FIS (NYSE:FIS), the world's largest provider of banking and payments technology, today reported financial results for the quarter and six months ended June 30, 2013.
Revenue increased 3.8% to $1.51 billion from $1.46 billion in the second quarter of 2012. GAAP net earnings from continuing operations attributable to common stockholders totaled $91 million, or $0.31 per diluted share. These results included debt refinancing costs and an adjustment related to the December 2010 acquisition of Capco, FIS' global consulting business, which totaled $0.26 per share. In the prior-year quarter, GAAP net earnings from continuing operations were $156 million, or $0.52 per diluted share.
Second quarter revenue increased 3.7% on an organic basis compared to the second quarter of 2012, which excludes the impact of acquisitions and foreign currency. Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased to $209 million, up 5.5% from $198 million in the second quarter of 2012. Adjusted net earnings per diluted share increased 7.6% to $0.71 from $0.66 in the prior-year quarter.
For the six months ended June 30, 2013, FIS posted revenue of $2.99 billion, a 4.2% increase from $2.87 billion in the prior-year period. GAAP net earnings from continuing operations attributable to common stockholders totaled $239 million, or $0.81 per diluted share. This included $0.24 per share in debt refinancing costs and the aforementioned Capco adjustment, which were partially offset by a gain resulting from the purchase of the remaining interest in shares of mFoundry. GAAP net earnings from continuing operations for the prior-year period were $0.83 per share and included $0.08 per share in debt refinancing costs, charges for accelerated vesting of certain equity grants and other compensation costs.
In the first half of 2013, FIS reported a 4.2% increase in organic revenue, a 10.3% increase in adjusted net earnings from continuing operations and a 10.8% increase in adjusted net earnings per share from continuing operations compared to the prior-year period.
"We are pleased with our financial results through the first half of 2013, which are in line with our expectations," said Frank Martire, chairman and CEO of FIS. "We remain focused on delivering strategic value to our clients, executing our global business strategy and driving higher returns for our shareholders."
Organic revenue growth, which excludes the impact of acquisitions and foreign currency, was 3.7% in the second quarter of 2013. EBITDA increased 2.8% to $450 million in the second quarter, as adjusted, from $438 million in the 2012 quarter. EBITDA margin was 29.8% versus 30.0% in the prior-year quarter, reflecting a less favorable revenue mix and higher information security costs.
Organic revenue growth for the first half of 2013 was 4.2%. EBITDA increased 5.5% to $878 million, as adjusted, and the EBITDA margin expanded 40 basis points to 29.4%.
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 discusses second quarter results by segment:
- Financial Solutions: Revenue increased 4.2% to $587 million from $563 million a year earlier and rose 2.7% on an organic basis, driven by growth in eBanking solutions, global commercial services and consulting. Higher termination fees also contributed to second quarter results. Financial Solutions EBITDA increased 7.5% to $231 million from $215 million a year ago. EBITDA margin expanded 120 basis points to 39.4%.
- Payment Solutions: Revenue increased 2.8% to $623 million from $606 million in the 2012 quarter, reflecting growth in output solutions, bill payment services and card loyalty programs. Higher termination fees also contributed to the latest quarter's results. Excluding the check-related businesses, revenue increased 4.2%. Revenue from the check-related businesses totaled $105 million and $109 million in the second quarters of 2013 and 2012, respectively. EBITDA rose 5.3% to $263 million from $250 million a year earlier. EBITDA margin expanded 100 basis points to 42.2%.
- International Solutions: Revenue increased 5.6% to $304 million from $287 million in the 2012 quarter. Revenue increased 7.9% on an organic basis, excluding an unfavorable currency impact of $7 million. These results were driven by strong growth in Latin America, including the Brazilian card joint venture, consulting services in Europe and new client implementations in Asia. EBITDA increased 2.7% to $65 million from $63 million in the prior-year quarter. EBITDA margin was 21.4% compared to 22.0% in the prior-year quarter, reflecting a less favorable revenue mix.
- Corporate/Other: Corporate costs, as adjusted, were $109 million in the second quarter 2013, up from $90 million in the prior year quarter. The increase reflected higher investments associated with information security, risk management and increased healthcare costs. Interest expense, net of interest income, declined to $49 million in the most recent quarter from $57 million in the year-ago quarter. The effective tax rate was approximately 30% in the second quarter, up from 29% a year earlier. Both periods reflect the favorable resolution of certain tax matters.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $653 million as of June 30, 2013. Debt outstanding totaled approximately $4.8 billion.
Net cash provided by operations decreased to $157 million for the second quarter of 2013 compared to $259 million in the 2012 quarter. Net cash provided by operations, as adjusted, totaled $199 million for the quarter. Capital expenditures totaled $83 million compared to $91 million in the prior-year quarter. Free cash flow was $115 million for the most recent quarter, down from $178 million in the 2012 quarter, reflecting higher tax payments in the current year.
FIS repurchased approximately 2.8 million common shares at a total cost of approximately $125 million in the second quarter at an average cost of $44.25 per share. The company repurchased approximately 5.5 million shares in the first six months of 2013, at a total cost of approximately $225 million. Approximately $424 million remains under the existing share repurchase authorization.
FIS' outlook for full-year 2013:
- Reported revenue growth of 4% to 6% ; 3% to 5% organic growth
- 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