Reiterates 2010 Outlook for 17% to 23% Growth in Adjusted EPS
Fourth Quarter Highlights:
- Adjusted EPS of $0.44
- Adjusted revenue of $1.3 billion, up 2.7%
- Adjusted EBITDA margin of 29.5%, up 240 basis points
- Adjusted free cash flow of $237 million
Adjusted revenue (which excludes the $15 million negative impact to deferred revenue from purchase accounting) increased 2.7% to $1.316 billion in U.S. dollars in the fourth quarter of 2009 compared to pro forma revenue of $1.281 billion in the fourth quarter of 2008, and increased 0.4% in constant currency. Adjusted net earnings from continuing operations totaled $167.0 million, or $0.44 per diluted share. Adjusted EBITDA was $387.7 million, 11.5% higher as compared to $347.7 million in the prior year quarter. The adjusted EBITDA margin expanded 240 basis points to 29.5%, driven by improved operating performance across all reporting segments, including the benefit of acquisition related cost savings. Strong earnings, higher deferred revenues and a favorable impact from the timing and amount of tax payments drove strong improvement in adjusted free cash flow to $237 million in the quarter. On a GAAP basis, fourth quarter consolidated revenue totaled $1.301 billion. During the quarter, FIS recorded acquisition related after-tax costs totaling $82.2 million, or $0.22 per diluted share. Additionally, the company incurred $87.6 million, or $0.23 per share, in after-tax charges related to the write-down of previously acquired trademarks and other assets in conjunction with the combination of FIS and Metavante and the company’s comprehensive re-branding initiative. The deferred revenue adjustment impacted after-tax earnings by $9.8 million, or $0.03 per share. These combined charges, along with purchase price amortization on intangible assets acquired through various acquisitions, resulted in a net (loss) from continuing operations attributable to common stockholders of ($54.2 million), or( $0.14) per diluted share.
For the full year 2009, pro forma adjusted revenue decreased 0.8% to $5.052 billion in U.S. dollars compared to pro forma revenue of $5.092 billion in 2008, and increased 0.3% in constant currency. Pro forma adjusted EBITDA increased 9.7% to $1.428 billion, compared to pro forma adjusted EBITDA of $1.302 billion in the prior year, and the adjusted EBITDA margin expanded 270 basis points to 28.3% compared to 25.6% in 2008. On a GAAP basis, FIS reported consolidated revenue of $3.770 billion and net earnings from continuing operations attributable to common stockholders of $101.3 million, or $0.42 per diluted share.
“Despite the highly challenging economic environment, 2009 was a very successful year for our company,” stated FIS Chairman William P. Foley, II. “FIS generated excellent operating results and also completed the most significant acquisition in the company’s history. These achievements provide a strong foundation for our continued growth and success.”
FIS President and Chief Executive Officer Frank Martire added, “We are very pleased with the solid execution by our management team and employees around the world. We remain highly focused on serving the needs of our clients, and are encouraged by the pace of recent new customer wins. We are reaffirming our outlook for 17% to 23% growth in adjusted earnings per share in 2010, combined with strong margin expansion and increased cash flow.”
Acquisitions and Discontinued Operations
On October 1, 2009, FIS completed the acquisition of Metavante Technologies, Inc. The transaction was treated as a purchase and the results of Metavante are included in the consolidated results of FIS beginning October 1, 2009. For comparative purposes, in accordance with management’s desire to improve the understanding of the company’s operating performance, the supplemental information provided below assumes the merger was completed on January 1, 2008 and combines Metavante’s results with FIS’s historical results on a pro forma basis.
In addition, FIS completed the sale of its ClearPar automated syndicated loan trade settlement business on January 1, 2010. The results of ClearPar are reported as discontinued operations for all periods presented.
Supplemental Information
The following supplemental information is presented on an adjusted pro forma basis, which management believes provides more meaningful comparisons between the periods presented. Reconciliations of non-GAAP measures to related GAAP measures are provided in the attached schedules and in the Investor Relations section of the FIS Web site, www.fisglobal.com.
Consolidated fourth quarter revenue increased 2.7% to $1.316 billion in U.S. dollars, compared with $1.281 billion in the fourth quarter of 2008. Excluding a $29.3 million favorable foreign currency impact, consolidated revenue increased 0.4%.
- Financial Solutions revenue declined 1.3% to $452.5 million compared to $458.4 million in the prior period, as increases in global commercial services revenue and software sales were more than offset by a reduction in professional services revenue.
- Payment Solutions revenue declined 1.0% to $629.6 million compared to $635.9 million in the 2008 quarter as growth in debit and network solutions was more than offset by reduced termination fees and lower item processing, prepaid card and retail check activity.
- International Solutions revenue increased 24.0% to $232.3 million in U.S. dollars, and 8.4% in constant currency compared to $187.3 million in the prior year quarter. Core processing revenue increased 6.4% driven by increased software sales and strong services revenue, while payments revenue increased 9.7% driven by organic account growth across all regions.
Adjusted EBITDA increased 11.5% to $387.7 million in the fourth quarter of 2009 compared to $347.7 million in the 2008 quarter. The adjusted EBITDA margin improved 240 basis points to 29.5% compared to 27.1% in the prior-year quarter, driven by the realization of acquisition related synergies and ongoing expense management across all operating segments.
- Financial Solutions EBITDA increased 0.6% to $197.6 million, while the margin improved 80 basis points to 43.7% compared to 42.9% in the prior year.
- Payment Solutions EBITDA increased 0.3% to $219.0 million, and the margin increased 50 basis points to 34.8% compared to 34.3% in the prior year.
- International EBITDA increased 90.2% to $63.9 million, which included a $5.3 million favorable currency impact. The EBITDA margin improved 960 basis points to 27.5% compared to 17.9% in the prior year due to increased software sales, improved operating leverage in payment and processing services and ongoing cost management activity.
Balance Sheet
FIS had $430.9 million in cash and cash equivalents and total debt outstanding of $3.3 billion at December 31, 2009. The majority of FIS’s debt has been swapped to fixed interest rates. The effective interest rate was 3.6% at year end.
Capital expenditures totaled $66.8 million in the quarter, compared to $85.9 million in pro forma capital expenditures in the fourth quarter of 2008.
2010 Outlook
The company reiterated the following 2010 guidance provided at its December 7, 2009 analyst day:
- 2% to 4% growth in adjusted revenues (1% to 3% growth in constant currency)
- Adjusted EBITDA margin expansion of at least 300 basis points
- Adjusted earnings per diluted share of $1.91 to $2.01, which is an increase of 17% to 23% compared to $1.63 in 2009
- Adjusted free cash flow of more than $750 million.
Conference Call and Webcast
FIS will host a call with investors and analysts to discuss fourth quarter and full year 2009 results on Thursday, February 4, 2010 beginning at 5:00 p.m. Eastern daylight time. To register for the live event and to access a supplemental slide presentation, go to the Investor Relations section at www.fisglobal.com and click on “Events and Multimedia.” A webcast replay will be available on FIS’ Investor Relations website, and a telephone replay will be available through February 18, 2010, by dialing 800-475-6701 (USA) or 320-365-3844 (International). The access code will be 141855. To access a PDF version of this release and accompanying financial tables, go to http://www.investor.fisglobal.com.
About FIS
FIS delivers banking and payments technologies to more than 14,000 financial institutions and businesses in more than 100 countries worldwide. FIS provides financial institution core processing, and card issuer and transaction processing services, including the NYCE® Network. FIS maintains processing and technology relationships with 40 of the top 50 global banks, including nine of the top 10. FIS is a member of Standard and Poor's (S&P) 500® Index and consistently holds a leading ranking in the annual FinTech 100 rankings. Headquartered in Jacksonville, Fla., FIS employs approximately 30,000 on a global basis. FIS is listed on the New York Stock Exchange under the “FIS” ticker symbol. For more information about FIS see www.fisglobal.com.
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