FIS™ (FIS), the world's largest provider of banking and payments technology solutions, and a global leader in consulting and outsourcing solutions, today reported third quarter revenue increased 7 percent to $1.6 billion from $1.5 billion a year earlier.
GAAP net earnings from continuing operations attributable to common stockholders was $152 million, or $0.53 per diluted share, compared to $175 million, or $0.60 per diluted share in the prior year quarter.
Third quarter 2014 revenue increased 5 percent on an organic basis, which excludes the impact of acquisitions and changes in foreign currency, from the prior year quarter. Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased to $229 million in the third quarter 2014 from $218 million in the prior year quarter. Adjusted net earnings per diluted share increased 8 percent to $0.80 per share from $0.74 per share in the third quarter 2013. Third quarter 2014 non-GAAP adjusted net earnings from continuing operations excludes costs pertaining to acquisition-related purchase amortization of $0.13 per share, refinancing activities of $0.09 per share, and acquisition, integration, and severance of $0.06 per share. Adjusted EBITDA increased to $488 million in the third quarter 2014, up 4 percent from $470 million in the prior year quarter, while adjusted EBITDA margin was 30.4 percent compared to 31.3 percent in the prior year quarter.
“It was another solid quarter of growth for FIS demonstrating the strength and consistency of our business model,” said Frank Martire, chairman and chief executive officer of FIS. “Strong cash flow generation and disciplined capital allocation enabled us to return more cash to shareholders.”
“These results reflect our focus on business execution to deliver strategic value to our clients and drive profitable growth,” commented Gary Norcross, president and chief operating officer of FIS. “We continue to build on our market leadership position and are optimistic about the opportunities ahead for FIS.”
For the nine months ended September 30, 2014, GAAP revenue increased 5 percent to $4.7 billion, from $4.5 billion in the prior year period. GAAP net earnings from continuing operations attributable to common stockholders increased to $488 million, or $1.69 per diluted share, from $416 million, or $1.41 per diluted share, in the prior year period.
Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased to $646 million in the first nine months of 2014, from $610 million in the prior year period. Adjusted net earnings per diluted share increased 8 percent to $2.23 from $2.07 in the first nine months of 2013.
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.
Segment Information
The following is a review of third quarter 2014 results by segment:
Revenue increased 9 percent to $633 million, from $579 million in the third quarter 2013 and increased 6 percent on an organic basis, driven by growth in consulting and professional services, risk and compliance solutions, and mobile banking. Adjusted EBITDA increased 5 percent to $251 million from $239 million in the third quarter 2013, while adjusted EBITDA margin was 39.6 percent compared to 41.4 percent a year earlier reflecting lower termination fees and a less favorable revenue mix.
Revenue increased 2 percent to $615 million from $602 million in the third quarter 2013, reflecting growth in network solutions, debit processing, and software license sales. Adjusted EBITDA increased to $262 million from $255 million in the third quarter of 2013, while adjusted EBITDA margin increased to 42.7 percent from 42.4 percent a year earlier.
Revenue increased 12 percent to $358 million from $320 million in the third quarter 2013 and increased 9 percent on an organic basis. Adjusted EBITDA grew to $82 million from $81 million in the third quarter of 2013. Adjusted EBITDA margin was 22.9 percent compared to 25.3 percent a year earlier, reflecting lower license sales and increased investment in the global financial institutions market.
Corporate costs totaled $108 million in the third quarter 2014 compared to $106 million in the prior year quarter. Interest expense, net of interest income, decreased to $38 million from $44 million in the third quarter 2013, reflecting lower costs resulting from debt refinancing. The effective tax rate was 31.2 percent in the third quarter of 2014.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $612 million as of September 30, 2014, while debt outstanding totaled $5.0 billion.
Net cash provided by operations was $208 million and adjusted cash flow from operations was $287 million in the third quarter of 2014. Capital expenditures totaled $86 million resulting in free cash flow of $201 million in the third quarter 2014.
FIS repurchased 2.7 million common shares at a total cost of $150 million in the third quarter 2014 and 8.7 million shares at a total cost of $475 million in the first nine months of 2014. Approximately $1.5 billion remained under the existing share repurchase authorization as of September 30, 2014. The company paid shareholder dividends of $68 million in the third quarter 2014 and $206 million in the first nine months of 2014.
2014 Outlook
FIS is reiterating its full year 2014 organic revenue and EBITDA growth rates while narrowing its EPS range as follows:
- Organic revenue growth of 4.5 to 6.5 percent
- EBITDA, as adjusted, growth of 4.5 to 6.5 percent
- EPS from continuing operations of $3.06 to $3.12, as adjusted, an increase of 9 to 11 percent
- Free cash flow is expected to approximate adjusted net earnings