How Did FIS’s Earnings Stack Up in 4Q16?



4Q16 earnings

Fidelity National Information Services (FIS) posted adjusted EPS (earnings per share) of $1.14 for 4Q16, a rise of 23.0% from 4Q15. Revenues rose 30.0% year-over-year to $2.4 billion from $1.9 billion last year. Organic revenues rose 4.8%.

For 2016, FIS reported EPS of $3.82 and revenues of $9.2 billion, which was a 40.0% rise year-over-year. Peers Fiserv (FISV) and Jack Henry & Associates (JKHY) also reported healthy revenue growth for the year.

Integration of the SunGard portfolio significantly expanded the company’s profit margins in 4Q16. During the quarter, FIS recorded EBITDA (earnings before interest, tax, depreciation, and amortization) margins of 34.4%, which was 340 basis points higher than the previous year. For 2016, the company’s EBITDA margins were 31.2%, or 220 basis points higher.

Segmental performance

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

In 4Q16, revenues for IFS rose 11.1% to $1.2 billion, while organic revenues rose 2.5%. Adjusted EBITDA rose 5.0% to $478.0 million since the company saw strong cross-selling activity. During the quarter, it signed several strategic long-term agreements with regional banks as well as large financial institutions (XLF). Demand for the digital solutions suite was strong, representing double-digit growth in user bases for digital banking platforms.

The GFS business was primarily driven by the inclusion of the SunGard portfolio offerings. Currently, 85.0% of its revenues are driven by IP (Internet Protocol) solutions from the SunGard acquisition. The company also has a very diversified pipeline, primarily driven by the addition of new offerings from SunGard and Clear2Pay next-generation payment solutions.

The pipeline is expected to bring higher profit margins and more stable revenue streams. In 4Q16, GFS posted organic revenue growth of 7.7% and adjusted EBITDA of $412.0 million. Overall, revenues for GFS rose 56.0% to $1.1 billion due to the SunGard acquisition.

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