FIS (NYSE:FIS), a leading global provider of technology services to financial institutions, today reported financial results for the quarter ended September 30, 2009.
Consolidated revenue of $850.7 million declined 3.8% in U.S. dollars and 1.9% in constant currency compared to $884.0 million in the third quarter of 2008. The adjusted EBITDA margin expanded 250 basis points to 27.7%. Non-GAAP adjusted net earnings per share increased 12.2% to $0.46 per share in U.S. dollars, compared to $0.41 in the prior year, and increased 14.6% in constant currency. The increase is due primarily to improved operating performance across all major business lines, which offset a higher average diluted share count in the third quarter of 2009. GAAP net earnings from continuing operations attributable to common stockholders totaled $67.6 million, or $0.35 per share, compared to $0.23 per share in the prior period. Free cash flow (cash from operations less capital expenditures) was $132.8 million compared with $118.2 million in the prior year quarter.
FIS completed the acquisition of Metavante Technologies, Inc. (NYSE: MV - News) on October 1, 2009. Metavante's operations will be included in the FIS results prospectively, beginning in the fourth quarter of 2009.
"While revenue growth remains challenging in the current economic environment, we continue to drive strong margin expansion, double-digit growth in earnings per share and excellent free cash flow. We are confident in our ability to drive solid organic top line growth and realize strong operating leverage when the banking industry recovers," stated William P. Foley, II, executive chairman. "With the successful completion of the Metavante acquisition, FIS will be even better positioned to compete on a global basis and deliver strong financial performance."
Frank Martire, president and chief executive officer of FIS added, "We are very excited about the future of this great company. We remain highly focused on meeting our customers' needs, driving operational excellence and building long-term value."
Consolidated revenue in the third quarter of 2009 was $850.7 million, compared with $884.0 in the prior year quarter, a decrease of 3.8% in U.S. dollars. Excluding a $16.8 million unfavorable impact of foreign currency, consolidated revenue declined 1.9%. The decline was primarily due to lower license and professional services revenue, coupled with nonrecurring interchange adjustments and card marketing revenue recorded in the prior year quarter.
- Financial Solutions revenue declined 7.3% to $278.2 million compared to $300.2 million in the prior period, due to lower software license and professional services revenue.
- Payment Solutions revenue declined 5.0% to $369.5 million compared to $389.1 million in the 2008 quarter, due to ongoing weakness in consumer spending and lower item processing volumes. The growth rate was also impacted by a nonrecurring interchange adjustment and particularly strong card marketing revenue in the third quarter of 2008.
- International Solutions revenue increased 4.1% to $203.5 million in U.S. dollars, and 12.7% in constant currency compared to $195.4 million in the prior year quarter. Core processing revenue increased 14.3% driven by strong services revenue and volumes in Asia Pacific and EMEA, while payments revenue increased 11.8% driven by organic account growth across all regions.
Adjusted EBITDA increased 5.6% to $235.3 million in the third quarter of 2009 compared to $222.8 million in the 2008 quarter. The adjusted EBITDA margin improved 250 basis points to 27.7% compared to 25.2% in the prior-year quarter, driven by ongoing expense management across all operating segments.
- Financial Solutions EBITDA decreased 1.7% to $126.6 million due to lower software sales and professional services revenue, while the margin improved 260 basis points to 45.5% compared to 42.9% in the prior year.
- Payment Solutions EBITDA increased 2.8% to $108.3 million, and the margin increased 220 basis points to 29.3% compared to 27.1% in the prior year.
- International EBITDA increased 57.1% to $42.9 million. The EBITDA margin improved 710 basis points to 21.1% compared to 14.0% in the prior year, as account growth and productivity improvements more than offset a $3.7 million unfavorable currency impact
The effective tax rate in the third quarter of 2009 was 34.4% compared to 34.9% in the third quarter of 2008.
FIS had $205.6 million in cash and cash equivalents at September 30, 2009. The company repaid $153.7 million of debt during the third quarter, reducing total debt outstanding to $2.1 billion, the majority of which has been swapped to fixed interest rates. The effective interest rate was 5.9% as of September, 2009. Total debt outstanding increased to $3.4 billion in conjunction with the October 1, 2009 acquisition of Metavante.
Capital expenditures totaled $49.4 million in the quarter, compared to $48.2 million spent in the prior year.