FIS (NYSE:FIS), the world's largest provider of banking and payments technology, today reported financial results for the quarter ended March 31, 2012.
Revenue from continuing operations increased 4.6% to $1.45 billion in the first quarter of 2012, compared to $1.38 billion in the first quarter of 2011. GAAP net earnings from continuing operations attributable to common stockholders totaled $95.8 million, or $0.32 per diluted share, in the first quarter of 2012, compared to $96.1 million, or $0.31 per diluted share, in the prior year quarter.
Organic revenue growth, which excludes the impact of foreign currency, was 5.3%. EBITDA, as adjusted, increased 10.3% to $406.1 million in the first quarter of 2012, compared to $368.3 million in the first quarter of 2011. EBITDA margin, as adjusted, increased 150 bps to 28.1% reflecting growth in processing and professional services revenue, diligent cost management and lower integration and severance costs compared to the first quarter of 2011, and a loss in 2011 of approximately $13 million associated with the Sunrise prepaid platform.
Net earnings from continuing operations, as adjusted, totaled $162.2 million, or $0.55 per diluted share, compared to $137.7 million, or $0.45 per diluted share, in the first quarter of 2011. Free cash flow totaled $136.4 million compared to $130.3 million in the prior year 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.
"We are encouraged by the strong start to the year, which was driven by solid results across all our operating segments," stated Frank Martire, chairman and chief executive officer of FIS. "We continue to focus on serving our clients, driving organic growth and optimizing performance."
The following is a discussion of first quarter results by segment:
First quarter 2012 Financial Solutions revenue increased 7.0% to $538.9 million compared to $503.7 million in the 2011 quarter, driven by growth in processing revenue, professional services and global commercial services. Financial Solutions EBITDA increased 7.1% to $209.0 million compared to $195.1 million in the first quarter of 2011. The EBITDA margin increased to 38.8% compared to 38.7% in the prior year quarter.
First quarter 2012 Payment Solutions revenue increased 2.6% to $630.6 million compared to $614.5 million in the 2011 quarter, driven by strong growth in electronic transactions. Payment Solutions revenue increased 4.2%, excluding the check related businesses, which totaled $107.9 million and $113.0 million in the first quarters of 2012 and 2011, respectively. Payment Solutions EBITDA increased 13.7% to $249.4 million compared to $219.3 million in the 2011 quarter. The EBITDA margin increased 380 bps to 39.5% compared to the prior year quarter, reflecting growth in electronic transactions and continued focus on cost management.
International Solutions revenue increased 3.2% to $276.8 million compared to $268.1 million in the 2011 quarter and increased 7.1% on an organic basis driven by transaction and services growth in Brazil, coupled with growth in Europe, driven primarily by Capco. International Solutions EBITDA increased 5.1% to $51.4 million compared to $48.9 million in the first quarter of 2011, and the EBITDA margin increased 40 bps to 18.6% compared to the prior year quarter.
Corporate expense, as adjusted, totaled $103.7 million in the first quarter 2012, compared to $95.0 million in the prior year quarter.
Net interest expense, excluding refinancing costs, totaled $59.4 million in the first quarter of 2012 compared to $68.0 million in the 2011 quarter. The decrease was due primarily to lower borrowing costs, combined with a reduction in total debt outstanding.
The effective tax rate in the first quarter of 2012 was 34% compared to 35% in the first quarter of 2011.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $481.7 million as of March 31, 2012. Debt outstanding totaled approximately $4.8 billion as of March 31, 2012.
Net cash provided by operating activities totaled $203.8 million in the first quarter of 2012 compared to $260.2 million in the first quarter of 2011. The decline was due primarily to a payment of approximately $42 million related to the final settlement of an interest rate swap assumed in the acquisition of Metavante Technologies, Inc. Capital expenditures totaled $65.0 million in the first quarter of 2012, compared to $71.6 million in capital expenditures in the prior year quarter. Free cash flow, excluding settlement activity related to the payments businesses, totaled $136.4 million in the first quarter of 2012 compared to $130.3 million in the 2011 quarter.
During the second quarter of 2012, FIS completed a debt refinancing to extend the overall duration of its outstanding debt, reduce its weighted average interest rates and take additional steps towards attaining investment grade credit ratings. The refinancing included the private offering of $700 million aggregate principal amount of 5.0% senior unsecured notes due March 15, 2022 and the amendment and extension of FIS' existing credit facility. There was no material change to FIS' total leverage as a result of the debt refinancing activities. During the second quarter of 2012, the corporate credit ratings issued by Standard & Poor's and Fitch Ratings were upgraded to BB+ and BBB-, respectively.
FIS reiterated its full year 2012 outlook for earnings from continuing operations as provided below.
- Organic revenue growth of 3% to 5%;
- EBITDA growth of 5% to 7%, as adjusted;
- Margin expansion of 40 to 80 basis points, as adjusted;
- Adjusted net earnings per share from continuing operations of $2.47 to $2.57.
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