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Fidelity National Information Services, Inc. (FIS) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

SEC Filings

FIS Quarterly Reports

Fidelity National Information Services,

CIK: 1136893 Ticker: FIS

fislogoq22018a19fa131.jpg
Exhibit 99.1
News Release

FIS Reports First Quarter 2020 Results

Revenue increased 50% on a reported basis and 2% on an organic basis to $3,078 million
Achieved annual run-rate revenue and expense synergies of approximately $100 million and $580 million, respectively
Increased annual run-rate expense synergy target to at least $700 million exiting 2020, an increase of more than $100 million
Generated net cash provided by operating activity of $383 million and free cash flow of $539 million

JACKSONVILLE Fla., May 7, 2020 -
FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its first quarter 2020 results.

First Quarter 2020 Results

On a GAAP basis, revenue increased 50% to $3,078 million, primarily driven by the July 31, 2019 acquisition of Worldpay, Inc. (Worldpay). Net earnings attributable to common stockholders was $15 million or $0.02 per diluted share.

On an adjusted basis, organic revenue growth increased 2% over the prior year period. Adjusted EBITDA margin expanded by 510 basis points (bps) over the prior year period to 40.5%, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $802 million or $1.28 per diluted share.

“As a critical infrastructure provider to commerce and the financial world, we remain intensely focused on protecting our employees and continuing to meet the needs of our clients during this time of worldwide uncertainty,” said Gary Norcross, FIS chairman, president and chief executive officer. “In challenging times like these, we are very pleased with the strength and durability of our business model. We continue to invest and innovate across our broad portfolio of banking, capital markets and merchant solutions in order to help lift our clients and communities while continuing to deliver value to our shareholders.”

($ millions, except per share data, unaudited)Three Months Ended March 31,
%Organic
20202019ChangeGrowth
Revenue$3,078  $2,057  50%2%
Merchant Solutions935  50  *—%
Banking Solutions1,462  1,373  6%1%
Capital Market Solutions631  572  10%7%
Corporate and Other50  62  (18)%(18)%
Adjusted EBITDA$1,247  $729  71%
Adjusted EBITDA Margin40.5 %35.4 %510 bps
Net earnings attributable to FIS common stockholders (GAAP)$15  $148  (90)%
Diluted EPS (GAAP)$0.02  $0.45  (96)%
Adjusted net earnings$802  $378  112%
Adjusted EPS$1.28  $1.16  10%
* Indicates comparison not meaningful



The following information was filed by Fidelity National Information Services, Inc. (FIS) on Thursday, May 7, 2020 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.

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  
JacksonvilleFlorida 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:
TradingName of each exchange
Title of each classSymbol(s)on which registered
Common Stock, par value $0.01 per shareFISNew York Stock Exchange
0.400% Senior Notes due 2021FIS21ANew York Stock Exchange
Floating Rate Senior Notes due 2021FIS21BNew York Stock Exchange
0.125% Senior Notes due 2021FIS21CNew York Stock Exchange
1.700% Senior Notes due 2022FIS22BNew York Stock Exchange
0.125% Senior Notes due 2022FIS22CNew York Stock Exchange
0.750% Senior Notes due 2023FIS23ANew York Stock Exchange
1.100% Senior Notes due 2024FIS24ANew York Stock Exchange
2.602% Senior Notes due 2025FIS25ANew York Stock Exchange
0.625% Senior Notes due 2025FIS25BNew York Stock Exchange
1.500% Senior Notes due 2027FIS27New York Stock Exchange
1.000% Senior Notes due 2028FIS28New York Stock Exchange
2.250% Senior Notes due 2029FIS29New York Stock Exchange
2.000% Senior Notes due 2030FIS30New York Stock Exchange
3.360% Senior Notes due 2031FIS31New York Stock Exchange
2.950% Senior Notes due 2039FIS39New 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

1




FIDELITY NATIONAL INFORMATION SERVICES, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
March 31, 2020December 31, 2019
ASSETS  
Current assets:  
Cash and cash equivalents$1,373  $1,152  
Settlement deposits and merchant float2,337  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 assets141  124  
Settlement receivables770  647  
Other receivables275  337  
Prepaid expenses and other current assets334  308  
Total current assets8,346  8,692  
Property and equipment, net870  900  
Goodwill51,823  52,242  
Intangible assets, net15,148  15,798  
Software, net3,239  3,204  
Other noncurrent assets2,299  2,303  
Deferred contract costs, net749  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 payables3,434  4,228  
Deferred revenue898  817  
Short-term borrowings743  2,823  
Current portion of long-term debt652  140  
Total current liabilities7,926  10,382  
Long-term debt, excluding current portion18,982  17,229  
Deferred income taxes4,131  4,281  
Other noncurrent liabilities2,031  2,406  
Deferred revenue47  52  
Total liabilities33,117  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
  
Additional paid in capital45,548  45,358  
Retained earnings3,952  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’ equity49,167  49,440  
Noncontrolling interest15  16  
Total equity49,182  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,
 20202019
Revenue$3,078  $2,057  
Cost of revenue2,089  1,381  
Gross profit989  676  
Selling, general, and administrative expenses881  361  
Operating income108  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 earnings18  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-basic616  323  
Net earnings per share-diluted attributable to FIS common stockholders$0.02  $0.45  
Weighted average shares outstanding-diluted625  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,
 20202019
Net earnings$18  $149  
Other comprehensive earnings (loss), before tax:
Unrealized gain (loss) on derivatives$—  $—  
Adjustment for (gain) loss reclassified to net earnings—  —  
Unrealized gain (loss) on derivatives, net—  —  
Foreign currency translation adjustments(208)  
Minimum pension liability adjustments (4) 
Other comprehensive earnings (loss), before tax(207)  
Provision for income tax expense (benefit) related to items of other comprehensive earnings (1) 
Other comprehensive earnings (loss), net of tax$(215) (215) $  
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   
 CommonTreasuryCommonpaid inRetainedcomprehensiveTreasuryNoncontrollingTotal
 sharessharesstockcapitalearningsearnings (loss)stockinterest (1)equity
Balances, December 31, 2019615  —  $ $45,358  $4,161  $(33) $(52) $16  $49,456  
Issuance of restricted stock—  —  —  (7) —  —   —  —  
Exercise of stock options —  —  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—  —  —   (6) —  —  —  (5) 
Net earnings—  —  —  —  15  —  —   16  
Other comprehensive earnings (loss), net of tax—  —  —  —  —  (215) —  —  (215) 
Balances, March 31, 2020617  (1) $ $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   
 CommonTreasuryCommonpaid inRetainedcomprehensiveTreasuryNoncontrollingTotal
 sharessharesstockcapitalearningsearnings (loss)stockinterestequity
Balances, December 31, 2018433  (106) $ $10,800  $4,528  $(430) $(4,687) $ $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  —  —   149  
Other comprehensive earnings (loss), net of tax—  —  —  —  —   —  —   
Balances, March 31, 2019433  (110) $ $10,844  $4,558  $(427) $(5,083) $ $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,
 20202019
Cash flows from operating activities: 
Net earnings$18  $149  
Adjustment to reconcile net earnings to net cash provided by operating activities:  
Depreciation and amortization914  368  
Amortization of debt issue costs  
Loss (gain) on sale of businesses, investments and other  
Stock-based compensation56  19  
Deferred income taxes(108) (10) 
Net changes in assets and liabilities, net of effects from acquisitions and foreign currency:  
Trade and other receivables96  13  
Contract assets(21) (1) 
Settlement activity(368) (56) 
Prepaid expenses and other assets61  (117) 
Deferred contract costs(150) (106) 
Deferred revenue86  110  
Accounts payable, accrued liabilities, and other liabilities(211) (85) 
Net cash provided by operating activities383  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, net92  (41) 
Net cash provided by (used in) investing activities(616) (143) 
Cash flows from financing activities:  
Borrowings10,958  5,952  
Repayment of borrowings and other financing obligations(10,391) (5,754) 
Proceeds from stock issued under stock-based compensation plans176  62  
Treasury stock activity(46) (423) 
Dividends paid(216) (113) 
Other financing activities, net(4)  
Net cash provided by (used in) financing activities477  (275) 
Effect of foreign currency exchange rate changes on cash(15) (3) 
Net increase (decrease) in cash and cash equivalents229  (127) 
Cash and cash equivalents, beginning of period3,211  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 consideration38,635  
Pay-off of Worldpay long-term debt not contractually assumed 5,738  
Value of outstanding converted equity awards attributed to services already rendered449  
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 receivables1,599  
Goodwill38,063  
Intangible assets13,682  
Computer software1,297  
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
MerchantBankingMarketCorporate
SolutionsSolutionsSolutionsand OtherTotal
Primary Geographical Markets:
North America$661  $1,243  $404  $40  $2,348  
All others274  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 88  122  —  211  
Other recurring21  44  24  —  89  
Total recurring932  1,228  457  47  2,664  
Software license 19  72  —  92  
Professional services—  143  102   246  
Other non-recurring 72  —   76  
Total$935  $1,462  $631  $50  $3,078  

For the three months ended March 31, 2019 (in millions):
Reportable Segments
Capital
MerchantBankingMarketCorporate
SolutionsSolutionsSolutionsand OtherTotal
Primary Geographical Markets:
North America$50  $1,126  $356  $47  $1,579  
All others—  247  216  15  478  
Total$50  $1,373  $572  $62  $2,057  
Type of Revenue:
Recurring revenue:
Transaction processing and services$49  $991  $272  $59  $1,371  
Software maintenance—  89  121  —  210  
Other recurring—  44  27  —  71  
Total recurring49  1,124  420  59  1,652  
Software license—  39  57  —  96  
Professional services—  139  95   235  
Other non-recurring 71  —   74  
Total$50  $1,373  $572  $62  $2,057  


10

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

Contract Balances

The Company recognized revenue of $338 million and $321 million during the three months ended March 31, 2020 and 2019, 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 March 31, 2020, approximately $20.5 billion of revenue is estimated to be recognized in the future primarily from the Banking Solutions and Capital Market Solutions segments’ 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 the Banking Solutions and Capital Market Solutions segments’ remaining performance obligations over the next 12 months, approximately another 25% over the next 13 to 24 months, and the balance thereafter.

As permitted by ASC 606, Revenue from Contracts with Customers, the Company has elected to exclude from this disclosure an estimate for the Merchant Solutions segment, which is primarily comprised of contracts with an original duration of one year or less or variable consideration that meet specific criteria. This segment’s core performance obligations consist of variable consideration under a stand-ready series of distinct days of service, and revenue from the segment’s products and service arrangements are generally billed and recognized as the services are performed. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

(5)       Condensed Consolidated Financial Statement Details

Cash and Cash Equivalents

The Company includes restricted cash in the cash and cash equivalents balance reported in the consolidated statements of cash flows. The reconciliation between cash and cash equivalents in the consolidated balance sheets and the consolidated statements of cash flows is as follows (in millions):
March 31,
2020
December 31,
2019
Cash and cash equivalents on the consolidated balance sheets$1,373  $1,152  
Merchant float restricted cash (in Settlement deposits and merchant float)1,536  1,519  
Other restricted cash (in Other noncurrent assets)531  540  
Total Cash and cash equivalents per the consolidated statements of cash flows$3,440  $3,211  

Property and Equipment, Intangible Assets and Computer Software

The following table shows the Company’s consolidated financial statement details as of March 31, 2020 and December 31, 2019 (in millions):
 March 31, 2020December 31, 2019
 CostAccumulated
depreciation and amortization
NetCostAccumulated
depreciation and amortization
Net
Property and equipment$2,179  $1,309  $870  $2,177  $1,277  $900  
Intangible assets$18,487  $3,339  $15,148  $18,564  $2,766  $15,798  
Computer software$4,962  $1,723  $3,239  $4,820  $1,616  $3,204  
As of March 31, 2020, intangible assets, net of amortization, includes $14,718 million of customer relationships and other amortizable intangible assets, $388 million of finite-lived trademarks, as well as $42 million of non-amortizable indefinite-lived trademarks.  Amortization expense with respect to these intangible assets was $598 million and $156 million for the three months ended March 31, 2020 and 2019, respectively.


11

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

Goodwill

Changes in goodwill during the three months ended March 31, 2020 are summarized below (in millions). Prior-period amounts have been reclassified to conform to the new reportable segment presentation as discussed in Note 12.
CapitalCorporate
MerchantBankingMarketAnd
 SolutionsSolutionsSolutionsOtherTotal
Balance, December 31, 2019$35,543  $12,225  $4,382  $92  $52,242  
Goodwill attributable to acquisitions (1) (5) —  248  —  243  
Foreign currency adjustments  (603) (49) (9) (1) (662) 
Balance, March 31, 2020$34,935  $12,176  $4,621  $91  $51,823  

(1)The amount of goodwill attributable to the acquisitions of Worldpay and Virtus, including its allocation to reportable segments, is preliminary and subject to change.

We assess goodwill for impairment on an annual basis during the fourth quarter or more frequently if circumstances indicate potential impairment. We concluded as a result of our fourth quarter 2019 step zero annual impairment tests that it remained more likely than not that the fair value of each of our reporting units continued to exceed their carrying amounts. Due to the economic impact of the COVID-19 pandemic, we evaluated if events and circumstances as of March 31, 2020, indicated potential impairment. We performed a qualitative assessment by examining factors most likely to affect our valuations and considered the impact to our business from the COVID-19 pandemic. The factors examined involve significant use of management judgment and included, among others, (1) forecasted revenue, growth rates, operating margins, and capital expenditures used to calculate estimated future cash flows, (2) future economic and market conditions and (3) the reduction in FIS’ market capitalization.

Based on our interim impairment assessment as of March 31, 2020, we concluded that it remained more likely than not that the fair value of each of our reporting units continued to exceed their carrying amounts; therefore, goodwill was not impaired. However, the Company believes it is reasonably possible that future developments related to the economic impact of the COVID-19 pandemic on our Merchant Solutions business, such as an extended duration of the pandemic and/or governmental imposed shutdowns, prolonged economic downturn or recession, or lack of governmental support for recovery, could have a material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment and could result in future goodwill impairment.

Visa Europe and Contingent Value Rights

As part of the Worldpay acquisition, the Company acquired certain assets and liabilities related to the June 2016 Worldpay Group plc (Legacy Worldpay) disposal of its ownership interest in Visa Europe to Visa Inc.  As part of the disposal, Legacy Worldpay received consideration from Visa Inc. in the form of cash and convertible Visa Inc. Series B preferred stock ("preferred stock"), the value of which may be reduced by settlement of potential liabilities relating to ongoing interchange-related litigation involving Visa Europe. Also in connection with the disposal, Legacy Worldpay agreed to pay former Legacy Worldpay owners 90% of the net-of-tax proceeds from the disposal, known as contingent value rights ("CVR"), pending the finalization of the proceeds from disposal, which is expected to occur no later than June 2028, at which time the preferred stock is subject to mandatory conversion into Visa Inc. Class A common stock.

The Company has elected the fair value option under ASC 825, Financial Instruments ("ASC 825"), for measuring its preferred stock asset and related CVR liability. The estimated fair value of the preferred stock and related CVR liability are determined using Level 3-type measurements. Significant inputs into the valuation of the preferred stock include the Visa Inc. Class A common stock price per share and the conversion ratio, which are observable, and an estimate of potential losses that will result from the ongoing litigation involving Visa Europe, which is unobservable. The Company engaged third-party valuation specialists and external counsel to assist management in making the fair value determination for the preferred stock. The fair value of the preferred stock was $320 million and $400 million at March 31, 2020 and December 31, 2019, respectively, recorded in Other noncurrent assets on the consolidated balance sheets.

The fair value of the CVR liability is determined based on 90% of the net-of-tax proceeds from the disposal, including the preferred stock and the cash consideration. The portion of the cash consideration that is payable as part of the CVR liability is
12

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

segregated pursuant to contractual provisions and reflected as restricted cash in the amount of $531 million and $540 million at March 31, 2020 and December 31, 2019, respectively, recorded in Other noncurrent assets on the consolidated balance sheets. The fair value of the CVR liability was $770 million and $838 million at March 31, 2020 and December 31, 2019, respectively, recorded in Other noncurrent liabilities on the consolidated balance sheets. Pursuant to ASC 825, the Company remeasures the fair value of the preferred stock and related CVR liability each reporting period. The net change in fair value was $20 million during the three months ended March 31, 2020, recorded in Other income (expense), net on the consolidated statement of earnings.

(6)       Deferred Contract Costs

Origination and fulfillment costs from contracts with customers capitalized as of March 31, 2020 and December 31, 2019 consists of the following (in millions):
March 31, 2020December 31, 2019
Contract costs on implementations in progress$190  $138  
Contract origination costs on completed implementations, net374  352  
Contract fulfillment costs on completed implementations, net185  177  
Total Deferred contract costs, net$749  $667  

Amortization of deferred contract costs on completed implementations was $51 million and $44 million during the three months ended March 31, 2020 and 2019, respectively, and there were no significant impairment losses in relation to the costs capitalized for the periods presented.

(7)       Debt

Long-term debt as of March 31, 2020 and December 31, 2019, consists of the following (in millions):

March 31, 2020
Weighted
Average
InterestInterestMarch 31,December 31,
RatesRateMaturities20202019
Fixed Rate Notes
Senior USD Notes
3.0% - 5.0%
3.8%2023 - 2048$4,938  $4,938  
Senior Euro Notes
0.1% - 3.0%
1.1%2021 - 20398,526  8,694  
Senior GBP Notes
1.7% - 3.4%
2.7%2022 - 20312,288  2,440  
Senior Euro Floating Rate Notes0.0%2021550  561  
Revolving Credit Facility (1)2.0%20233,250  600