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Fidelity National Information Services, Inc.: Initiation of Research Coverage

Tuesday, March 28, 2017

William Blair & Company initiated research coverage of Fidelity National Information Services, Inc. (FIS $80.12), a global financial technology and services company providing solutions for retail and commercial banking, capital markets, asset and wealth management, risk and compliance, treasury, and insurance.

Analyst Chris Shutler estimated the company would generate adjusted EPS growth of 12% in 2017, to $4.29, and 12% in 2018, to $4.80, driven by low- to midsingle-digit organic revenue growth, margin expansion, debt pay-down, and share repurchases.

“FIS is one of the largest financial technology companies in the world,” Shutler said, “with services ranging from core banking and ancillary solutions such as digital banking and card processing to risk and compliance, treasury and corporate liquidity, financial recordkeeping, and consulting. Seventy-eight percent of 2016 revenue was recurring, client concentration is low, retention rates are high, adjusted EBITDA margins are 31%, and cash flow conversion is roughly on par with adjusted net income. Vendor rationalization and an increasing focus by financial institutions on total cost of ownership are advantages for FIS. In addition, the company has had boots on the ground in Asia and Latin America for years, providing a solid base from which to expand in faster-growing markets.”

Shutler continued, “FIS closed the acquisition of SunGard in November 2015. Despite pressure on capital markets, SunGard has performed well, increasing revenue 4%-5% in each of the last two years. The acquisition improved FIS’s share of wallet with many large financial institutions, and the retooling of SunGard’s salesforce from a vertical to a more horizontal approach should enhance cross-selling. The acquisition, along with FIS’s global footprint, opens the door to a wider range of future M&A opportunities than may be available to its peers.”

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Current Ratings Distribution (as of 2/28/17)

Coverage Universe
Outperform (Buy): 59%
Market Perform (Hold): 34%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 9%
Market Perform (Hold): 3%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

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