Fidelity National Information Services, Inc. (FIS) 10-Q Quarterly Report Tue Aug 06 2019


•	FIS issues consolidated guidance for third and fourth quarter 2019, including the impact of the Worldpay acquisition, which closed on July 31, 2019

JACKSONVILLE Fla., August 6, 2019 - FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its second quarter 2019 results and also reported second quarter 2019 results for Worldpay, Inc. (Worldpay) following the July 31, 2019 acquisition of Worldpay by FIS.

FIS Second Quarter 2019 Results

“We are very pleased with our strong quarter, which was underpinned by robust sales and continued operational execution,” said Gary Norcross, FIS chairman, president and chief executive officer. “Our recent closing of the Worldpay acquisition is a demonstrable proof point in our overall growth strategy. We are confident that our focus on innovating with purpose to advance the way the world pays, banks and invests will continue to deliver long-term value to our clients and shareholders.”

On a GAAP basis, revenue was flat at $2,112 million from $2,106 million in the prior year quarter driven by solid growth in the continuing operations, partially offset by the impact of divestitures in 2018. Net earnings attributable to common stockholders was $154 million for the quarter, or $0.47 per diluted share, compared to $0.64 per diluted share in the prior year quarter, a decrease of 27 percent.

On an adjusted basis, organic revenue increased 5 percent, excluding the impact of divestitures and foreign currency fluctuations. Adjusted EBITDA margin expanded 170 basis points to 37.6 percent. Adjusted net earnings was $582 million, or $1.78 per diluted share, compared to $1.63 per diluted share in the prior year quarter, an increase of 9 percent.



($ millions, except per share data, unaudited)	Three Months Ended June 30,
							%	Organic
	2019			2018			Change	Growth
Revenue	$	2,112		$	2,106		—	5%
Integrated Financial Solutions	1,179			1,124			5%	6%
Global Financial Solutions	865			899			(4)%	4%
Corporate and Other	68			83			(18)%	3%
Adjusted EBITDA	$	794		$	757		5%
Adjusted EBITDA Margin	37.6		%	35.9		%	170 bps
Net earnings attributable to FIS common stockholders (GAAP)	$	154		$	212		(27)%
Diluted EPS (GAAP)	$	0.47		$	0.64		(27)%
Adjusted net earnings	$	582		$	544		7%
Adjusted EPS	$	1.78		$	1.63		9%

The following information was filed by Fidelity National Information Services, Inc. (FIS) on Tuesday, August 6, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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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 June 30, 2019



☐	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)

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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
0.750% 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
1.500% Senior Notes due 2027	FIS27	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 August 5, 2019, 613,444,279 shares of the Registrant’s Common Stock were outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended June 30, 2019

INDEX



	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
A. Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	2
B. Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2019 and 2018	3
C. Condensed Consolidated Statements of Comprehensive Earnings for the three and six months ended June 30, 2019 and 2018	4
D. Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2019 and 2018	5
E. Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	7
F. Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosure About Market Risks	34
Item 4. Controls and Procedures	36
Part II: OTHER INFORMATION
Item 1A. Risk Factors	36
Item 6. Exhibits	48

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In millions, except per share amounts)

(Unaudited)



	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	9,756		$	703
Settlement deposits	538			700
Trade receivables, net of allowance for doubtful accounts of $27 and $17 as of June 30, 2019 and December 31, 2018, respectively	1,366			1,472
Contract assets	122			123
Settlement receivables	289			281
Other receivables	137			166
Prepaid expenses and other current assets	297			288
Total current assets	12,505			3,733
Property and equipment, net	541			587
Goodwill	13,542			13,545
Intangible assets, net	2,863			3,132
Computer software, net	1,798			1,795
Other noncurrent assets	1,049			503
Deferred contract costs, net	561			475
Total assets	$	32,859		$	23,770
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities	$	1,030		$	1,099
Settlement payables	792			972
Deferred revenue	788			739
Short-term borrowings	1,507			267
Current portion of long-term debt	53			48
Total current liabilities	4,170			3,125
Long-term debt, excluding current portion	16,682			8,670
Deferred income taxes	1,295			1,360
Other long-term liabilities	664			326
Deferred revenue	56			67
Total liabilities	22,867			13,548
Equity:
FIS stockholders’ equity:
Preferred stock, $0.01 par value, 200 shares authorized, none issued and outstanding as of June 30, 2019 and December 31, 2018	—			—
Common stock, $0.01 par value, 600 shares authorized, 433 and 433 shares issued as of June 30, 2019 and December 31, 2018	4			4
Additional paid in capital	10,887			10,800
Retained earnings	4,599			4,528
Accumulated other comprehensive earnings (loss)	(438		)	(430		)
Treasury stock, $0.01 par value, 109 and 106 common shares as of June 30, 2019 and December 31, 2018, respectively, at cost	(5,067		)	(4,687		)
Total FIS stockholders’ equity	9,985			10,215
Noncontrolling interest	7			7
Total equity	9,992			10,222
Total liabilities and equity	$	32,859		$	23,770

See accompanying notes to unaudited condensed consolidated financial statements.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In millions, except per share amounts)

(Unaudited)



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018

Revenue	$	2,112		$	2,106		$	4,169		$	4,172
Cost of revenue	1,404			1,414			2,785			2,828
Gross profit	708			692			1,384			1,344
Selling, general and administrative expenses	317			339			678			697
Operating income	391			353			706			647
Other income (expense):
Interest expense, net	(72		)	(73		)	(147		)	(144		)
Other income (expense), net	(120		)	(4		)	(172		)	(2		)
Total other income (expense), net	(192		)	(77		)	(319		)	(146		)
Earnings before income taxes and equity method investment earnings (loss)	199			276			387			501
Provision (benefit) for income taxes	40			51			72			85
Equity method investment earnings (loss)	(4		)	(7		)	(11		)	(8		)
Net earnings	155			218			304			408
Net (earnings) loss attributable to noncontrolling interest	(1		)	(6		)	(2		)	(14		)
Net earnings attributable to FIS common stockholders	$	154		$	212		$	302		$	394

Net earnings per share — basic attributable to FIS common stockholders	$	0.48		$	0.64		$	0.93		$	1.20
Weighted average shares outstanding — basic	324			329			323			329
Net earnings per share — diluted attributable to FIS common stockholders	$	0.47		$	0.64		$	0.92		$	1.18
Weighted average shares outstanding — diluted	327			333			327			334

See accompanying notes to unaudited condensed consolidated financial statements.

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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,
	2019						2018						2019						2018

Net earnings				$	155					$	218					$	304					$	408
Other comprehensive earnings, before tax:
Unrealized gain (loss) on derivatives	$	(16	)				$	—					$	(16	)				$	—
Reclassification adjustment for (gains) losses included in net earnings	(4		)				—						(4		)				—
Unrealized gain (loss) on derivatives, net	(20		)				—						(20		)				—
Foreign currency translation adjustments	11						(102		)				17						(88		)
Minimum pension liability adjustment	—						—						(4		)				—
Other comprehensive earnings (loss), before tax:	(9		)				(102		)				(7		)				(88		)
Provision for income tax expense (benefit) related to items of other comprehensive earnings	2						—						1						—
Other comprehensive earnings (loss), net of tax	$	(11	)	(11		)	$	(102	)	(102		)	$	(8	)	(8		)	$	(88	)	(88		)
Comprehensive earnings:				144						116						296						320
Net (earnings) loss attributable to noncontrolling interest				(1		)				(6		)				(2		)				(14		)
Other comprehensive (earnings) loss attributable to noncontrolling interest				—						17						—						17
Comprehensive earnings attributable to FIS common stockholders				$	143					$	127					$	294					$	323

See accompanying notes to unaudited condensed consolidated financial statements.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

Three and six months ended June 30, 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			equity
Balances, March 31, 2019	433	(110	)	$	4	$	10,844	$	4,558		$	(427	)	$	(5,083	)	$	7		$	9,903
Exercise of stock options	—	1		—		19		—			—			16			—			35
Stock-based compensation	—	—		—		24		—			—			—			—			24
Cash dividends paid ($0.35 per share per quarter) and other distributions	—	—		—		—		(113		)	—			—			(1		)	(114		)
Net earnings	—	—		—		—		154			—			—			1			155
Other comprehensive earnings, net of tax	—	—		—		—		—			(11		)	—			—			(11		)
Balances, June 30, 2019	433	(109	)	$	4	$	10,887	$	4,599		$	(438	)	$	(5,067	)	$	7		$	9,992



				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	—	1		—		44		—			—			43			—			87
Treasury shares held for taxes due upon exercise of stock options	—	—		—		—		—			—			(23		)	—			(23		)
Purchases of treasury stock	—	(4	)	—		—		—			—			(400		)	—			(400		)
Stock-based compensation	—	—		—		43		—			—			—			—			43
Cash dividends paid ($0.35 per share per quarter) and other distributions	—	—		—		—		(226		)	—			—			(2		)	(228		)
Other	—	—		—		—		(5		)	—			—			—			(5		)
Net earnings	—	—		—		—		302			—			—			2			304
Other comprehensive earnings, net of tax	—	—		—		—		—			(8		)	—			—			(8		)
Balances, June 30, 2019	433	(109	)	$	4	$	10,887	$	4,599		$	(438	)	$	(5,067	)	$	7		$	9,992

See accompanying notes to unaudited condensed consolidated financial statements.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

Three and 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 (loss)			stock			interest			equity
Balances, March 31, 2018	432	(102	)	$	4	$	10,585		$	4,186		$	(318	)	$	(3,962	)	$	116		$	10,611
Issuance of restricted stock	1	—		—		—			—			—			—			—			—
Exercise of stock options	—	2		—		59			—			—			53			—			112
Treasury shares held for taxes due upon exercise of stock options	—	—		—		(10		)	—			—			(3		)	—			(13		)
Purchases of treasury stock	—	(2	)	—		—			—			—			(200		)	—			(200		)
Stock-based compensation	—	—		—		25			—			—			—			—			25
Cash dividends paid ($0.32 per share per quarter) and other distributions	—	—		—		—			(107		)	—			—			—			(107		)
Net earnings	—	—		—		—			212			—			—			6			218
Other comprehensive earnings, net of tax	—	—		—		—			—			(85		)	—			(17		)	(102		)
Balances, June 30, 2018	433	(102	)	$	4	$	10,659		$	4,291		$	(403	)	$	(4,112	)	$	105		$	10,544



				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, 2017	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.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)



	Six months ended June 30,
	2019			2018
Cash flows from operating activities:
Net earnings	$	304		$	408
Adjustment to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	736			706
Amortization of debt issue costs	10			9
Acquisition-related financing foreign exchange	104			—
Loss (gain) on sale of businesses and investments	—			(6		)
Loss (gain) other	17			—
Loss on extinguishment of debt	—			1
Stock-based compensation	43			45
Deferred income taxes	(68		)	(24		)
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:
Trade and other receivables	93			189
Contract assets	1			(3		)
Settlement activity	(27		)	13
Prepaid expenses and other assets	(140		)	(11		)
Deferred contract costs	(174		)	(119		)
Deferred revenue	39			(2		)
Accounts payable, accrued liabilities, and other liabilities	(118		)	(383		)
Net cash provided by operating activities	820			823

Cash flows from investing activities:
Additions to property and equipment	(57		)	(83		)
Additions to computer software	(228		)	(233		)
Net proceeds from sale of businesses and investments	43			49
Other investing activities, net	(42		)	(6		)
Net cash provided by (used in) investing activities	(284		)	(273		)

Cash flows from financing activities:
Borrowings	19,201			5,703
Repayment of borrowings and other financing obligations	(10,028		)	(5,521		)
Debt issuance costs	(71		)	(24		)
Proceeds from exercise of stock options	86			203
Treasury stock activity	(423		)	(637		)
Dividends paid	(226		)	(211		)
Other financing activities, net	(24		)	(2		)
Net cash provided by (used in) financing activities	8,515			(489		)

Effect of foreign currency exchange rate changes on cash	2			(43		)
Net increase (decrease) in cash and cash equivalents	9,053			18
Cash and cash equivalents, beginning of period	703			665
Cash and cash equivalents, end of period	$	9,756		$	683

Supplemental cash flow information:
Cash paid for interest	$	159		$	146
Cash paid for income taxes	$	149		$	353

See accompanying notes to unaudited condensed consolidated financial statements.

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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, 2018. 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 revenue and expenses during the reported periods. Actual results could differ from those estimates. Certain reclassifications have been made in the 2018 Condensed Consolidated Financial Statements (Unaudited) to conform to the classifications used in 2019. Amounts in tables in the financial statements and accompanying footnotes may not sum due to rounding.

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

(2) Summary of Significant Accounting Policies


(a)	Change in Accounting Policy

The Company adopted Topic 842, Leases, with an initial application date of January 1, 2019. As a result, the Company has changed its accounting policy for leases. The accounting policy pursuant to Topic 842 for operating leases is disclosed below. The primary impact of adopting Topic 842 is the establishment of a right-of-use ("ROU") model that requires a lessee to recognize ROU assets and lease liabilities on the consolidated balance sheet for operating leases.

The Company applied Topic 842 using the effective date method; consequently, financial information was not updated and the disclosures required under the new standard were not provided for dates and periods before January 1, 2019. For transition purposes, the Company elected the "package of practical expedients," which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the practical expedient not to separate lease and non-lease components. The Company did not elect the use-of-hindsight practical expedient nor the short-term lease recognition exemption allowed under the new standard.

The adoption of ASC 842 resulted in the recognition of operating lease ROU assets and lease liabilities on the Company’s Condensed Consolidated Balance Sheet (Unaudited) of $442 million and $446 million, respectively, on January 1, 2019. The standard did not impact the Company’s results of operations or cash flows.


(b)	Operating Leases

The Company leases certain of its property, primarily real estate, under operating leases. Operating lease ROU assets are included in other noncurrent assets, and operating lease liabilities are included in accounts payable, accrued and other liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets (Unaudited). ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any prepaid lease payments and exclude lease incentives received. The Company uses an incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. Lease terms may include options to extend, generally ranging from one to five years, or to terminate the lease when it is reasonably certain that the Company will

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Lease agreements may include lease and related non-lease components, which are accounted for as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

(3) Acquisition of Worldpay

On March 17, 2019, FIS, Wrangler Merger Sub, Inc., a wholly owned subsidiary of FIS (“Merger Sub”), and Worldpay, Inc. (“Worldpay”) entered into an Agreement and Plan of Merger (the “merger agreement”) pursuant to which FIS would acquire Worldpay through a merger transaction (“Worldpay transaction,” “Transaction” or “ the merger”). On July 31, 2019, FIS completed the Transaction. Through its acquisition of Worldpay, FIS is now a global leader in technology, solutions and services for merchants, as well as banks and capital markets. The Worldpay acquisition brings an integrated technology platform with a comprehensive suite of products and services serving merchants and financial institutions. Worldpay processed over 40 billion transactions annually, supporting more than 300 payment types across 146 countries and 126 currencies. Through the Transaction, FIS will have enhanced global payment capabilities, robust risk and fraud solutions and advanced data analytics.

Pursuant to the merger agreement, FIS acquired 100 percent of the equity of Worldpay at the closing on July 31, 2019. At the closing, Worldpay shareholders received approximately 289 million shares of FIS common stock and $3.4 billion in cash, using an exchange ratio of 0.9287 FIS shares plus $11.00 in cash for each share of Worldpay common stock. FIS also converted approximately 7 million outstanding Worldpay equity awards into corresponding equity awards with respect to shares of FIS common stock pursuant to an exchange ratio in the merger agreement designed to maintain the intrinsic value of the applicable award immediately prior to conversion. In connection with the Transaction, FIS also repaid approximately $7.5 billion in Worldpay debt. The combination of stock and cash valued Worldpay at an enterprise value of approximately $50 billion, including the repayment of Worldpay debt of approximately $7.5 billion. As a result of the Transaction, legacy FIS shareholders own approximately 53 percent and legacy Worldpay shareholders own approximately 47 percent of the combined company on a fully diluted basis. FIS funded the cash portion of the merger consideration, the pay-off of the indebtedness of Worldpay and the payment of transaction-related expenses through a combination of available cash-on-hand and proceeds from debt issuances, including proceeds from concurrent public offerings on May 21, 2019 of Euro-, Pound Sterling-, and U.S. Dollar-denominated senior unsecured notes of FIS and borrowings under the newly established Euro-commercial paper program. See Note 7 for further discussion of these debt issuances.

Due to the close proximity in timing of the Transaction closing date and the Company's filing of this Quarterly Report on Form 10-Q, the initial accounting for the business combination is incomplete; therefore, the Company is unable to disclose certain information required by FASB ASC Topic 805, Business Combinations. The Company plans to provide preliminary purchase price allocation information in FIS' Quarterly Report on Form 10-Q for the quarter ending September 30, 2019.

(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.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the three months ended June 30, 2019 (in millions):



	Reportable Segments
					Corporate
	IFS		GFS		and Other		Total
Primary Geographical Markets:
North America	$	1,135	$	463	$	55	$	1,653
All others	44		402		13		459
Total	$	1,179	$	865	$	68	$	2,112

Type of Revenue:
Processing and services	$	947	$	463	$	57	$	1,467
License and software related	99		242		—		341
Professional services	47		156		3		206
Hardware and other	86		4		8		98
Total	$	1,179	$	865	$	68	$	2,112

Recurring Nature of Revenue Recognition:
Recurring fees	$	1,029	$	617	$	57	$	1,703
Non-recurring fees	150		248		11		409
Total	$	1,179	$	865	$	68	$	2,112

For the six months ended June 30, 2019 (in millions):



	Reportable Segments
					Corporate
	IFS		GFS		and Other		Total
Primary Geographical Markets:
North America	$	2,221	$	904	$	107	$	3,232
All others	88		824		25		937
Total	$	2,309	$	1,728	$	132	$	4,169

Type of Revenue:
Processing and services	$	1,859	$	926	$	117	$	2,902
License and software related	184		492		—		676
Professional services	88		302		5		395
Hardware and other	178		8		10		196
Total	$	2,309	$	1,728	$	132	$	4,169

Recurring Nature of Revenue Recognition:
Recurring fees	$	2,022	$	1,235	$	117	$	3,374
Non-recurring fees	287		493		15		795
Total	$	2,309	$	1,728	$	132	$	4,169

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

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

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Contract Balances

The Company recognized revenue of $188 million and $170 million during the three months and $508 million and $452 million during the six months ended June 30, 2019 and 2018, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2019, approximately $20.0 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 (Unaudited) details as of June 30, 2019 and December 31, 2018 (in millions):



	June 30, 2019						December 31, 2018
	Cost		Accumulated depreciation and amortization		Net		Cost		Accumulated depreciation and amortization		Net
Property and equipment	$	1,784	$	1,243	$	541	$	1,645	$	1,058	$	587
Intangible assets	$	6,157	$	3,294	$	2,863	$	6,122	$	2,990	$	3,132
Computer software	$	3,230	$	1,432	$	1,798	$	3,103	$	1,308	$	1,795

The Company entered into other financing obligations of $1 million and $0 million during the three months and $35 million and $0 million during the six months ended June 30, 2019 and 2018, respectively, for certain computer hardware and software. The assets are included in property and equipment and computer software and the other financing obligations are classified as long-term debt on our Condensed Consolidated Balance Sheets (Unaudited). Periodic payments are included in repayment of borrowings and other financing obligations on the Condensed Consolidated Statements of Cash Flows (Unaudited).

Changes in goodwill during the six months ended June 30, 2019 are summarized as follows (in millions):




	Total
Balance, December 31, 2018	$	13,545
Foreign currency adjustments	(3		)
Balance, June 30, 2019	$	13,542

As of June 30, 2019, intangible assets, net of amortization, includes $2,779 million of customer relationships and other amortizable intangible assets, $41 million of finite-lived trademarks, as well as $43 million of non-amortizable indefinite-lived trademarks. Amortization expense with respect to these intangible assets was $158 million and $169 million for the three months and $314 million and $336 million during the six months ended June 30, 2019 and 2018, respectively.

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

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 June 30, 2019 and December 31, 2018 consisted of the following (in millions):



	June 30, 2019		December 31, 2018
Contract costs on implementations in progress	$	103	$	93
Incremental contract origination costs on completed implementations, net	290		219
Contract fulfillment costs on completed implementations, net	168		163
Total deferred contract costs, net	$	561	$	475

Amortization of deferred contract costs on completed implementations was $44 million and $30 million during the three months and $87 million and $58 million during the six months ended June 30, 2019 and 2018, respectively, and there were no impairment losses in relation to the costs capitalized for the period presented.

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FIDELITY NATIONAL INFORMATION SERVICES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(7) Debt

Long-term debt as of June 30, 2019 and December 31, 2018, consisted of the following (in millions):



	June 30,		December 31,
	2019		2018
Senior Notes due October 2020, interest payable semi-annually at 3.625% ("2020 Notes")	$	1,150	$	1,150
Senior Euro Notes due January 2021, interest payable annually at 0.400% ("2021 Euro Notes")	569		572
Senior Euro Floating Rate Notes due May 2021, interest payable quarterly ("Floating Rate Notes") (1)	569		—
Senior Euro Notes due May 2021, interest payable annually at 0.125% ("May 2021 Euro Notes")	569		—
Senior Notes due August 2021, interest payable semi-annually at 2.250% ("2021 Notes")	750		750
Senior GBP Notes due June 2022, interest payable annually at 1.700% ("2022 GBP Notes")

Fidelity National Information Services, Inc. (FIS) SEC Filing 10-Q Quarterly report for the period ending Sunday, June 30, 2019

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