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February 06, 2018
Fourth Quarter 2017
JACKSONVILLE Fla., Feb. 6, 2018 – FIS™ (NYSE: FIS), a global leader in financial services technology, today reported fourth quarter and full-year 2017 results. The Company’s GAAP results were impacted by “The Tax Cuts and Jobs Act” and the divestitures of its public sector and education business and its consulting businesses in 2017.
GAAP revenue decreased 4.7 percent to $2,329 million from $2,445 million in the prior year quarter. Operating income increased to $485 million from $432 million in the prior year quarter, while operating income margin expanded 310 basis points to 20.8 percent. Net earnings from continuing operations attributable to common stockholders and diluted EPS in the period were significantly impacted by “The Tax Cuts and Jobs Act” which recently passed into legislation. This legislation resulted in a net tax benefit of $781 million to our net earnings from continuing operations attributable to common stockholders, or $2.32 of diluted EPS. Net earnings from continuing operations attributable to common stockholders was $988 million for the quarter, or $2.93 per diluted share, compared to $0.63 per diluted share in the prior year quarter.
For the fourth quarter, organic revenue increased 3.1 percent. Adjusted EBITDA increased to $881 million for the quarter, from $846 million in the prior year quarter, while adjusted EBITDA margin expanded 340 basis points to 37.8 percent. Adjusted net earnings from continuing operations attributable to common stockholders was $458 million for the quarter, or $1.36 per diluted share, compared to $1.14 per diluted share in the prior year quarter.
GAAP revenue decreased 1.3 percent to $9,123 million from $9,241 million in the prior year period. Operating income increased to $1,492 million from $1,298 million in the prior year period, while operating income margin expanded 240 basis points to 16.4 percent. Net earnings from continuing operations attributable to common stockholders was $1,319 million for the year, or $3.93 per diluted share, compared to $1.72 per diluted share in the prior year period.
For the year, organic revenue increased 2.0 percent. Adjusted EBITDA increased to $3,068 million for the year, from $2,945 million in the prior year period, while adjusted EBITDA margin expanded 240 basis points to 33.6 percent. Adjusted net earnings from continuing operations attributable to common stockholders was $1,483 million for the year, or $4.42 per diluted share, compared to $3.82 per diluted share in the prior year period.
“We are very pleased to deliver results that exceeded our profitability and earnings expectations, delivering exceptional margin expansion and significant shareholder returns,” said Gary Norcross, FIS president and chief executive officer. “Our strategy is working and our leadership team is continuing to execute very well. We are confident in our continuing ability to deliver positive results in a rapidly changing industry.”
The Company’s segment GAAP results were impacted by the divestitures of its public sector and education business and its consulting businesses in 2017.
As of December 31, 2017, cash and cash equivalents totaled $665 million and debt outstanding totaled $8,763 million. Fourth quarter net cash provided by operating activities was $662 million and free cash flow was $551 million. Full-year net cash provided by operating activities was $1,741 million and free cash flow was $1,595 million.
The Company repurchased 1.1 million common shares at a total cost of approximately $100 million in the fourth quarter. Approximately $3,900 million remained under the existing share repurchase authorization as of December 31, 2017. The Company paid dividends of $96 million in the fourth quarter and $385 million in the year.
The Company’s 2018 GAAP and non-GAAP guidance reflect the impact of “The Tax Cuts and Jobs Act” and includes the impact of the new revenue recognition accounting standard (ASC 606). The Company’s 2018 GAAP guidance is also impacted by the divestitures of its public sector and education business and its consulting businesses in 2017.
As a direct result of “The Tax Cuts and Jobs Act,” in 2018 FIS will be incrementally investing up to $100 million into: our employees, innovation and data center consolidation.
FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EDT) Tues., Feb. 6, 2018. 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.
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 from continuing operations (including per share amounts), adjusted cash flow 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’s core 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 core 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 processing and services 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, which also excludes 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 from continuing operations 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, which is recurring.
Adjusted net earnings per diluted share, or Adjusted EPS, reflects adjusted net earnings from continuing operations divided by weighted average diluted shares outstanding.
Adjusted cash flow from operations reflects GAAP cash flow from operations as adjusted for the net change in settlement assets and obligations, and excludes 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 flow 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 web site, www.fisglobal.com.
FIS is a global leader in financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions. Through the depth and breadth of our solutions portfolio, global capabilities and domain expertise, FIS serves more than 20,000 clients in over 130 countries. Headquartered in Jacksonville, Fla., FIS employs more than 53,000 people worldwide and holds leadership positions in payment processing, financial software and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial world, FIS is a Fortune 500 company 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 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:
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.
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