November 01, 2011 07:00 AM Eastern Daylight Time
Continued Strong Growth in International Solutions
- Revenue of $1.43 billion, up 4.3%; organic growth of 4.1%
- International Solutions revenue up 49.3%; organic growth of 21.9%
- EPS of $0.62, as adjusted, up 19.2%
- Free cash flow of $193 million
JACKSONVILLE, Fla.--(BUSINESS WIRE)--FIS™ (NYSE:FIS), the world’s largest provider of banking and payments technology, today reported financial results for the quarter ended September 30, 2011.
“We remain focused on providing solutions that enable our clients to drive growth, optimize efficiency and meet their overall business objectives.”
GAAP Results
Revenue from continuing operations increased 4.3% to $1.43 billion in the third quarter of 2011, compared to $1.37 billion in the third quarter of 2010, which included an $83.3 million termination fee related to the card processing joint venture in Brazil. GAAP net earnings from continuing operations attributable to common stockholders totaled $145.4 million, or $0.47 per diluted share, in the third quarter of 2011, compared to $134.3 million, or $0.40 per diluted share, in the prior year quarter.
Non-GAAP Results
Adjusted revenue growth was 10.8% in the third quarter of 2011, and organic revenue growth was 4.1%. EBITDA increased 2.7% to $438.0 million compared to EBITDA of $426.6 million, as adjusted, in the third quarter of 2010. EBITDA margin was 30.7% in the third quarter of 2011, compared to 33.1%, as adjusted, in the prior year quarter. EBITDA margin in the current year quarter reflects the addition of Capco, continued growth in lower margin services revenue, as well as approximately $10.1 million of integration, severance and merger and acquisition costs. EBITDA in the prior year quarter included a benefit of approximately $10.0 million for reimbursed legal fees.
Adjusted net earnings from continuing operations totaled $188.8 million compared to $176.7 million in the third quarter of 2010. Adjusted earnings per share increased 19.2% to $0.62 compared to $0.52 in the prior year quarter. Integration, severance, merger and acquisition costs reduced third quarter 2011 adjusted earnings by approximately $0.02 per share. Free cash flow was $193.4 million compared to free cash flow of $220.4 million, as adjusted, in the 2010 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.
“Excellent growth in International Solutions drove solid top-line performance and contributed to the strong 19.2% growth in adjusted earnings per share in the third quarter,” stated Frank Martire, president and chief executive officer, FIS. “We remain focused on providing solutions that enable our clients to drive growth, optimize efficiency and meet their overall business objectives.”
Segment Information
The following is a discussion of third quarter results by segment:
- Financial Solutions:
Third quarter 2011 Financial Solutions revenue increased 7.8% to $523.2 million compared to $485.5 million in the 2010 quarter, driven by the addition of Capco’s North American operations, growth in account processing and higher services revenue. Financial Solutions revenue increased 0.6% on an organic basis. Financial Solutions EBITDA increased 1.9% to $224.0 million compared to $219.8 million in the third quarter of 2010. The EBITDA margin was 42.8% compared to 45.3% in the prior year quarter, reflecting the addition of Capco, lower license revenue, growth in lower margin services and approximately $1.7 million in integration and severance costs in the third quarter of 2011.
- Payment Solutions:
Third quarter 2011 Payment Solutions revenue increased 0.5% to $603.7 million compared to $600.6 million in the 2010 quarter. Payment Solutions revenue increased 2.0% excluding a $6.4 million decline in the check-related businesses. Payment Solutions EBITDA totaled $229.6 million in the third quarter of 2011 compared to $230.9 million in the third quarter of 2010. The decline was due primarily to $4.3 million of integration and severance costs that are included in the current year quarter. The EBITDA margin was 38.0% compared to 38.4% in the prior year quarter.
- International Solutions:
International Solutions revenue increased 49.3% to $297.7 million compared to $199.4 million in the 2010 quarter, and increased 21.9% on an organic basis. The strong performance was driven primarily by continued strong growth in Brazil card processing and Capco’s European business. International Solutions EBITDA increased 44.1% to $67.0 million compared to $46.5 million in the third quarter of 2010. Integration and severance costs of approximately $1.2 million are included in the current year quarter. The EBITDA margin was 22.5% compared to 23.3% in the prior year quarter, reflecting the addition of Capco.
- Corporate/Other:
Corporate expense totaled $82.6 million in the third quarter 2011, compared to $70.6 million in the prior year quarter. As previously disclosed, the prior year quarter included a benefit of approximately $10.0 million related to the reimbursement of legal expenses. Integration, severance and merger and acquisition costs of approximately $2.9 million are included in the current year quarter.
Net interest expense totaled $60.5 million compared to $60.9 million in the prior year quarter. The effective tax rate declined to 30.6% in the third quarter of 2011 compared to 36.6% in the prior year quarter due to the implementation of state and federal tax planning strategies and a non-recurring benefit related to the Company’s international business. FIS anticipates that the full year tax rate for 2011 will be approximately 33%.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $386.8 million as of September 30, 2011. Debt outstanding totaled approximately $4.9 billion as of September 30, 2011. Capital expenditures totaled $82.1 million in the third quarter of 2011, compared to $93.1 million in capital expenditures in the prior year quarter.
Free cash flow totaled $193.4 million in the third quarter of 2011 compared to adjusted free cash flow of $220.4 million in the 2010 quarter due primarily to higher interest payments in the current year.
2011 Outlook
FIS updated its outlook for full year 2011 as follows:
- Revenue growth of approximately 10% (approximately 5% organic revenue growth);
- EBITDA growth of approximately 4% to 5%;
- Adjusted net earnings per share from continuing operations of $2.24 to $2.30;
- Free cash flow in excess of adjusted net earnings.
