FIS's Earnings Drop Due to Debt Refinancing, Higher Security Costs

FIS said Tuesday that its earnings fell roughly 30% for the second quarter — an effect of debt refinancing and, to a much smaller extent, information security costs. The quarter ended June 30.

The Jacksonville, Fla. bank tech vendor announced a profit of $104.8 million, or 31 cents per share, down from $150.6 million, or 53 cents per share, from the same period last year.

Despite the downtick in earnings, FIS said its revenue increased 3.4% to $1.51 billion.

FIS' executives explained, on a call with investors, that paying extra for safeguarding its systems and risk management has fast become the standard.

"This is really the new normal," said Gary Norcross, FIS' president and COO, on the call. "And everybody in this industry is going to be subjected to making those investments."

FIS's corporate expenses increased $19 million to $109 million in the second quarter in part due to spending more on security, said Woody Woodall, FIS' chief financial officer.

"As you read the paper and look at the news globally, information security and cyber attacks are more prevalent and complicated, more sophisticated than ever," he said, on the call. "And we have to be prepared to repel and defend against these attacks. So we continue to invest in that area. Information security has always been a top priority for FIS, and will continue to be that."

This year, FIS, the number-one financial services technology company on the FinTech 100 ranking, has been strengthening its focus on financial services.

In July, the company announced that the Merchant Customer Exchange (MCX), a consortium of retailers planning to supersede the traditional payment networks, would leverage FIS's infrastructure.

The deal calls for FIS to provide settlement services and transaction processing, among other utilities, to MCX.

"So basically we're running it into our network. We do a lot of that, as you would expect," said Norcross, on the call. "We own a couple of networks, but we also do it for some third parties, for some other large networks out there. So this is not a difficult process for us, but leveraging a lot of our capabilities, so it's a great win."

And, in January, FIS announced that it was acquiring mobile banking and payments provider mFoundry.

Early Tuesday afternoon, shares of FIS were trading at $43.13, down 2.6% from previous closing price a day earlier.