- Increases 2020 synergy targets for revenue and expense synergies by $50 million and $250 million, respectively
- Increases total synergy targets for revenue and expense synergies by $50 million and $175 million, respectively
- Provides first quarter and full-year 2020 guidance
JACKSONVILLE Fla., February 13, 2020 – FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its fourth quarter and full-year 2019 results.
“2019 was a transformative year for FIS,” said Gary Norcross, FIS chairman, president and chief executive officer. “We closed the largest fintech acquisition of the year and exited 2019 well ahead of our Worldpay integration synergy schedule. Our record-setting new sales performance was underpinned by our ongoing investment in next-generation technology, and we are seeing significant cross sell gains from our expanded payments portfolio. These substantial accomplishments give us confidence in achieving our 2020 guidance.”
Fourth Quarter 2019
On a GAAP basis, revenue increased 54 percent to $3,341 million from $2,167 million in the prior year period, primarily driven by the July 31, 2019 acquisition of Worldpay, Inc. (Worldpay). Net earnings (loss) attributable to common stockholders was $(158) million or $(0.26) per diluted share.
On an adjusted basis, organic revenue growth grew to 7 percent over the prior year period. Adjusted EBITDA margin expanded by 470 basis points (bps) over the prior year period to 44.6 percent, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $977 million or $1.57 per diluted share.
On a GAAP basis, revenue increased 23 percent to $10,333 million from $8,423 million in the prior year, primarily driven by the July 31, 2019 acquisition of Worldpay. Net earnings attributable to common stockholders was $298 million or $0.66 per diluted share.
On an adjusted basis, organic revenue growth was 6 percent over the prior year. Adjusted EBITDA margin expanded 350 basis points over the prior year to 40.7 percent, primarily driven by the acquisition of Worldpay and associated expense synergies. Adjusted net earnings was $2,530 million or $5.61 per diluted share.
- Merchant Solutions:
Fourth quarter 2019 GAAP revenue increased significantly to $1,116 million as compared to $71 million in the prior year period, primarily reflecting the Worldpay acquisition. Organic revenue growth was 10 percent over the prior year period, primarily driven by ongoing growth in the global eCommerce business, and Adjusted EBITDA margin was 52.4 percent.
Full-year 2019 GAAP revenue increased significantly to $2,013 million as compared to $276 million in the prior year, primarily reflecting the Worldpay acquisition. Organic revenue growth was 9 percent over the prior year, and Adjusted EBITDA margin was 49.4 percent.
- Banking Solutions:
Fourth quarter GAAP revenue increased 6 percent to $1,556 million as compared to $1,474 million in the prior year period. Organic revenue growth was 5 percent over the prior year period, primarily driven by increased volume and new sales, and Adjusted EBITDA margin was 43.8 percent.
Full-year 2019 GAAP revenue increased 3 percent to $5,873 million as compared to $5,712 million in the prior year. Organic revenue growth was 6 percent over the prior year, and Adjusted EBITDA margin was 41.8 percent.
- Capital Market Solutions:
Fourth quarter GAAP revenue increased 8 percent to $669 million as compared to $622 million in the prior year period. Organic revenue growth was 8 percent over the prior year period, primarily driven by improved recurring revenue growth trends and license sales, and Adjusted EBITDA margin was 50.6 percent.
Full-year 2019 GAAP revenue increased 2 percent to $2,447 million as compared to $2,391 million in the prior year. Organic revenue growth was 3 percent over the prior year, and Adjusted EBITDA margin was 46.1 percent.
FIS continued to realize revenue and expense synergies during the fourth quarter of 2019. Teams across the combined Company continue to execute on synergy workflows and to identify additional opportunities for both revenue and cost synergies.
The Company achieved annual run-rate synergies exiting the fourth quarter 2019 as follows:
- Revenue synergies of $80 million
- Expense synergies of $465 million, inclusive of $275 million interest expense savings
The Company is increasing its 2020 annual run-rate synergy targets and now expects to achieve the following by the end of the year:
- Revenue synergies of $200 million, an increase of $50 million
- Expense synergies of $600 million, an increase of $250 million
The Company is also increasing its total annual run-rate synergy targets and now expects to achieve the following by the end of 2022:
- Revenue synergies of $550 million, an increase of $50 million
- Expense synergies of $675 million, an increase of $175 million
Virtus Partners Acquisition
FIS recently closed the acquisition of a majority interest in Virtus Partners, a provider of high value managed services and technology to the credit and loan market. This tuck-in acquisition is expected to accelerate the organic revenue growth of the Capital Market Solutions segment by enabling a more robust offering to both buy-side and sell-side market participants in the middle- and back-office. The Virtus acquisition does not change the Company’s prior expectation to reduce leverage to approximately 2.7x by the end of the year 2020 and is not expected to have a material impact on consolidated organic revenue growth.
Balance Sheet and Cash Flows
As of December 31, 2019, cash and cash equivalents totaled $1,152 million, and debt outstanding totaled $20,192 million with an effective weighted average interest rate of 1.7 percent. Net cash provided by operating activities was $670 million, and free cash flow was $812 million in the quarter. FIS paid dividends of $215 million in the quarter.
FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EST) Thursday, February 13, 2020. To access the webcast, go to the Investor Relations section of FIS’ homepage, www.fisglobal.com. A replay will be available after the conclusion of the live webcast.
FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our over 55,000 people are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.
FIS 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 in the United States. 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, we have provided certain non-GAAP financial measures.
These non-GAAP measures include adjusted revenue, constant currency revenue, organic revenue increase/decrease, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings (including per share amounts), adjusted cash flows from operations and free cash flow. These non-GAAP measures may be used in this release and/or in the attached supplemental financial information.
We believe these non-GAAP measures help investors better understand the underlying fundamentals of our business. As further described below, the non-GAAP revenue and earnings measures presented eliminate items management believes are not indicative of FIS’ operating performance. The constant currency and organic revenue increase/decrease measures adjust for the effects of exchange rate fluctuations, while organic revenue increase/decrease also adjusts for acquisitions and divestitures, giving investors further insight into our performance. Finally, the non-GAAP cash flow measures provide further information about the ability of our business to generate cash. For these reasons, management also uses these non-GAAP measures in its assessment and management of FIS’ performance.
Adjusted revenue consists of revenue, increased to reverse the purchase accounting deferred revenue adjustment made upon the acquisition of SunGard. The deferred revenue adjustment represents revenue that would have been recognized in the normal course of business by SunGard under GAAP but was not recognized due to GAAP purchase accounting adjustments. The deferred revenue adjustment in purchase accounting was made entirely in the Corporate and Other segment; reported GAAP results for the IFS and GFS segments are not affected by this adjustment and, therefore, no adjusted revenue is presented for these segments.
Constant currency revenue represents (i) adjusted revenue, as defined above, in respect of the consolidated results and the Corporate and Other segment and (ii) reported revenue in respect of the IFS and GFS segments, in each case excluding the impact of fluctuations in foreign currency exchange rates in the current period.
Organic revenue increase/decrease is constant currency revenue, as defined above, for the current period compared to an adjusted revenue base for the prior period, which is further adjusted to add pre-acquisition revenue of acquired businesses for a portion of the prior year matching the portion of the current year for which the business was owned, and subtract pre-divestiture revenue for divested businesses for the portion of the prior year matching the portion of the current year for which the business was not owned, for any acquisitions or divestitures by FIS.
EBITDA reflects earnings from continuing operations before interest, taxes, depreciation and amortization.
Adjusted EBITDA is EBITDA, as defined above, excluding certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, adjusted EBITDA, as it relates to our segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K.
Adjusted EBITDA margin reflects adjusted EBITDA divided by adjusted revenue.
Adjusted net earnings (New Method) excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of depreciation and amortization and equity method investment earnings (loss), both of which are recurring.
Adjusted net earnings (Prior Method) excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of acquisition-related purchase accounting amortization and equity method investment earnings (loss), both of which are recurring.
Adjusted net earnings per diluted share, or Adjusted EPS (New Method), reflects adjusted net earnings from continuing operations (New Method) divided by weighted average diluted shares outstanding.
Adjusted net earnings per diluted share, or Adjusted EPS (Prior Method), reflects adjusted net earnings from continuing operations (Prior Method) divided by weighted average diluted shares outstanding.
Adjusted cash flows from operations reflect net cash provided by operating activities adjusted for the net change in settlement assets and obligations and exclude certain transactions that are closely associated with non-operating activities or are otherwise non-operational in nature and not indicative of future operating cash flows.
Free cash flow reflects adjusted cash flows from operations less capital expenditures. Free cash flow does not represent our residual cash flow available for discretionary expenditures, since we have mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure.
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 measures. 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, including footnotes describing the specific adjustments, are provided in the attached schedules and in the Investor Relations section of the FIS website, www.fisglobal.com.
This earnings 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 anticipated financial outcomes, including any earnings guidance of the Company, business and market conditions, outlook, foreign currency exchange rates, expected dividends and share repurchases, the Company’s sales pipeline and anticipated profitability and growth, as well as other statements about our expectations, beliefs, 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:
- the risk that the Worldpay transaction will not provide the expected benefits, or that we will not be able to achieve the cost or revenue synergies anticipated;
- the risk that the integration of FIS and Worldpay will be more difficult, time-consuming or expensive than anticipated;
- the risk of customer loss or other business disruption in connection with the Worldpay transaction, or of the loss of key employees;
- the fact that unforeseen liabilities of FIS or Worldpay may exist;
- the risk that acquired businesses will not be integrated successfully, or that the integration will be more costly or more time-consuming and complex than anticipated;
- the risk that cost savings and other synergies anticipated to be realized from acquisitions may not be fully realized or may take longer to realize than expected;
- the risks of doing business internationally;
- changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, changes in either or both the United States and international lending, capital and financial markets, and currency fluctuations;
- the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy and cybersecurity laws and regulations;
- 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 our solutions;
- failures to adapt our solutions to changes in technology or in the marketplace;
- internal or external security breaches of our systems, including those relating to unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our software or platforms, and the reactions of customers, card associations, government regulators and others to any such events;
- the risk that implementation of software (including software updates) for customers or at customer locations or employee error in monitoring our software and platforms may result in the corruption or loss of data or customer information, interruption of business operations, outages, exposure to liability claims or loss of customers;
- the reaction of current and potential customers to communications from us or regulators regarding information security, risk management, internal audit or other matters;
- competitive pressures on pricing related to the decreasing number of community banks in the U.S., the development of new disruptive technologies competing with one or more of our solutions, increasing presence of international competitors in the U.S. market and the entry into the market by global banks and global companies with respect to certain competitive solutions, each of which may have the impact of unbundling individual solutions from a comprehensive suite of solutions we provide to many of our customers;
- the failure to innovate in order to keep up with new emerging technologies, which could impact our solutions and our ability to attract new, or retain existing, customers;
- the failure to meet financial goals to grow the business in Brazil after the unwinding of the Brazilian Venture;
- the risks of reduction in revenue from the loss of existing and/or potential customers in Brazil after the unwinding of the Brazilian Venture;
- an operational or natural disaster at one of our major operations centers;
- failure to comply with applicable requirements of payment networks or card schemes or changes in those requirements;
- fraud by merchants or bad actors; and
- other risks detailed in the “Risk Factors” and other sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in our other filings with the Securities and Exchange Commission.
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, 904.438.6083
Chief Marketing Officer
FIS Global Marketing and Corporate Communications
Nathan Rozof, CFA, 866.254.4811
Executive Vice President
FIS Investor Relations