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How Did FIS’s Earnings Stack Up in 1Q16?

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Earnings overview

Fidelity National Information Services (FIS) posted earnings of $0.79 per share for 1Q16, 22% higher than the same period last year. Revenues grew by 4.2% year-over-year to $2.2 billion.

Integration of the SunGard portfolio significantly expanded FIS’s profit margins during the quarter. In 1Q16, FIS recorded EBITDA (earnings before interest, tax, depreciation, and amortization) margins of 28.2%, 170 basis points higher than last year.

For fiscal 2016, FIS targets organic revenue growth of 3%–4%, while its earnings per share are expected to be $3.70–$3.80, ~15% higher year-over-year.

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With SunGard, FIS stands to take in more than $9 billion in annual revenue. SunGard is expected to boost FIS’s revenues by 40%. Among its rivals (JKHY) in the financial solutions business (XLF) (VFH), Fiserv (FISV) booked $5.2 billion in revenues in 2015 while DST Systems (DST) generated $2.8 billion.

Segmental performance

FIS operates under two primary segments: Integrated Financial Solutions (or IFS) and Global Financial Solutions (or GFS).

In 1Q16, revenues in the IFS business grew by 5.2% and its adjusted EBITDA increased to $426 million as the company saw strong cross-selling activity. During the quarter, the company signed several strategic long-term agreements with regional banks as well as large financial institutions. Demand for the digital solutions suite was strong, representing double-digit growth in its user base for digital banking platforms.

The GFS business was primarily driven by the inclusion of the SunGard portfolio offerings. Currently, 85% of revenues in this business come from the IP-led solutions from the SunGard acquisition.

The company also has a diversified pipeline that is primarily driven by the addition of new offerings from SunGard and Clear2Pay next-generation payment solutions. This is expected to bring higher profit margins and more stable revenue streams for the company. In 1Q16, this segment posted organic revenues growth of 4.4% and adjusted EBITDA of $251 million.

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