FIS bullish on strong first quarter
30 April 2013 | 1282 views | 0
FIS™ (FIS), the world's largest provider of banking and payments technology, today reported strong first quarter gains in revenue and earnings from continuing operations.
Revenue increased 4.6% to $1.5 billion, compared to $1.4 billion in the first quarter of 2012. GAAP net earnings from continuing operations attributable to common stockholders rose to $148 million or $0.50 per diluted share in the first quarter of 2013, compared to $91 million, or $0.31 per diluted share in the prior-year quarter.
First quarter revenue increased 4.8% on an organic basis, excluding the impact of acquisitions and foreign currency. Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased to $182 million compared to $157 million in the first quarter of 2012. Adjusted net earnings per diluted share increased 17.0% to $0.62 compared to $0.53 in the prior-year quarter.
"We are very pleased with our strong first quarter results. We are consistently delivering on our financial targets and executing our strategy to optimize performance through organic revenue growth, margin expansion and double-digit increases in earnings per share," said Frank Martire, chairman and chief executive officer of FIS.
Organic revenue growth, which adjusts for the impact of acquisitions and foreign currency, remained strong at 4.8%, with growth in International Solutions accelerating to 10.8%. EBITDA increased 8.5% to $428 million in the first quarter of 2013, as adjusted, compared to $395 million in the 2012 quarter. The EBITDA margin increased 110 basis points to 29.0%.
First quarter 2013 non-GAAP results exclude after-tax acquisition related amortization of $41 million, or $0.14 per share and a gain of $6 million, or $0.02 per share after-tax, resulting from the purchase of the remaining interest in shares of mFoundry. The gain represents the difference between the fair value and the carrying value of the previously held minority interest investment in mFoundry. First quarter 2012 non-GAAP results exclude after-tax acquisition related purchase amortization and other items totaling $65 million, or $0.65 million, or $0.22 per diluted share. These excluded items are detailed in Exhibit E of the press release schedules.
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.
The following is a discussion of first quarter results by segment:
First quarter 2013 Financial Solutions revenue increased 6.8% to $575 million compared to $539 million in the 2012 quarter and rose 4.6% on an organic basis, driven by growth in consulting revenue, global commercial services and eBanking solutions. Financial Solutions EBITDA increased 9.5% to $228 million compared to $208 million in the first quarter of 2012. The EBITDA margin expanded 100 basis points to 39.6% compared to the prior-year quarter.
First quarter 2013 Payment Solutions revenue increased 2.5% to $612 million compared to $597 million in the 2012 quarter driven by continued growth in network solutions, electronic bill payment and output solutions. Payment Solutions revenue increased 3.8%, excluding the check-related businesses, which totaled $104 million and $108 million in the first quarters of 2013 and 2012, respectively. Payment Solutions EBITDA rose 8.6% to $258 million compared to $238 million in the first quarter of 2012. The EBITDA margin expanded 240 basis points to 42.2% compared to the prior-year quarter.
First quarter International Solutions revenue increased 5.3% to $292 million compared to $277 million in the 2012 quarter. Revenue increased 10.8% on an organic basis, excluding an unfavorable currency impact of $15 million, driven by growth across all major regions. International Solutions EBITDA increased 15.0% to $59 million compared to $51 million in the prior-year quarter. The EBITDA margin expanded 170 basis points to 20.3% compared to 18.6% in the 2012 quarter.
Corporate costs, as adjusted, totaled $117 million in the first quarter 2013 compared to $102 million in the prior-year quarter. The increase was due primarily to higher investments associated with information security. Interest expense, net of interest income, declined to $52 million in the first quarter of 2013 compared to $59 million in the 2012 quarter. The effective tax rate was approximately 33% in the first quarter of 2013 compared to approximately 34% in the first quarter of 2012.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $591 million as of March 31, 2013. Debt outstanding totaled approximately $4.6 billion as of March 31, 2013.
Net cash provided by operations increased to $208 million for the first quarter of 2013. Capital expenditures totaled $74 million in the first quarter of 2013 compared to $65 million in the prior-year quarter. Free cash flow, which excludes settlement activity related to the payments businesses, increased to $148 million for first quarter of 2013, compared to $136 million in the 2012 quarter.
In March, FIS completed the acquisition of the remaining interest in shares of mFoundry for approximately $115 million, net of cash acquired. Also during the quarter, the company repurchased 2.7 million shares of its common stock at a total cost of $100 million. Approximately $550 million remains under the existing share repurchase authorization. The company paid cash dividends totaling $65 million in the first quarter of 2013, compared to $59 million in the 2012 quarter.
FIS reiterated its full year 2013 outlook as follows:
Reported revenue growth of 4% to 6%
Organic revenue growth of 3% to 5%
EBITDA margin expansion of 30 to 50 basis points, as adjusted
EPS from continuing operations of $2.77 to $2.87, as adjusted, an increase of 11% to 15% compared to $2.50 per share in 2012
Free cash flow is expected to approximate adjusted net earnings