FIS Reports Full Year and Fourth Quarter 2012 Results
5% Organic Revenue Growth for the Year
13% Growth in Adjusted Earnings Per Share
- Full year revenue of $5.8 billion
- EPS from continuing operations of $2.50, as adjusted, for the year
- Continued strong free cash flow of $873 million for the year
- $451 million in share repurchases for the year
- $235 million in shareholder dividends paid for the year
Full year 2012 revenue increased 4.6% on an organic basis, excluding the impact of foreign currency and acquisitions. On a non-GAAP basis, adjusted net earnings from continuing operations attributable to common stockholders increased 9.1% to $743.6 million for the year, resulting in $2.50 per diluted share, up 12.6% compared to $2.22 per diluted share in 2011. Average diluted shares outstanding declined approximately 3% to 298 million in 2012 compared to average diluted shares of 307 million in 2011. Free cash flow increased approximately 9% to $872.8 million for the year, compared to $799.3 million in 2011.
“Our strong performance in 2012 reflects the strength of our operating model and success in executing our business strategy,” said Frank Martire, chairman and chief executive officer of FIS. “Consistent with our focus on value creation and disciplined capital allocation, we returned $686 million to shareholders through dividends and share repurchases.”
Looking ahead, Martire said, “FIS anticipates continued strong performance in 2013, with 4% to 6% revenue growth (3% to 5% organic) and an expected 11% to 15% increase in adjusted earnings per share.”
Fourth Quarter 2012
GAAP revenue from continuing operations increased 2.7% to $1.5 billion in the fourth quarter of 2012, and increased 3.1% on an organic basis compared to the fourth quarter of 2011. GAAP net earnings from continuing operations attributable to common stockholders grew 21.5% to $145.3 million and rose 22.5% to $0.49 per diluted share, compared to $119.6 million, or $0.40 per diluted share, respectively, in the prior year quarter. EBITDA totaled $470.3 million in the fourth quarter of 2012, as adjusted, compared to $460.2 million in the 2011 quarter. The EBITDA margin of 31.4% was comparable to the fourth quarter of 2011. Adjusted net earnings from continuing operations increased to $201.4 million, or $0.68 per diluted share, compared to $194.6 million, or $0.65 per diluted share in the prior year quarter.
Fourth quarter 2012 results exclude after-tax acquisition related amortization of $39.8 million, or $0.13 per share, and after-tax charges of $16.3 million, or $0.05 per diluted share, related to accelerated vesting of equity grants and other compensation charges. Fourth quarter 2011 results exclude acquisition related purchase amortization and other items totaling $75.0 million after-tax, or $0.25 per diluted share. These excluded items are outlined in Exhibit E of the press release schedules. 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.
Full Year 2012
GAAP revenue for the full year 2012 increased 3.2% to $5.8 billion compared to $5.6 billion in 2011. GAAP net earnings from continuing operations attributable to common stockholders grew to $540.4 million, or $1.82 per diluted share in 2012, compared to $483.1 million, or $1.57 per diluted share, in the prior year.
Revenue increased 4.6% organically in 2012 compared to 2011. EBITDA increased 5.3% to $1.75 billion, as adjusted, compared to EBITDA of $1.66 billion, as adjusted, in the prior year. The EBITDA margin increased 60 basis points to 30.1%, as adjusted, compared to 29.5% in 2011. Adjusted net earnings from continuing operations attributable to common stockholders increased 9.1% to $743.6 million, or $2.50 per diluted share, which is a 12.6% increase compared to $2.22 per diluted share in 2011. Free cash flow increased to $872.8 million for the full year 2012 compared to $799.3 million in 2011, driven by strong operating results and working capital performance.
Excluded from the 2012 adjusted net earnings are after-tax charges of $28.6 million, or $0.10 per share; charges for payments and accelerated vesting of stock option and restricted stock grants associated with the departure or change in role of certain company executives; debt refinancing costs of $12.2 million after-tax, or $0.04 per share; and after-tax acquisition-related amortization of $162.4 million, or $0.55 per share. Excluded from the 2011 results are acquisition-related purchase amortization and other items totaling $198.4 million after tax, or $0.65 per diluted share. These excluded items are outlined in Exhibit E of the press release schedules.
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 is a discussion of fourth quarter and full year results by segment:
- Financial Solutions:
Fourth quarter 2012 Financial Solutions revenue increased 8.4% to $578.4 million compared to $533.4 million in the 2011 quarter and rose 6.4% on an organic basis. Financial Solutions EBITDA increased 10.9% to $236.9 million compared to $213.7 million in the fourth quarter of 2011. The EBITDA margin expanded 90 basis points to 41.0% compared to the prior-year quarter.
For the full year 2012, Financial Solutions revenue increased 8.2% to $2.2 billion compared to $2.1 billion in 2011 and increased 7.0% on an organic basis. Full year 2012 EBITDA increased 5.1% to $884.2 million compared to $841.1 million in 2011. Financial Solutions full year 2012 EBITDA margin was 39.4% compared to 40.5% in 2011 reflecting a change in revenue mix, higher costs related to information security and infrastructure improvements.
- Payment Solutions:
Fourth quarter 2012 Payment Solutions revenue totaled $601.3 million compared to $608.9 million in the 2011 quarter. Payment Solutions revenue increased modestly compared to the prior year quarter, excluding the check-related businesses, which totaled $115.1 million and $125.1 million in the fourth quarters of 2012 and 2011, respectively. Continued growth in network solutions and electronic bill payment was offset by previously disclosed client deconversions. Payment Solutions EBITDA totaled $245.9 million compared to $246.7 million in the fourth quarter of 2011. The EBITDA margin expanded 40 basis points to 40.9% compared to the prior-year quarter.
For the full year 2012, Payment Solutions revenue totaled $2.4 billion, which was comparable to 2011. Payment Solutions revenue increased 2.2% excluding the check related businesses which declined to $438.9 million in 2012 compared to $471.7 million in 2011. Double-digit growth in network solutions and electronic bill payment was offset by previously disclosed client deconversions. Full year 2012 EBITDA increased 6.6% to $968.0 million compared to $907.9 million in 2011, and the EBITDA margin expanded 240 basis points to 40.7% compared to 38.3% in 2011, driven by growth in high margin transaction volumes and disciplined cost management.
- International Solutions:
Fourth quarter International Solutions revenue, which included a negative currency impact of $16.7 million, increased 0.7% to $320.9 million, and increased 5.9% on an organic basis, excluding an unfavorable currency impact of $16.7 million. International Solutions EBITDA totaled $89.2 million compared to $92.8 million in the prior-year quarter. The EBITDA margin was 27.8% compared to 29.1% compared to the 2011 quarter.
For the full year 2012, International Solutions revenue totaled $1.2 billion including an unfavorable currency impact of approximately $100 million. International Solutions revenue increased 8.7% on an organic basis fueled by strong growth in professional services and consulting revenue. Full year 2012 EBITDA increased 2.0% to $275.3 million compared to $269.9 million in 2011, and the EBITDA margin expanded 40 basis points to 23.3%.
Corporate costs, as adjusted, totaled $101.7 million in the fourth quarter 2012, compared to $93.0 million in the prior-year quarter. For the year, corporate costs, as adjusted, totaled $382.3 million compared to $361.7 million in 2011. The increase in both periods was due primarily to higher investments associated with information security and enterprise risk management.
Interest expense, net of interest income, declined to $52.7 million in the fourth quarter of 2012 compared to $64.5 million in the 2011 quarter. Full year interest expense, net of interest income, declined to $222.7 million in 2012 compared to $258.8 million in 2011, reflecting lower borrowing rates and a reduction in total debt outstanding.
The effective tax rate was 34% in the fourth quarter of 2012 and 33% for the full year, which is comparable to the prior periods.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $517.6 million as of December 31, 2012. Debt outstanding totaled approximately $4.4 billion as of December 31, 2012, down from $4.8 billion as of as of year-end 2011. Net cash provided by operations totaled $1.0 billion for the year, including tax payments of approximately $105 million related to the sale of the healthcare business, compared to $1.2 billion in 2011. Capital expenditures totaled $296.1 million compared to $300.3 million in the prior year. Free cash flow, which excludes settlement activity related to the payments businesses and tax payments related to the sale of the healthcare business, increased to $872.8 million for full year 2012, compared to $799.3 million in 2011.
FIS repurchased 14.0 million shares of its common stock at a total cost of approximately $451 million in 2012, including 5.7 million shares repurchased in the fourth quarter at a total cost of approximately $200 million. Approximately $650 million remains under the existing share repurchase authorization. The company paid shareholder dividends totaling $235 million in 2012, compared to $60 million in 2011.
FIS provided its outlook for revenue growth and earnings in 2013 as follows:
- Reported revenue growth of 4% to 6%
- Organic revenue growth of 3% to 5%
- EBITDA margin expansion of 30 to 50 basis points, as adjusted
- 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
FIS will host a webcast on February 12, 2013, to discuss fourth quarter 2012 results and management’s outlook for 2013 in conjunction with the 2013 Investor Day, beginning at 8:30 a.m. ET. To listen to the live event and to access a supplemental slide presentation, go to the Investor Relations section at www.fisglobal.com and click on “News and Events.” A webcast replay will be available on FIS’ Investor Relations website. To access a PDF version of this release and accompanying financial tables click here.
Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, the Company has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future.
These non-GAAP measures include organic revenue, adjusted earnings before interest, taxes and depreciation and amortization (EBITDA), adjusted net earnings and free cash flow. Organic revenue includes reported revenue plus pre-acquisition revenue for companies acquired during the applicable reporting periods. Organic revenue excludes the impact of foreign currency fluctuation in 2012.
Adjusted EBITDA (2012 comparative data) excludes charges for payments and accelerated vesting of stock option and restricted stock grants associated with the departure or change in role of certain company executives. Adjusted EBITDA (2011 comparative data) excludes a net benefit related to adjustments from the Capco acquisition.
Adjusted net earnings (2012 comparative data) exclude the after-tax impact of acquisition related amortization, debt refinancing costs, charges for payments and accelerated vesting of stock option and restricted stock grants associated with the departure or change in role of certain company executives. Adjusted net earnings (2011 comparative data) exclude the after-tax impact of acquisition related amortization, a non-cash charge related to an other than temporary decline in the market value of investments, debt refinancing costs and a net benefit related to adjustments from the Capco acquisition.
Free cash flow is GAAP operating cash flow less capital expenditures, the net change in settlement assets and obligations and tax payments related to the sale of the healthcare business.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings. Further, FIS’ non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these 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
FIS (NYSE: FIS) is the world’s largest global provider dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 100 countries. Headquartered in Jacksonville, Fla., FIS employs more than 35,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions. First in financial technology, FIS tops the annual FinTech 100 list, is 425 on the Fortune 500 and is a member of Standard & Poor’s 500® Index. For more information about FIS, visit www.fisglobal.com.
This news release and today’s webcast contain “forward-looking statements” within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about revenue, organic revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), earnings per share and margin expansion, as well as other statements about our expectations, hopes, intentions, or strategies regarding the future, are forward-looking statements. These statements relate to future events and our future results, and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements.
Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include without limitation:
- changes and conditions in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes and conditions in either or both the United States and international lending, capital and financial markets;
- the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy regulations;
- the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level;
- the effects of our leverage which may limit the funds available to make acquisitions and invest in our business, pay dividends and repurchase shares;
- the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in or new laws or regulations affecting the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;
- changes in the growth rates of the markets for core processing, card issuer, and transaction processing services;
- failures to adapt our services and products to changes in technology or in the marketplace;
- internal or external security breaches of our systems, including those relating to the theft of personal information and computer viruses affecting our software or platforms, and the reactions of customers, card associations and others to any such events;
- the reaction of our current and potential customers to the regulatory letter we received about information security, risk management and internal audit following the security breach we experienced in early 2011 and to any other communications about such topics from our regulators or from us;
- the failure to achieve some or all of the benefits that we expect from acquisitions;
- our potential inability to find suitable acquisition candidates or finance such acquisitions, which depends upon the availability of adequate cash reserves from operations or of acceptable financing terms and the variability of our stock price, or difficulties in integrating past and future acquired technology or business’ operations, services, clients and personnel;
- competitive pressures on product pricing and services including the ability to attract new, or retain existing, customers;
- an operational or natural disaster at one of our major operations centers;
- and other risks detailed in “Risk Factors” and other sections of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and other filings with the SEC.
Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.
For More Information:
Ellyn Raftery, Chief Marketing Officer, FIS Global Marketing and Communications
Phone: 904.438.6083, Email: firstname.lastname@example.org
Mary Waggoner, SVP, FIS Investor Relations
Phone: 904.438.6282, Email: email@example.com