10-Q: FIS Reports Q2 Loss Amid Worldpay Divestiture Accounting

Fidelity National Information Services (FIS) reported a net loss from continuing operations in Q2 2025, primarily driven by a significant non-cash tax expense related to the pending sale of its remaining Worldpay interest and a write-off of contingent consideration.

Summary

• FIS reported a net loss from continuing operations of $469 million for the three months ended June 30, 2025, compared to net earnings of $238 million in the prior year period.
• For the six months ended June 30, 2025, the net loss from continuing operations was $392 million, a significant decline from net earnings of $237 million in the same period last year.
• Revenue from continuing operations increased by 5% to $2,616 million for the three months ended June 30, 2025, and by 4% to $5,148 million for the six months ended June 30, 2025.
• Operating income grew by 10% to $408 million for the quarter and 4% to $755 million for the six-month period.
• Adjusted EBITDA increased by 5% to $1,041 million for the quarter and 2% to $1,999 million for the six-month period.
• The equity method investment earnings (loss) from Worldpay was a loss of $598 million for the quarter and $669 million for the six-month period, largely due to a $539 million increase in deferred tax liability related to the agreement to sell the remaining Worldpay interest.
• FIS no longer anticipates receiving up to $1.0 billion in contingent consideration from the 2024 Worldpay Sale, resulting in a $108 million non-cash loss in Q2 2025.
• The company plans to acquire the Issuer Solutions business from Global Payments for a net purchase price of $12.0 billion and sell its remaining 45% equity interest in Worldpay to Global Payments for $6.6 billion, with both transactions expected to close in the first half of 2026.
• FIS intends to fund the Issuer Solutions acquisition with approximately $8.0 billion of new debt and proceeds from the Worldpay Minority Interest Sale.
• Approximately $2.4 billion remained available for repurchase under the share repurchase program as of June 30, 2025, with $246 million repurchased in Q2 2025 and $696 million in H1 2025.
• A regular quarterly dividend of $0.40 per common share is payable on September 24, 2025.

Sentiment

Score: 4

Explanation: The core business segments (Banking and Capital Markets) show positive revenue and Adjusted EBITDA growth, indicating operational strength. However, the reported net loss is substantial due to significant non-cash accounting adjustments related to the Worldpay divestiture and increased interest expense. While these are largely non-operational impacts, they create a negative headline and reflect complex financial restructuring. The strategic acquisition and divestiture are transformative but carry execution risks and near-term financial impacts.

Positives

• Revenue from continuing operations increased by 5% for the quarter and 4% for the six-month period, driven by growth in Banking and Capital Markets segments.
• Operating income increased by 10% for the quarter and 4% for the six-month period, demonstrating improved operational efficiency.
• Adjusted EBITDA showed healthy growth, increasing by 5% for the quarter and 2% for the six-month period, indicating strong underlying business performance.
• Selling, general, and administrative expenses decreased by 6% for the quarter and 4% for the six-month period, reflecting cost management efforts.
• The Banking segment's recurring revenue grew by 6% for the quarter, led by commercial services, cards and money movement, international, digital, and automated finance.
• The Capital Markets segment's revenue increased by 6% for the quarter and 7% for the six-month period, with recurring revenue contributing significantly due to new sales implementations.
• The company maintains strong liquidity with $3.3 billion available as of June 30, 2025, including $0.6 billion in cash and $2.8 billion in Revolving Credit Facility capacity.
• The pending sale of the remaining Worldpay equity interest is expected to result in a significant pre-tax gain of approximately $2.7 billion (estimated $6.6 billion selling price over $3.9 billion carrying value).
• The company is committed to returning capital to shareholders through a $0.40 per share quarterly dividend and an ongoing share repurchase program with $2.4 billion remaining.

Negatives

• Reported a net loss from continuing operations of $469 million for Q2 2025 and $392 million for H1 2025, a significant reversal from prior year earnings.
• Equity method investment earnings (loss) from Worldpay resulted in a substantial loss of $598 million for Q2 2025 and $669 million for H1 2025, primarily due to a $539 million increase in deferred tax liability related to the pending sale of the remaining Worldpay interest.
• A $108 million non-cash loss was recognized in Q2 2025 due to the write-off of contingent consideration from the 2024 Worldpay Sale, as it is no longer anticipated.
• Interest expense, net, increased significantly by 156% for the quarter and 58% for the six-month period, driven by lower interest income from unused proceeds and bridge facility fees for the Issuer Solutions acquisition.
• Gross profit margin decreased to 36% for both the three and six months ended June 30, 2025, from 38% and 37% respectively, due to higher amortization of internally developed software and increased personnel costs.
• The Banking segment's Adjusted EBITDA margin decreased due to an increase in bad debt expense.
• Short-term borrowings increased to $1,719 million as of June 30, 2025, from $636 million at December 31, 2024.
• Current portion of long-term debt increased to $2,318 million as of June 30, 2025, from $968 million at December 31, 2024.

Risks

• Changes in general economic, business, and political conditions, including recession, inflation, and interest rate increases, could negatively impact financial performance.
• The pending acquisition of Issuer Solutions may not be completed or may not provide the expected benefits, including anticipated cost or revenue synergies, within the expected timeframe or at all.
• Integration of acquired businesses, particularly Issuer Solutions, may be more difficult, time-consuming, or expensive than anticipated.
• Failure to realize anticipated cost savings and synergies from acquisitions could impact profitability.
• The company is exposed to risks of doing business internationally, including currency fluctuations.
• Changes in legislative initiatives or proposals, statutory changes, governmental regulations, and industry requirements (e.g., privacy, data protection, cybersecurity, AI laws) could affect operations.
• Reduction in revenue may occur due to consolidation in the banking, retail, and financial services industries or financial failures of clients.
• Internal or external security or privacy breaches of systems, including those involving unauthorized access, theft, corruption, or loss of personal information, could lead to liability claims and loss of customers.
• Implementation of software or employee error could result in data corruption, business interruption, or outages.
• Partners and third parties may fail to satisfy their legal obligations, impacting the company's operations.
• The company faces competitive pressures on pricing and from new disruptive technologies, international competitors, and global banks entering the market.
• Failure to innovate and keep up with new emerging technologies could impact solutions and customer retention.
• Operational or natural disasters at major operations centers pose a risk to business continuity.
• Non-compliance with payment network requirements or changes in those requirements could lead to penalties or loss of business.
• Fraud by bad actors remains a persistent threat to financial services operations.

Future Outlook

FIS expects to close the Issuer Solutions Acquisition and the Worldpay Minority Interest Sale in the first half of 2026, which will significantly reshape its business and financial profile. The company intends to fund the Issuer Solutions acquisition with approximately $8.0 billion of new debt and the proceeds from the Worldpay Minority Interest Sale. Following the Issuer Solutions acquisition, FIS plans to temporarily pause further investment in acquisitions to accelerate deleveraging until it returns to its target leverage ratio. The company anticipates continuing to pay quarterly dividends, targeting dividend-per-share growth aligned with adjusted earnings-per-share growth, and intends to repurchase approximately $1.2 billion of shares in aggregate during the year ending December 31, 2025.

Management Comments

• We are experiencing relatively stable sales cycles and levels of client activity across our businesses.
• We have experienced, and continue to experience, relatively high inflation in our primary markets over the medium-term cycle.
• Relatively high interest rates have had, and may continue to have, a negative impact on our interest expense.
• We expect to incur approximately $8.0 billion of new debt upon closing of the Issuer Solutions Acquisition expected in the first half of 2026.
• We continue to assist financial institutions and other businesses in migrating to outsourced integrated technology solutions to improve their profitability and address increasing and ongoing regulatory requirements.
• We believe our integrated solutions and outsourced services are well-positioned to address this outsourcing trend across the markets we serve.
• We continue to invest in modernization, innovation and integrated solutions to meet the demands of the markets we serve and to compete with global banks, financial and other technology providers, and emerging technology innovators.
• Consumer preference, particularly in younger generations, continues to shift to digital-first banking solutions.
• It is increasingly clear that a priority for our clients is to provide a unified, engaging and inclusive banking experience powered by digital capabilities across all channels and customer activities.
• We continue to see demand in the payments market for innovative solutions that will deliver faster, more convenient payment options in mobile channels, internet applications, in-store cards, and digital currencies.
• Cyberattacks on information technology systems and the vendors and technological supply chain on which they rely continue to grow in frequency, complexity and sophistication, including the increasing use of artificial intelligence by threat actors.
• Using expertise we have gained from our ongoing focus and investment, we have developed and we offer fraud, security, risk management and compliance solutions to target this growth opportunity in the financial services industry.

Industry Context

The financial technology industry continues to be shaped by digital transformation, with a strong shift towards digital-first banking solutions and demand for faster, more convenient payment options across various channels. Consolidation within the banking industry, driven by merger and acquisition activity, presents both opportunities and risks for technology providers like FIS. The increasing frequency and sophistication of cyberattacks, including those leveraging AI, highlight the critical need for robust fraud, security, and risk management solutions, which FIS is actively developing and offering. The company's strategic moves, such as the acquisition of Issuer Solutions and the full divestiture of Worldpay, reflect a broader industry trend of companies streamlining portfolios to focus on core strengths and capitalize on specific market opportunities.

Comparison to Industry Standards

• The company's revenue growth in Banking Solutions (6% for Q2 2025) and Capital Markets Solutions (6% for Q2 2025) indicates a competitive performance within their respective segments, aligning with or exceeding growth rates seen by peers focused on core processing and capital markets software.
• The decline in gross profit margin (from 38% to 36% in Q2) suggests potential pressure on cost of revenue, possibly due to increased investment in internally developed software and personnel, which could be a common challenge for large-scale technology providers balancing innovation with cost efficiency.
• The significant increase in interest expense reflects the broader macroeconomic environment of higher interest rates, impacting all highly leveraged companies in the financial services sector.
• The strategic acquisition of Issuer Solutions from Global Payments for $13.5 billion and the sale of the remaining Worldpay interest for $6.6 billion are substantial transactions that will reshape the company's competitive landscape, similar to other large-scale portfolio re-alignments seen in the fintech space (e.g., PayPal's divestiture from eBay, or various payment processor mergers and acquisitions like Fiserv's acquisition of First Data).
• The company's continued investment in platform modernization, digital solutions (Digital One), and AI capabilities is consistent with industry leaders like Jack Henry & Associates or Temenos, who are also heavily investing in next-generation banking and payment technologies to meet evolving client and consumer demands.

Management Changes

Corporate Governance

Legal Proceedings

• A putative class action, In re Fidelity National Information Services, Inc. Securities Litigation, was filed on March 6, 2023, alleging violations of federal securities laws related to the former Merchant Solutions segment's valuation, integration, and synergies. The court denied the motion to dismiss on September 30, 2024, moving the case to discovery.
• Multiple shareholder derivative actions (McCollum, Hialeah, Young, Luthin demands) were filed, claiming officers and directors violated federal securities laws and breached fiduciary duties concerning the former Merchant Solutions segment. The Board established a Demand Review Committee to investigate these demands.
• The City of Hialeah Employees' Retirement System v. Stephanie L. Ferris et al. (Hialeah Action) derivative action was filed on October 18, 2023. The court partially granted a motion to stay and denied a motion to dismiss on March 21, 2025, with the case partially stayed pending the Demand Review Committee's investigation.
• Another shareholder derivative action, Portia McCollum, derivatively on behalf of Fidelity National Information Services, Inc. v. Gary Norcross et al. (McCollum Action), was filed on October 22, 2024, and subsequently stayed on November 7, 2024.

Related Party Transactions

• FIS has continuing involvement with Worldpay through a 45% non-controlling equity interest, a transition services agreement (TSA), and various other commercial agreements.
• Under the TSA, FIS provides technology infrastructure, risk and security, accounting, and other corporate services to Worldpay, and Worldpay provides corporate services to FIS.
• Net TSA services income of $28 million (Q2 2025) and $56 million (H1 2025) was recognized in Other operating (income) expense, net related party.
• Revenue earned from various commercial services provided to Worldpay was $38 million (Q2 2025) and $73 million (H1 2025).
• A receivable from related party of $43 million was recorded as of June 30, 2025, in connection with the TSA and commercial agreements.
• Other payables to Worldpay of $21 million were recorded as of June 30, 2025.
• FIS maintains guarantees on behalf of certain former Worldpay subsidiaries, including a $378 million CVR liability due October 12, 2027, and standby letters of credit totaling $299 million as of June 30, 2025. Worldpay is required to fully reimburse and indemnify FIS for any payments under these guarantees.

Stakeholder Impact

• Shareholders: Experience a net loss from continuing operations due to significant non-cash accounting adjustments, but also benefit from continued dividends and share repurchase programs. The pending strategic transactions (Issuer Solutions acquisition, Worldpay sale) are expected to reshape the company's future value proposition.
• Employees: The company is undergoing enterprise-wide cost savings initiatives, including severance costs, which may impact employment levels. The acquisition of Issuer Solutions will bring new employees into the FIS ecosystem.
• Customers: Benefit from continued investment in modernization, innovation, and integrated solutions like the Digital One platform. The strategic transactions aim to enhance service offerings and capabilities.
• Creditors: The company plans to incur approximately $8.0 billion in new debt to fund the Issuer Solutions acquisition, which will increase overall leverage, though the company intends to maintain investment-grade debt ratings and accelerate deleveraging post-acquisition.
• Suppliers: The company's ongoing operations and strategic initiatives will continue to drive demand for third-party services and technology, impacting suppliers.

Next Steps

• Finalize the purchase price allocations for two businesses acquired in 2024, no later than one year from their respective acquisition dates.
• Continue to evaluate the organizational structure and expect to incur additional severance costs in the second half of 2025 as part of enterprise-wide cost savings initiatives.
• Close the Issuer Solutions Acquisition and the Worldpay Minority Interest Sale, expected in the first half of 2026, subject to regulatory approvals and other customary closing conditions.
• Temporarily pause further investment in acquisitions after the Issuer Solutions Acquisition to accelerate deleveraging until the target leverage ratio is achieved.
• Continue to pay quarterly dividends, targeting dividend-per-share growth aligned to adjusted earnings-per-share growth.
• Repurchase approximately $1.2 billion of shares in aggregate during the year ending December 31, 2025.
• The Demand Review Committee will continue its investigation into shareholder derivative demands, with the Hialeah Action partially stayed pending completion of this investigation.
• Evaluate the impacts of the One Big Beautiful Bill Act (OBBBA) on consolidated financial statements for the year ending December 31, 2025.

Key Dates

Recommendation

The filing presents a mixed picture. While the core Banking and Capital Markets segments show healthy revenue and Adjusted EBITDA growth, indicating underlying operational strength, the reported net loss is substantial. This loss is primarily driven by non-cash accounting adjustments related to the Worldpay divestiture, specifically a large deferred tax liability increase and the write-off of contingent consideration. These are not indicative of a deterioration in core business performance but reflect complex financial restructuring. The pending acquisition of Issuer Solutions and the full divestiture of Worldpay are transformative strategic moves that could unlock long-term value, but they also introduce significant integration and execution risks. Given the current financial restructuring impacts obscuring core profitability and the inherent risks of large-scale M&A, a 'hold' recommendation is appropriate. Investors should monitor the successful integration of Issuer Solutions, the realization of expected synergies, and the company's deleveraging progress before considering a stronger position.

Keywords

Financial Technology, Fintech, Banking Solutions, Capital Markets, Issuer Solutions, Worldpay, Payments Processing, SEC Filing, Quarterly Report, Acquisition, Divestiture, Debt, Share Repurchase, Dividend, Corporate Governance, Litigation, Risk Management