FIS, a global leader in financial services technology, today reported that second quarter revenue increased 45.3 percent on a reported basis to $2.3 billion from $1.6 billion in the prior year quarter.
Operating income decreased 1.4 percent to $283 million in the second quarter of 2016, from $287 million in the prior year quarter, with operating income margin of 12.3 percent for the quarter. Net earnings from continuing operations attributable to common stockholders was $120 million, or $0.36 per diluted share, compared to $242 million, or $0.85 per diluted share in the prior year quarter, a decrease of 57.6 percent. Declines in operating income and net earnings were driven by M&A-related items, including the gain on the sale of gaming contracts in the prior year quarter and charges related to the SunGard acquisition in the current year quarter.
For the second quarter, organic revenue increased 5.4 percent. Adjusted EBITDA increased 12.7 percent to $696 million in the second quarter 2016, from $617 million adjusted combined EBITDA in the prior year quarter, while adjusted EBITDA margin was 29.4 percent. Adjusted net earnings from continuing operations attributable to common stockholders was $295 million for the quarter, or $0.90 per share compared to $0.74 per share in the prior year period, an increase of 21.6 percent.
“We are pleased with our second quarter results. We continue to drive strong momentum, building on the sales successes started last year,” said Gary Norcross, president and chief executive officer, FIS. “The strength of our business model gives us confidence that we will continue to deliver positive results for our clients and shareholders and achieve our increased goals for the year.”
The comparisons of reported results for 2016 to those in 2015 remain significantly impacted by the acquisition of SunGard, which closed on November 30, 2015, and will continue to be impacted for the remainder of 2016. This press release provides additional non-GAAP financial information to enable shareholders to analyze comparable period results as if SunGard had been owned in those periods, to better assess performance and economic health of the business, and to reflect foreign currency translation impacts to reported results. 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 and supplemental schedules.
Integrated Financial Solutions:
Second quarter reported revenue grew 24.8 percent to $1.2 billion from $931 million reported in the prior year quarter. Organic revenue grew 8.3 percent. Adjusted EBITDA increased 8.7 percent to $450 million from $413 million adjusted combined EBITDA in the prior year quarter, and adjusted EBITDA margin was 38.7 percent. Adjusted combined EBITDA for the prior year quarter was $44 million greater than Adjusted EBITDA in the prior year quarter due to the acquisition of SunGard.
Global Financial Solutions:
Second quarter reported revenue grew 88.6 percent to $1.0 billion from $555 million reported in the prior year quarter. Organic revenue grew 2.9 percent. Adjusted EBITDA increased 9.2 percent to $287 million from $263 million adjusted combined EBITDA in the prior year quarter, and adjusted EBITDA margin was 27.4 percent. Adjusted combined EBITDA for the prior year quarter was $146 million greater than Adjusted EBITDA in the prior year quarter due to the acquisition of SunGard.
Corporate / Other:
Second quarter reported revenue decreased 5.0 percent to $95 million compared to $101 million in the prior year quarter. Organic revenue grew 1.3 percent. Adjusted EBITDA loss was $41 million and is inclusive of $78 million of corporate expenses.
Second quarter interest expense, net of interest income was $93 million. The effective tax rate was 35.0 percent in the second quarter.
Balance Sheet and Cash Flow
As of June 30, 2016, cash and cash equivalents totaled $765 million and debt outstanding totaled $11.1 billion. Second quarter net cash provided by operating activities was $435 million and free cash flow was $291 million. The company paid dividends in the second quarter totaling $86 million.
FIS raises its FY 2016 Guidance:
- Organic revenue growth of 4 to 5 percent, up from prior guidance of 3 to 4 percent
- Adjusted EPS of $3.75 to $3.85, up from prior guidance of $3.70 to $3.80
FIS has not provided a reconciliation of the foregoing forward-looking guidance to the most comparable GAAP measures because such measures are not available at this time without unreasonable efforts. The significant impact of the SunGard acquisition, including among other things, the timing and amount of integration and severance costs, such as the transition of systems, facilities and personnel, make it difficult to provide meaningful and comparable GAAP guidance.