FIS (NYSE:FIS), a leading global provider of technology services to financial institutions, today reported financial results for the quarter ended March 31, 2010. For comparative purposes, references to pro forma measures assume that the October 1, 2009 merger with Metavante Technologies, Inc. was completed on January 1, 2009 and reflect adjustments in a manner consistent with 2010 adjusted results.
"Our strong first quarter results once again highlight the strength of our business model, and position us well to achieve our 2010 objectives."
Adjusted revenue (which excludes the $9 million negative impact to deferred revenue from purchase accounting) increased 3.8% to $1.259 billion in U.S. dollars in the first quarter of 2010 compared to pro forma revenue of $1.212 billion in the first quarter of 2009, and increased 1.8% in constant currency. Adjusted net earnings from continuing operations totaled $154.1 million, or $0.41 per diluted share. Adjusted EBITDA was $362.7 million, 17.6% higher as compared to $308.3 million in the prior year quarter. The adjusted EBITDA margin expanded 340 basis points to 28.8%, driven by improved operating performance, including the benefit of acquisition related cost savings. The company generated $241 million in adjusted free cash flow in the first quarter, driven by growth in earnings, strong accounts receivable collections, reduced capital expenditures and a favorable impact from the timing and amount of tax payments. On a GAAP basis, first quarter consolidated revenue totaled $1.250 billion. During the quarter, FIS recorded acquisition related after-tax costs totaling $12.8 million, or $0.03 per diluted share. The deferred revenue adjustment impacted after-tax earnings by $5.6 million, or $0.01 per share. These combined charges, along with purchase price amortization of intangible assets acquired through various acquisitions, resulted in net earnings from continuing operations attributable to common stockholders of $94.7 million, or $0.25 per diluted share.
"FIS is off to a solid start in 2010," stated FIS Executive Chairman William P. Foley, II. "Our strong first quarter results once again highlight the strength of our business model, and position us well to achieve our 2010 objectives."
"We are pleased to begin the year with this solid performance. Improving revenue growth, strong margin expansion and excellent freet freecellent free cash flow are testaments to our ability to prudently manage all aspects of our operations," added FIS President and Chief Executive Officer Frank Martire. "In addition, we are encouraged by the continued sales momentum. Our employees have done a great job in staying focused on our clients while building on the strong foundation of our company."
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, 2009 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 first quarter revenue increased 3.8% to $1.259 billion in U.S. dollars, compared with $1.212 billion in the first quarter of 2009. Excluding a $24.2 million favorable foreign currency impact, consolidated revenue increased 1.8%.
* Financial Solutions revenue increased 3.2% to $443.5 million compared to $429.9 million in the prior period driven by higher professional services and software license fees.
* Payment Solutions revenue increased 1.0% to $618.8 million compared to $612.8 million in the 2009 quarter as growth in debit, government and healthcare solutions more than offset lower item processing and retail check activity.
* International Solutions revenue increased 14.9% to $195.0 million in U.S. dollars, and 0.6% in constant currency compared to $169.7 million in the prior year quarter.
Adjusted EBITDA increased 17.6% to $362.7 million in the first quarter of 2010 compared to $308.3 million in the 2009 quarter. The adjusted EBITDA margin improved 340 basis points to 28.8% compared to 25.4% in the prior-year quarter, driven primarily by the realization of acquisition related synergies and ongoing expense management.
* Financial Solutions EBITDA increased 13.9% to $185.6 million, while the margin improved 390 basis points to 41.8% compared to 37.9% in the prior year.
* Payment Solutions EBITDA increased 11.1% to $229.5 million, and the margin increased 340 basis points to 37.1% compared to 33.7% in the prior year.
* International EBITDA increased 5.0% to $31.6 million, which included a $2.3 million favorable currency impact. The EBITDA margin declined to 16.2% compared to 17.7% in the prior year quarter. The margin decline is due primarily to currency and a less favorable revenue mix in the current period.
Balance Sheet
FIS had $464 million in cash and cash equivalents and total debt outstanding of $3.1 billion at March 31, 2010. The majority of FIS's debt has been swapped to fixed interest rates. The effective interest rate was 3.5% at March 31, 2010.
Capital expenditures totaled $58.2 million in the quarter, compared to $71.6 million in pro forma capital expenditures in the prior year.