FIS

About FIS

At Fidelity National Information Services (FIS), the check will never get lost in the mail. FIS provides software, outsourcing, and IT consulting for the financial services industry. For banks and other financing entities, the company's offerings address financial functions, such as core processing, decision and risk management, and retail channel operations, – more... as well as payment services, such as electronic funds transfer, check and ticket processing, and credit card production and activation. The company's 14,000 customers aren't just the largest, private financial institutions, but also small businesses and government entities, and are in more than 100 countries.

Operations

FIS is divided into two product/service segments -- payment solutions and financial solutions -- and an international segment. Payment solutions is the company's largest segment, at more than 40% of sales, while financial solutions makes up more than 35%. International solutions, which makes up the remainder of sales, provides the company's services outside North America, primarily in Brazil, Germany, and the UK.

Financial Analysis

In an effort to boost its presence in the banking and payments software market, FIS acquired Milwaukee-based Metavante Technologies for about $3 billion in 2009. The acquisition included Metavante's NYCE Payments Network, which operates a network of more than 360,000 ATMs serving more than 90 million cardholders. FIS reaped the benefits of Metavante in 2010, when overall sales got back on track (after dropping to a six-year low in 2009), growing 40%, while profits bounded back more than 280%.

The company continued its return to form in 2011, though its largest segment grew only nominally (less than 1%). The payment solutions group eked out its growth thanks to print and mail and card personalization and electronic payment services, which was almost completely neutralized by diminished item processing and retail check business. The financial solutions group grew 10% for the year, driven by professional services, processing, and The Capital Markets Company (Capco, acquired in 2010) revenues. International expanded almost 30%, again partially from Capco business (in Europe), as well as through credit card increases in Brazil, ATM management in India, core banking business in Australia, and license revenue from customers in EMEA (Europe, Middle East, and Africa). Foreign currency exchange rate chipped in nearly $50 million (about 20% of the growth) for the segment.

Mergers & Acquisitions

In order to focus on providing services to financial institutions, in 2012 FIS sold its Healthcare Benefit Solutions business to equity investor Lightyear Capital in a $335 million deal. The sale included the Consumer Driven Healthcare Solutions and Health and Financial Network Solutions divisions, including benefits administration, benefit account processing, and payment fulfillment services for consumers, health care providers, and payers. FIS retained its state and federal government electronic benefits transfer (EBT) business, which has operations in 25 states, because the company is a market leader in that business with significant geographic scale.

FIS bought IT consultancy Capco from majority shareholder Symphony Technology Group to further expand its list of services for clients the financial industry. Earlier that year FIS bought Compliance Coach, a provider of risk assessment software used to manage compliance with laws and regulations. The deal expanded FIS' offerings for compliance management and added about 1,500 clients to its customer roster.

The company also enlisted the help of BMO Harris Bank to provide it with additional back-end customer-facing functions, such as core processing, mobile financial services, online bill payment, trust services, and EFT processing. The late 2012 five-year agreement extends FIS's existing partnership with BMO Harris Bank.

While FIS does the bulk of its business in North America, the company continues to look overseas for growth opportunities, and international business has brought in around a fifth of FIS's revenues in each of the past few years. In 2010 it expanded its presence in the Philippines with the opening of a new service facility to focus on business process outsourcing. The company made related investments in its India operations the previous year. Besides growing its top line, FIS is keen on using global expansion to produce scale-driven operating efficiencies. – less

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