UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

Form 10-Q

_______________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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

(904) 438-6000

(Registrant’s telephone number, including area code)

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:
	Trading	Name of each exchange
Title of each class	Symbol(s)	on which registered
Common Stock, par value $0.01 per share	FIS	New York Stock Exchange
0.400% Senior Notes due 2021	FIS21A	New York Stock Exchange
Floating Rate Senior Notes due 2021	FIS21B	New York Stock Exchange
0.125% Senior Notes due 2021	FIS21C	New York Stock Exchange
1.700% Senior Notes due 2022	FIS22B	New York Stock Exchange
0.125% Senior Notes due 2022	FIS22C	New York Stock Exchange
0.750% Senior Notes due 2023	FIS23A	New York Stock Exchange
1.100% Senior Notes due 2024	FIS24A	New York Stock Exchange
2.602% Senior Notes due 2025	FIS25A	New York Stock Exchange
0.625% Senior Notes due 2025	FIS25B	New York Stock Exchange
1.500% Senior Notes due 2027	FIS27	New York Stock Exchange
1.000% Senior Notes due 2028	FIS28	New York Stock Exchange
2.250% Senior Notes due 2029	FIS29	New York Stock Exchange
2.000% Senior Notes due 2030	FIS30	New York Stock Exchange
3.360% Senior Notes due 2031	FIS31	New York Stock Exchange
2.950% Senior Notes due 2039	FIS39	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

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

As of May 6, 2020, 617,833,816 shares of the Registrant’s Common Stock were outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended March 31, 2020

INDEX

	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Earnings	3
Condensed Consolidated Statements of Comprehensive Earnings	4
Condensed Consolidated Statements of Equity	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosure About Market Risks	30
Item 4. Controls and Procedures	31
Part II: OTHER INFORMATION
Item 1A. Risk Factors	32
Item 6. Exhibits	34
Signatures	35

1

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In millions, except per share amounts)

(Unaudited)

	March 31, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,373	$	1,152
Settlement deposits and merchant float	2,337		2,882
Trade receivables, net of allowance for credit losses of $74 and $60 at March 31, 2020 and December 31, 2019, respectively	3,116		3,242
Contract assets	141		124
Settlement receivables	770		647
Other receivables	275		337
Prepaid expenses and other current assets	334		308
Total current assets	8,346		8,692
Property and equipment, net	870		900
Goodwill	51,823		52,242
Intangible assets, net	15,148		15,798
Software, net	3,239		3,204
Other noncurrent assets	2,299		2,303
Deferred contract costs, net	749		667
Total assets	$	82,474	$	83,806
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities	$	2,199	$	2,374
Settlement payables	3,434		4,228
Deferred revenue	898		817
Short-term borrowings	743		2,823
Current portion of long-term debt	652		140
Total current liabilities	7,926		10,382
Long-term debt, excluding current portion	18,982		17,229
Deferred income taxes	4,131		4,281
Other noncurrent liabilities	2,031		2,406
Deferred revenue	47		52
Total liabilities	33,117		34,350
Redeemable noncontrolling interest	$	175	$	—
Equity:
FIS stockholders’ equity:
Preferred stock $0.01 par value; 200 shares authorized, none issued and outstanding at March 31, 2020 and December 31, 2019	—		—
Common stock $0.01 par value, 750 shares authorized, 617 and 615 shares issued at March 31, 2020 and December 31, 2019, respectively	6		6
Additional paid in capital	45,548		45,358
Retained earnings	3,952		4,161
Accumulated other comprehensive earnings (loss)	(248)		(33)
Treasury stock, $0.01 par value, 1 common shares as of March 31, 2020 and less than 1 common shares as of December 31, 2019, respectively, at cost	(91)		(52)
Total FIS stockholders’ equity	49,167		49,440
Noncontrolling interest	15		16
Total equity	49,182		49,456
Total liabilities, redeemable noncontrolling interest and equity	$	82,474	$	83,806

See accompanying notes to unaudited condensed consolidated financial statements.

2

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In millions, except per share amounts)

(Unaudited)

	Three months ended March 31,
	2020		2019
Revenue	$	3,078	$	2,057
Cost of revenue	2,089		1,381
Gross profit	989		676
Selling, general, and administrative expenses	881		361
Operating income	108		315
Other income (expense):
Interest expense, net	(80)		(75)
Other income (expense), net	(39)		(52)
Total other income (expense), net	(119)		(127)
Earnings (loss) before income taxes and equity method investment earnings (loss)	(11)		188
Provision (benefit) for income taxes	(30)		32
Equity method investment earnings (loss)	(1)		(7)
Net earnings	18		149
Net (earnings) loss attributable to noncontrolling interest	(3)		(1)
Net earnings attributable to FIS common stockholders	$	15	$	148
Net earnings per share-basic attributable to FIS common stockholders	$	0.02	$	0.46
Weighted average shares outstanding-basic	616		323
Net earnings per share-diluted attributable to FIS common stockholders	$	0.02	$	0.45
Weighted average shares outstanding-diluted	625		326

See accompanying notes to unaudited condensed consolidated financial statements.

3

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings

(In millions)

(Unaudited)

	Three months ended March 31,
	2020				2019
Net earnings			$	18			$	149
Other comprehensive earnings (loss), before tax:
Unrealized gain (loss) on derivatives	$	—			$	—
Adjustment for (gain) loss reclassified to net earnings	—				—
Unrealized gain (loss) on derivatives, net	—				—
Foreign currency translation adjustments	(208)				6
Minimum pension liability adjustments	1				(4)
Other comprehensive earnings (loss), before tax	(207)				2
Provision for income tax expense (benefit) related to items of other comprehensive earnings	8				(1)
Other comprehensive earnings (loss), net of tax	$	(215)	(215)		$	3	3
Comprehensive earnings			(197)				152
Net (earnings) loss attributable to noncontrolling interest			(3)				(1)
Other comprehensive (earnings) loss attributable to noncontrolling interest			—				—
Comprehensive earnings attribute to FIS common stockholders			$	(200)			$	151

See accompanying notes to unaudited condensed consolidated financial statements.

4

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

Three months ended March 31, 2020 and 2019

(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 (loss)		stock		interest (1)		equity
Balances, December 31, 2019	615	—	$	6	$	45,358	$	4,161	$	(33)	$	(52)	$	16	$	49,456
Issuance of restricted stock	—	—	—		(7)		—		—		7		—		—
Exercise of stock options	2	—	—		140		—		—		—		—		140
Treasury shares held for taxes due upon exercise of stock options	—	(1)	—		—		—		—		(46)		—		(46)
Stock-based compensation	—	—	—		56		—		—		—		—		56
Cash dividends declared ($0.35 per share per quarter) and other distributions	—	—	—		—		(218)		—		—		(2)		(220)
Other	—	—	—		1		(6)		—		—		—		(5)
Net earnings	—	—	—		—		15		—		—		1		16
Other comprehensive earnings (loss), net of tax	—	—	—		—		—		(215)		—		—		(215)
Balances, March 31, 2020	617	(1)	$	6	$	45,548	$	3,952	$	(248)	$	(91)	$	15	$	49,182

(1)Excludes redeemable noncontrolling interest that is not considered equity. See Note 3, Virtus Acquisition, for additional information.

			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 (loss)		stock		interest		equity
Balances, December 31, 2018	433	(106)	$	4	$	10,800	$	4,528	$	(430)	$	(4,687)	$	7	$	10,222
Exercise of stock options	—	—	—		25		—		—		27		—		52
Treasury shares held for taxes due upon exercise of stock options	—	—	—		—		—		—		(23)		—		(23)
Purchases of treasury stock	—	(4)	—		—		—		—		(400)		—		(400)
Stock-based compensation	—	—	—		19		—		—		—		—		19
Cash dividends declared ($0.35 per share per quarter) and other distributions	—	—	—		—		(113)		—		—		(1)		(114)
Other	—	—	—		—		(5)		—		—		—		(5)
Net earnings	—	—	—		—		148		—		—		1		149
Other comprehensive earnings (loss), net of tax	—	—	—		—		—		3		—		—		3
Balances, March 31, 2019	433	(110)	$	4	$	10,844	$	4,558	$	(427)	$	(5,083)	$	7	$	9,903

See accompanying notes to unaudited condensed consolidated financial statements.

5

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Three months ended March 31,
	2020		2019
Cash flows from operating activities:
Net earnings	$	18	$	149
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	914		368
Amortization of debt issue costs	8		4
Loss (gain) on sale of businesses, investments and other	2		6
Stock-based compensation	56		19
Deferred income taxes	(108)		(10)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
Trade and other receivables	96		13
Contract assets	(21)		(1)
Settlement activity	(368)		(56)
Prepaid expenses and other assets	61		(117)
Deferred contract costs	(150)		(106)
Deferred revenue	86		110
Accounts payable, accrued liabilities, and other liabilities	(211)		(85)
Net cash provided by operating activities	383		294
Cash flows from investing activities:
Additions to property and equipment	(55)		(37)
Additions to software	(251)		(108)
Acquisitions, net of cash acquired	(402)		—
Net proceeds from sale of businesses and investments	—		43
Other investing activities, net	92		(41)
Net cash provided by (used in) investing activities	(616)		(143)
Cash flows from financing activities:
Borrowings	10,958		5,952
Repayment of borrowings and other financing obligations	(10,391)		(5,754)
Proceeds from stock issued under stock-based compensation plans	176		62
Treasury stock activity	(46)		(423)
Dividends paid	(216)		(113)
Other financing activities, net	(4)		1
Net cash provided by (used in) financing activities	477		(275)
Effect of foreign currency exchange rate changes on cash	(15)		(3)
Net increase (decrease) in cash and cash equivalents	229		(127)
Cash and cash equivalents, beginning of period	3,211		703
Cash and cash equivalents, end of period	$	3,440	$	576
Supplemental cash flow information:
Cash paid for interest	$	33	$	49
Cash paid for income taxes	$	65	$	44

See accompanying notes to unaudited condensed consolidated financial statements.

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, 2019.

The preparation of these consolidated financial statements 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 consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The inputs into management’s critical and significant accounting estimates consider the economic impact of the outbreak of the novel coronavirus ("COVID-19") and the subsequently declared COVID-19 pandemic ("the pandemic") by the World Health Organization on March 11, 2020. The extent to which the pandemic further affects our financial statements will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Accordingly, our future results could be materially affected by changes in our estimates.

Certain reclassifications have been made in the 2019 consolidated financial statements to conform to the classifications used in 2020. Amounts in tables in the financial statements and accompanying footnotes may not sum due to rounding.

On July 31, 2019, FIS completed the acquisition of Worldpay, and Worldpay’s results of operations and financial position are included in the consolidated financial statements from and after the date of acquisition.

FIS reports its financial performance based on the following segments: Merchant Solutions, Banking Solutions, Capital Market Solutions, and Corporate and Other. As FIS continues to execute on its integration workflows and optimize its portfolio of assets, it reclassified certain non-strategic businesses from the Merchant Solutions and Banking Solutions segments into the Corporate and Other segment in the quarter ended March 31, 2020, and recast all prior-period segment information presented. These operations represented less than 2% of first quarter 2020 revenue. See Note 12 for a summary of each segment.

(2)      Summary of Significant Accounting Policies

Change in Accounting Policy

The Company adopted FASB Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses ("Topic 326"), with an adoption date of January 1, 2020. As a result, the Company changed its accounting policy for allowance for credit losses. The accounting policy pursuant to Topic 326 for credit losses is disclosed below. The adoption of Topic 326 resulted in an immaterial cumulative effect adjustment recorded in retained earnings as of January 1, 2020.

Allowance for Credit Losses

The Company monitors trade receivable balances including contract assets as well as other receivables and estimates the allowance for lifetime expected credit losses. Estimates of expected credit losses are based on historical collection experience and other factors, including those related to current market conditions and events.

While the COVID-19 pandemic did not result in a significant increase in the Company’s expected credit loss allowance recorded as of March 31, 2020, the Company believes it is reasonably possible that future developments related to the economic impact of the COVID-19 pandemic could have a material impact on management’s estimates.

7

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(3)      Acquisitions 

Worldpay Acquisition

On July 31, 2019, FIS completed the acquisition of Worldpay by acquiring 100 percent of Worldpay’s equity. The Worldpay acquisition brought an integrated technology platform with a comprehensive suite of products and services serving merchants and financial institutions and provided FIS with enhanced global payment capabilities, robust risk and fraud solutions and advanced data analytics.

The total purchase price was as follows (in millions):

Cash consideration	$	3,423
Value of FIS share consideration	38,635
Pay-off of Worldpay long-term debt not contractually assumed	5,738
Value of outstanding converted equity awards attributed to services already rendered	449
Total purchase price	$	48,245

The acquisition was accounted for as a business combination under FASB ASC Topic 805, Business Combinations ("Topic 805"). We recorded an allocation of the purchase price to Worldpay tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of July 31, 2019. The amounts for intangible assets were based on third-party valuations performed. Goodwill was recorded as the residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired. Goodwill consists primarily of expected synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets. As of March 31, 2020, the Company has substantially completed its allocation of the purchase price. The principal open items relate to the valuation of certain income tax matters and contingencies as management is awaiting additional information to complete its assessment. Estimates have been recorded as of the acquisition date, and updates to these estimates may increase or decrease goodwill.

Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional amount adjustments during the reporting period in which the adjustments are determined. We will also be required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The purchase price allocation as of March 31, 2020 is as follows (in millions):

Cash acquired	$	305
Settlement deposits and merchant float (1)	2,445
Trade receivables	1,599
Goodwill	38,063
Intangible assets	13,682
Computer software	1,297
Other noncurrent assets (2)	1,568
Accounts payable, accrued and other liabilities	(1,046)
Settlement payables	(3,167)
Deferred income taxes	(2,831)
Long-term debt, subsequently repaid	(1,805)
Other liabilities and noncontrolling interest (3)	(1,865)
Total purchase price	$	48,245

(1)Includes $1,693 million of merchant float.

(2)Includes $534 million of other restricted cash.

(3)Includes $542 million of noncurrent tax receivable agreement liability (see Note 9) and $819 million contingent value rights liability (see Note 5).

8

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The gross contractual amount of trade receivables acquired was approximately $1,646 million. The difference between that total and the amount reflected above represents our best estimate at the acquisition date of the contractual cash flows not expected to be collected. This difference was derived using Worldpay’s historical bad debts, sales allowances and collection trends.

Intangible assets primarily consist of software, customer relationship assets and trademarks with weighted average estimated useful lives of seven years, ten years and five years, respectively, and fair value amounts assigned of $1,297 million, $13,272 million and $410 million, respectively.

See Note 9 for acquired contingencies resulting from the Worldpay acquisition.

Virtus Acquisition

On January 2, 2020, FIS acquired a majority interest in Virtus Partners ("Virtus"), previously a privately held company that provides high value managed services and technology to the credit and loan market. FIS acquired a 70% voting and financial interest in Virtus with 30% interest retained by the founders of Virtus ("Founders"). The acquisition was accounted for as a business combination under Topic 805. We recorded a provisional allocation of the $405 million cash purchase price and the $174 million fair value of redeemable noncontrolling interest to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, consisting primarily of $254 million in customer relationships and $51 million in software assets. We also recorded $248 million in goodwill for the residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired. Our purchase price allocation is provisional as of March 31, 2020, and we expect to finalize as soon as practicable, but no later than one year from the acquisition date.

We recorded the 30% interest retained by the Founders at the acquisition date as redeemable noncontrolling interest, which is reflected outside of stockholders’ equity on the consolidated balance sheet, given the agreement between FIS and the Founders that provides FIS with a call option and the Founders with a put option requiring FIS to purchase all of the Founders’ retained interest in Virtus at a redemption value determined pursuant to the agreement. The call option and put option are exercisable at any time after two years and three years, respectively, following the acquisition date. Changes in the estimated redemption value are accreted through equity from the acquisition date to the date the call option becomes exercisable, to the extent the estimated redemption value is greater than the initial redeemable noncontrolling interest value recorded, as adjusted for the Founders’ share of the cumulative impact of net earnings (loss).

(4)       Revenue

Disaggregation of Revenue

In the following tables, revenue is disaggregated by primary geographical market and type of revenue. The tables also include a reconciliation of the disaggregated revenue with the Company’s reportable segments. Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 12.

9

FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the three months ended March 31, 2020 (in millions):

	Reportable Segments
					Capital
	Merchant		Banking		Market		Corporate
	Solutions		Solutions		Solutions		and Other		Total
Primary Geographical Markets:
North America	$	661	$	1,243	$	404	$	40	$	2,348
All others	274		219		227		10		730
Total	$	935	$	1,462	$	631	$	50	$	3,078
Type of Revenue:
Recurring revenue:
Transaction processing and services	$	910	$	1,096	$	311	$	47	$	2,364
Software maintenance	1		88		122		—		211
Other recurring	21		44		24		—		89
Total recurring	932		1,228		457		47