• Revenue of $1.45 billion, up 4.6%; organic growth of 5.3%;
• Margin expansion of 150 basis points, as adjusted;
• EPS of $0.55, as adjusted, up 22.2%;
• Completed debt refinancing, extending duration and reducing average interest rate.
FIS™ (NYSE: FIS), the world’s largest provider of banking and payments technology, today reported financial results for the quarter ended March 31, 2012.
Revenue from continuing operations increased 4.6% to $1.45 billion in the first quarter of 2012, compared to $1.38 billion in the first quarter of 2011. GAAP net earnings from continuing operations attributable to common stockholders totaled $95.8 million, or $0.32 per diluted share, in the first quarter of 2012, compared to $96.1 million, or $0.31 per diluted share, in the prior year quarter.
Organic revenue growth, which excludes the impact of foreign currency, was 5.3%. EBITDA, as adjusted, increased 10.3% to $406.1 million in the first quarter of 2012, compared to $368.3 million in the first quarter of 2011. EBITDA margin, as adjusted, increased 150 bps to 28.1% reflecting growth in processing and professional services revenue, diligent cost management and lower integration and severance costs compared to the first quarter of 2011, and a loss in 2011 of approximately $13 million associated with the Sunrise prepaid platform.
Net earnings from continuing operations, as adjusted, totaled $162.2 million, or $0.55 per diluted share, compared to $137.7 million, or $0.45 per diluted share, in the first quarter of 2011. Free cash flow totaled $136.4 million compared to $130.3 million in the prior year quarter. Definitions of non-GAAP financial measures and reconciliations of non-GAAP measures to related GAAP measures are provided in subsequent sections of the press release narrative and supplemental schedules.
“We are encouraged by the strong start to the year, which was driven by solid results across all our operating segments,” stated Frank Martire, chairman and chief executive officer of FIS. “We continue to focus on serving our clients, driving organic growth and optimizing performance.”
The following is a discussion of first quarter results by segment:
• Financial Solutions:
First quarter 2012 Financial Solutions revenue increased 7.0% to $538.9 million compared to $503.7 million in the 2011 quarter, driven by growth in processing revenue, professional services and global commercial services. Financial Solutions EBITDA increased 7.1% to $209.0 million compared to $195.1 million in the first quarter of 2011. The EBITDA margin increased to 38.8% compared to 38.7% in the prior year quarter.
• Payment Solutions:
First quarter 2012 Payment Solutions revenue increased 2.6% to $630.6 million compared to $614.5 million in the 2011 quarter, driven by strong growth in electronic transactions. Payment Solutions revenue increased 4.2%, excluding the check related businesses, which totaled $107.9 million and $113.0 million in the first quarters of 2012 and 2011, respectively. Payment Solutions EBITDA increased 13.7% to $249.4 million compared to $219.3 million in the 2011 quarter. The EBITDA margin increased 380 bps to 39.5% compared to the prior year quarter, reflecting growth in electronic transactions and continued focus on cost management.
• International Solutions:
International Solutions revenue increased 3.2% to $276.8 million compared to $268.1 million in the 2011 quarter and increased 7.1% on an organic basis driven by transaction and services growth in Brazil, coupled with growth in Europe, driven primarily by Capco. International Solutions EBITDA increased 5.1% to $51.4 million compared to $48.9 million in the first quarter of 2011, and the EBITDA margin increased 40 bps to 18.6% compared to the prior year quarter.
Corporate expense, as adjusted, totaled $103.7 million in the first quarter 2012, compared to $95.0 million in the prior year quarter. Net interest expense, excluding refinancing costs, totaled $59.4 million in the first quarter of 2012 compared to $68.0 million in the 2011 quarter. The decrease was due primarily to lower borrowing costs, combined with a reduction in total debt outstanding. The effective tax rate in the first quarter of 2012 was 34% compared to 35% in the first quarter of 2011.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $481.7 million as of March 31, 2012. Debt outstanding totaled approximately $4.8 billion as of March 31, 2012. Net cash provided by operating activities totaled $203.8 million in the first quarter of 2012 compared to $260.2 million in the first quarter of 2011. The decline was due primarily to a payment of approximately $42 million related to the final settlement of an interest rate swap assumed in the acquisition of Metavante Technologies, Inc. Capital expenditures totaled $65.0 million in the first quarter of 2012, compared to $71.6 million in capital expenditures in the prior year quarter. Free cash flow, excluding settlement activity related to the payments businesses, totaled $136.4 million in the first quarter of 2012 compared to $130.3 million in the 2011 quarter.
During the first quarter of 2012, FIS completed a debt refinancing to extend the overall duration of its outstanding debt, reduce its weighted average interest rates and take additional steps towards attaining investment grade credit ratings. The refinancing included the private offering of $700 million aggregate principal amount of 5.0% senior unsecured notes due March 15, 2022 and the amendment and extension of FIS’ existing credit facility. There was no material change to FIS’ total leverage as a result of the debt refinancing activities. During the first quarter of 2012, the corporate credit ratings issued by Standard & Poor’s and Fitch Ratings were upgraded to BB+ and BBB-, respectively.
FIS reiterated its full year 2012 outlook for earnings from continuing operations as provided below.
• Organic revenue growth of 3% to 5%;
• EBITDA growth of 5% to 7%, as adjusted;
• Margin expansion of 40 to 80 basis points, as adjusted;
• Adjusted net earnings per share from continuing operations of $2.47 to $2.57.
Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, the Company has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. These non-GAAP measures include organic revenue, adjusted earnings before interest, taxes and depreciation and amortization (EBITDA), adjusted net earnings and free cash flow. Organic revenue includes reported revenue plus pre-acquisition revenue for companies acquired during the applicable reporting periods. Organic revenue excludes the impact of foreign currency fluctuation in 2012. Adjusted EBITDA (2012 comparative data) excludes accelerated vesting of certain stock options and restricted stock grants and for a non-compete and change in role payment. Adjusted net earnings (2012 comparative data) exclude the after-tax impact of acquisition related amortization, debt refinancing costs and accelerated vesting of certain stock options and restricted stock grants and for a non-compete and change in role payment. Adjusted net earnings (2011 comparative data) exclude the after-tax impact of acquisition related amortization. Free cash flow is GAAP operating cash flow less capital expenditures and excludes the net change in settlement assets and obligations.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings. Further, FIS’ non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures are provided in the attached schedules and in the Investor Relations section of the FIS Website.
Conference Call and Webcast
FIS will host a call with investors and analysts to discuss first quarter 2012 results on Thursday, April 26, 2012 beginning at 8:30 am. Eastern standard time. To register for the live event and to access a supplemental slide presentation, go to the Investor Relations section at fisglobal.com and click on “News and Events.” A webcast replay will be available on FIS’ Investor Relations website, and a telephone replay will be available through May 10, 2012, by dialing 800-475-6701 (USA) or 320-365-3844 (International). The access code will be 243390. To access a PDF version of this release and accompanying financial tables, go to investor.fisglobal.com.
FIS (fisglobal.com) is the world's largest global provider dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 100 countries. Headquartered in Jacksonville, Fla., FIS employs more than 32,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions. First in financial technology, FIS tops the annual FinTech 100 list, is 426 on the Fortune 500 and is a member of Standard & Poor's 500® Index.
This news release and today’s conference call contain “forward-looking statements” within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about revenue, organic revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), earnings per share and margin expansion, as well as other statements about our expectations, hopes, intentions, or strategies regarding the future, are forward-looking statements. These statements relate to future events and our future results, and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements.
Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include without limitation:
• changes and conditions in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes and conditions in either or both the United States and international lending, capital and financial markets;
• the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy regulations;
• the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level;
• the effects of our substantial leverage which may limit the funds available to make acquisitions and invest in our business, pay dividends and repurchase shares;
• the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in or new laws or regulations affecting the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;
• changes in the growth rates of the markets for core processing, card issuer, and transaction processing services;
• failures to adapt our services and products to changes in technology or in the marketplace;
• internal or external security breaches of our systems, including those relating to the theft of personal information and computer viruses affecting our software or platforms, and the reactions of customers, card associations and others to any such future events;
• the failure to achieve some or all of the benefits that we expect from acquisitions;
• our potential inability to find suitable acquisition candidates or finance such acquisitions, which depends upon the availability of adequate cash reserves from operations or of acceptable financing terms and the variability of our stock price, or difficulties in integrating past and future acquired technology or business’ operations, services, clients and personnel;
• competitive pressures on product pricing and services including the ability to attract new, or retain existing, customers;
• an operational or natural disaster at one of our major operations centers;
• and other risks detailed in “Risk Factors” and other sections of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and other filings with the SEC.
Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.
Mary Waggoner, SVP, FIS Investor Relations
P: 904.438.6282 - E: mary.waggoner[.]fisglobal.com.