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FIS reports Q3 revenue rise

06 November 2012  |  1162 views  |  0 Source: FIS

FIS, the world's largest provider of banking and payments technology, today reported a 2.8% increase in revenue for the quarter ended September 30, 2012. GAAP net earnings from continuing operations attributable to common stockholders rose 3.1% and increased 6.4% per diluted share.

Third quarter revenue increased 5.0% on an organic basis, excluding the impact of acquisitions and foreign currency. FIS has posted organic growth approaching 5.0% or better in seven of the last eight quarters. On a non-GAAP basis, net earnings from continuing operations attributable to common stockholders increased 1.1% to $187.5 million, or $0.63 per diluted share in the third quarter of 2012, up 5.0% compared to the year-ago quarter.
"It was another very strong quarter for our company," stated Frank Martire, chairman and chief executive officer of FIS. "We continue to execute our business strategy and are well positioned to deliver our full year financial targets."

GAAP Results
Revenue increased 2.8% to $1.44 billion in the third quarter of 2012, compared to $1.40 billion in the third quarter of 2011. GAAP net earnings from continuing operations attributable to common stockholders totaled $147.8 million, or $0.50 per diluted share, in the third quarter of 2012, compared to $143.4 million, or $0.47 per diluted share, in the prior-year quarter.

For the nine months ended September 30, 2012, FIS reported revenue of $4.3 billion, a 3.4% increase compared to the year-ago period. GAAP net earnings from continuing operations attributable to common stockholders totaled $395.1 million, representing an 8.7% increase compared to the prior-year period, up 12.7% per diluted share.

Year to date, FIS has repurchased $251 million of common stock, including $100 million in the third quarter. "Our strong cash flow and disciplined capital management have enabled us to return $427 million to our shareholders through dividends and share repurchases through the first nine months of the year," Martire noted.

Non-GAAP Results
Organic revenue growth, which adjusts for the impact of acquisitions and foreign currency, remained strong at 5.0%, with growth in International Solutions accelerating to 11.9%. EBITDA increased 2.8% to $442.2 million in the third quarter of 2012, compared to $430.2 million in the third quarter of 2011. EBITDA margin of 30.8% was comparable to the prior-year quarter.

Net earnings from continuing operations, as adjusted, increased to $187.5 million in the third quarter of 2012, or $0.63 per diluted share, compared to $185.5 million, or $0.60 per diluted share, in the third quarter of 2011. Free cash flow totaled $193.2 million compared to $193.1 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.

For the first nine months of 2012, FIS reported a 5.1% increase in organic revenue, an 11.4% increase in adjusted net earnings from continuing operations, and a 15.2% increase in adjusted net earnings per share from continuing operations. EBITDA margin expanded 90 basis points to 29.6% compared to the prior-year period.

Segment Information
The following is a discussion of third quarter results by segment:

Financial Solutions:

Third quarter 2012 Financial Solutions revenue increased 8.1% to $565.7 million compared to $523.2 million in the 2011 quarter and rose 7.0% on an organic basis, driven by growth in processing revenue, consulting revenue and global commercial services. Financial Solutions EBITDA was $224.4 million compared to $224.0 million in the third quarter of 2011. The EBITDA margin was 39.7% compared to 42.8% in the prior-year quarter. The decline was driven primarily by higher investments associated with information security and a change in revenue mix, including lower license revenue coupled with strong growth in services and consulting revenues.

Payment Solutions:

Third quarter 2012 Payment Solutions revenue totaled $576.1 million compared to $575.7 million in the 2011 quarter. Revenue growth was negatively impacted by the deconversion of a large debit issuing client which offset strong growth in bill payment and network solutions. Payment Solutions revenue increased 1.6%, excluding the check related businesses, which totaled $106.9 million and $114.0 million in the third quarters of 2012 and 2011, respectively. Payment Solutions EBITDA increased 6.1% to $234.6 million compared to $221.1 million in the 2011 quarter. The EBITDA margin increased 230 basis points to 40.7% compared to the prior-year quarter, reflecting the benefits of ongoing expense management.

International Solutions:

International Solutions revenue decreased 0.7% to $295.5 million compared to $297.7 million in the 2011 quarter and increased 11.9% on an organic basis driven by growth across all major regions. International Solutions EBITDA increased 6.6% to $71.4 million compared to $67.0 million in the third quarter of 2011, and the EBITDA margin expanded 170 basis points to 24.2% compared to the prior-year quarter.

Corporate/Other:

Corporate expense, as adjusted, totaled $88.2 million in the third quarter 2012, compared to $81.9 million in the prior-year quarter. The increase was due in part to higher investments associated with information security.

Net interest expense totaled $54.0 million in the third quarter of 2012 compared to $60.5 million in the 2011 quarter. The decrease was due primarily to lower borrowing rates and lower debt outstanding.

The effective tax rate increased to 34% in the third quarter of 2012 compared to 30% in the third quarter of 2011 and 29% in the second quarter of 2012. The effective tax rates in both prior periods were reduced by the favorable resolution of certain tax positions taken by the Company. FIS anticipates an effective tax rate of approximately 33% for full year 2012.

Balance Sheet and Cash Flow

Cash and cash equivalents totaled $576.6 million as of September 30, 2012. Debt outstanding totaled approximately $4.5 billion as of September 30, 2012.

Net cash provided by operating activities totaled $255.4 million in the third quarter of 2012 compared to $275.5 million in the third quarter of 2011. Capital expenditures totaled $70.7 million in the third quarter of 2012, compared to $82.1 million in capital expenditures in the prior-year quarter. Free cash flow, which excludes settlement activity related to the payments businesses, totaled $193.2 million in the third quarter of 2012 compared to $193.1 million in the 2011 quarter.

FIS repurchased approximately 3.1 million shares in the third quarter at a total cost of approximately $100 million. Year to date, FIS has repurchased 8.3 million shares at a total cost of approximately $251 million. Approximately $850 million remains under the existing share repurchase authorization.

Sale of Healthcare Benefit Solutions Business

On August 15, 2012, FIS completed the sale of its Healthcare Benefit Solutions business in an all-cash transaction valued at approximately $335 million (approximately $220 million after tax). The Company incurred an after-tax GAAP loss of approximately $56 million related to the sale, which is included in discontinued operations. The Healthcare Benefit Solutions business is classified as a discontinued operation for all periods presented in accordance with GAAP.

2012 Outlook

The Company reiterated its full year 2012 outlook as follows:

  • Organic revenue growth of 3% to 5%
  • EBITDA growth of 5% to 7%, as adjusted
  • EBITDA margin expansion of 40 to 80 basis points, as adjusted
  • EPS from continuing operations of $2.45 to $2.55, as adjusted (+10% to 15% compared to full year 2011) 

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