Professional services
 
80

 
287

 
4

 
371

Hardware and other
 
96

 

 
9

 
105

Total
 
$
2,185

 
$
1,826

 
$
161

 
$
4,172

 
 
 
 
 
 
 
 
 
Recurring Nature of Revenue Recognition:
 
 
 
 
 
 
 
 
Recurring fees
 
$
1,942

 
$
1,379

 
$
148

 
$
3,469

Non-recurring fees
 
243

 
447

 
13

 
703

Total
 
$
2,185

 
$
1,826

 
$
161

 
$
4,172



19

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


For the three months ended June 30, 2017 (in millions):

 
 
Reportable Segments
 
 
As Adjusted
 
 
 
 
 
 
Corporate
 
 
 
 
IFS
 
GFS
 
and Other
 
Total
Primary Geographical Markets:
 
 
 
 
 
 
 
 
North America
 
$
1,049

 
$
519

 
$
73

 
$
1,641

All others
 
38

 
567

 
12

 
617

Total
 
$
1,087

 
$
1,086

 
$
85

 
$
2,258

 
 
 
 
 
 
 
 
 
Type of Revenue:
 
 
 
 
 
 
 
 
Processing and services
 
$
884

 
$
556

 
$
80

 
$
1,520

License and software related
 
102

 
246

 
1

 
349

Professional services
 
56

 
284

 
2

 
342

Hardware and other
 
45

 

 
2

 
47

Total
 
$
1,087

 
$
1,086

 
$
85

 
$
2,258

 
 
 
 
 
 
 
 
 
Recurring Nature of Revenue Recognition:
 
 
 
 
 
 
 
 
Recurring fees
 
$
939

 
$
710

 
$
79

 
$
1,728

Non-recurring fees
 
148

 
376

 
6

 
530

Total
 
$
1,087

 
$
1,086

 
$
85

 
$
2,258



20

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


For the six months ended June 30, 2017 (in millions):

 
 
Reportable Segments
 
 
As Adjusted
 
 
 
 
 
 
Corporate
 
 
 
 
IFS
 
GFS
 
and Other
 
Total
Primary Geographical Markets:
 
 
 
 
 
 
 
 
North America
 
$
2,048

 
$
1,009

 
$
168

 
$
3,225

All others
 
76

 
1,080

 
25

 
1,181

Total
 
$
2,124

 
$
2,089

 
$
193

 
$
4,406

 
 
 
 
 
 
 
 
 
Type of Revenue:
 
 
 
 
 
 
 
 
Processing and services
 
$
1,734

 
$
1,106

 
$
167

 
$
3,007

License and software related
 
196

 
447

 
13

 
656

Professional services
 
104

 
536

 
8

 
648

Hardware and other
 
90

 

 
5

 
95

Total
 
$
2,124

 
$
2,089

 
$
193

 
$
4,406

 
 
 
 
 
 
 
 
 
Recurring Nature of Revenue Recognition:
 
 
 
 
 
 
 
 
Recurring fees
 
$
1,852

 
$
1,409

 
$
174

 
$
3,435

Non-recurring fees
 
272

 
680

 
19

 
971

Total
 
$
2,124

 
$
2,089

 
$
193

 
$
4,406


Contract Balances

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

 
 
As of
 
 
June 30,
 
December 31,
 
 
2018
 
2017
 
 
 
 
As adjusted
 
 
 
 
 
Trade receivables
 
$
1,408

 
$
1,624

Contract assets (current)
 
109

 
108

Contract assets (non-current), included in other noncurrent assets
 
98

 
118

Deferred revenues (current)
 
766

 
776

Deferred revenues (non-current)
 
103

 
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 revenues on our Condensed Consolidated Balance Sheets. 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

21

FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
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 revenues result from customer payments in advance of our satisfaction of the associated performance obligation(s) and relate 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 assets and deferred revenues balances during the six months ended June 30, 2018 were not materially impacted by any factors other than those described above.

The Company recognized revenue of $170 million and $169 million during the three months and $452 million and $413 million during the six months ended June 30, 2018 and 2017, respectively, that was included in the corresponding deferred revenues balance at the beginning of the periods.

During the three and six months ended June 30, 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 June 30, 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 June 30, 2018 and December 31, 2017 (in millions):

 
June 30, 2018
 
December 31, 2017, As adjusted
 
Cost
 
Accumulated
depreciation and amortization
 
Net
 
Cost
 
Accumulated
depreciation and amortization
 
Net
Property and equipment
$
1,675

 
$
1,118

 
$
557

 
$
1,657

 
$
1,047

 
$
610

Intangible assets
$
6,325