Press Release
FIS Reports Fourth Quarter and Full Year 2015 Results
February 09, 2016
Full year 2015
- Revenue of $6.6 billion
- EPS from continuing operations of $2.21, or $3.22 on an adjusted basis
- Free cash flow of $920.9 million
Fourth quarter 2015
- Revenue of $1.9 billion
- EPS from continuing operations of $0.35, or $0.93 on an adjusted basis
- Free cash flow of $399.1 million
JACKSONVILLE, Fla., February 9, 2016 – FIS™ (NYSE: FIS), a global leader in financial services technology, today reported a full year 2015 revenue increase of three percent to $6.6 billion. The increase was seven percent on an adjusted constant currency basis. GAAP net earnings from continuing operations attributable to common stockholders was $638.8 million, or $2.21 per diluted share, compared to $690.5 million, or $2.39 per diluted share in 2014.
2015 full year adjusted EBITDA increased five percent to $2.0 billion. The increase was eight percent on a constant currency basis. Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased four percent to $930.4 million. Adjusted net earnings per diluted share increased four percent to $3.22 from $3.10 in 2014. Full year non-GAAP adjusted net earnings from continuing operations adjusts for acquisition-related deferred revenue adjustments of $0.10 per share, acquisition, integration, and severance costs of $0.45 per share, a $0.19 per share benefit from gains on divestitures, global restructuring of $0.10 per share, and purchase accounting amortization expense of $0.54 per share.
“The resilience of our business model characterized by highly recurring revenues and operational efficiencies allowed us to deliver strong cash flows and earnings,” said Gary Norcross, president and chief executive officer, FIS. “The end-of-year closing of the SunGard acquisition allows us to leverage our newly expanded IP-led solutions portfolio to create deeper and broader relationships with our more than 20,000 clients. The acquisition creates a solid foundation for meeting our 2016 goals and driving long-term value creation for our shareholders.”
Fourth Quarter 2015
The quarter ending December 31, 2015, benefitted from the acquisition, increasing reported revenue eleven percent to $1.9 billion from $1.7 billion in the fourth quarter of 2014, or eighteen percent on an adjusted constant currency basis. GAAP net earnings from continuing operations attributable to common stockholders was $105.5 million, or $0.35 per diluted share, compared to $202.4 million, or $0.71 per diluted share in the prior year quarter.
Non-GAAP adjusted net earnings from continuing operations attributable to common stockholders increased to $278.4 million in the fourth quarter of 2015 from $249.3 million in the prior year quarter. Adjusted net earnings per diluted share increased seven percent to $0.93 per share from $0.87 per share in the fourth quarter 2014. Fourth quarter non-GAAP adjusted net earnings from continuing operations adjusts for acquisition-related deferred revenue adjustments of $0.10 per share, acquisition, integration, and severance costs of $0.26 per share, a $0.03 per share tax impact from the sale of our gaming industry check warranty business earlier in the year, and costs pertaining to acquisition-related purchase accounting amortization expense of $0.19 per share.
Adjusted EBITDA increased nineteen percent to $624.1 million in the fourth quarter of 2015 from $525.6 million in the prior year quarter and was up twenty-one percent on a constant currency basis. Adjusted EBITDA margin was 32.5 percent compared to 31.1 percent in the prior year period.
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.
Segment Information
- Integrated Financial Solutions:
Fourth quarter revenue on a reported basis grew three percent to $1.02 billion from $989.3 million in the fourth quarter of 2014. Adjusted EBITDA increased to $405.3 million from $394.2 million in the fourth quarter of 2014, while adjusted EBITDA margin was 39.7 percent compared to 39.8 percent in the prior year period.
Full year 2015 revenue increased two percent on a reported basis to $3.93 billion from $3.86 billion in the prior year. Full year adjusted EBITDA increased two percent to $1.57 billion compared to $1.54 billion in 2014, and adjusted EBITDA margin increased to 40.0 percent compared to 39.8 percent in the prior year period. - Global Financial Solutions:
Fourth quarter revenue on a reported basis increased twenty-nine percent to $902.2 million from $701.0 million in the fourth quarter of 2014 and increased thirty-eight percent on a constant currency basis. Adjusted EBITDA increased to $259.0 million from $173.1 million in the fourth quarter of 2014, while adjusted EBITDA margin expanded to 28.7 percent compared to 24.7 percent in the prior year period. This segment’s results include earnings from SunGard, following the acquisition which closed on November 30, 2015.
Full year 2015 revenue increased six percent on a reported basis to $2.72 billion from $2.56 billion in the prior year. Full year adjusted EBITDA increased fifteen percent to $628.9 million compared to $545.7 million in 2014 and adjusted EBITDA margin increased to 23.1 percent compared to 21.3 percent in the prior year period. - Corporate / Other:
Fourth quarter corporate operating loss as reported increased $172.0 million to $290.4 million due largely to acquisition-related expenses. On an adjusted basis, fourth quarter 2015 corporate operating loss decreased four percent to $40.2 million compared to $41.7 million in the prior year quarter. Fourth quarter interest expense, net of interest income, increased to $74.6 million from $36.8 million in the fourth quarter 2014. The effective tax rate was 36.7 percent in the fourth quarter and 36.5 percent for the full year 2015.
The effective tax rate on an adjusted basis was 33.4 percent in the fourth quarter and 33.1 percent for the full year 2015.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $687.6 million as of December 31, 2015. Debt outstanding totaled approximately $11.51 billion compared to $5.07 billion as of year-end 2014, reflecting the incremental debt issued in conjunction with the SunGard acquisition.
Net cash provided by operations was $1.14 billion and adjusted cash flow from operations was $1.34 billion for the year. Capital expenditures increased to $415.3 million from $371.2 million in 2014. Free cash flow was $920.9 million for the year, compared to $864.3 million in the prior year.
In the first half of 2015, FIS repurchased approximately 4.5 million common shares at a total cost of approximately $300 million and an average cost of $66.10 per share. The company paid shareholder dividends totaling approximately $305 million in 2015 compared to $275 million in 2014.
2016 Outlook
FIS’ outlook for revenue growth and earnings per share in 2016 is as follows:
- Organic revenue growth of 3 to 4 percent
- Adjusted EPS from continuing operations of $3.70 to $3.80, an increase of 15 to 18 percent compared to $3.22 per share in 2015
- Free cash flow is expected to approximate adjusted net earnings
Webcast
FIS will announce fourth quarter and full-year 2015 financial results on Tuesday, February 9 prior to market open. The company will sponsor a live webcast of its earnings conference call with the investment community, beginning at 8:30 a.m. (EST) Tuesday, February 9. 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.
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. For these reasons, management also uses these measures in part to assess its performance.
These non-GAAP measures include constant currency revenue, adjusted revenue, EBITDA, adjusted EBITDA and adjusted EBITDA margin, adjusted net earnings from continuing operations (including per share amounts), adjusted cash flow from operations, free cash flow and organic revenue.
Adjusted revenue (2014) includes reported revenue and is increased by $9 million for a negotiated contract cash settlement for the extinguishment of certain contractual minimums with a reseller. Although the 2014 cash settlement has no contractual performance obligation, under GAAP the cash settlement revenue is amortized in this circumstance over the remaining relationship with the reseller.
Adjusted revenue (2015) includes reported revenue and is increased to adjust for the purchase accounting deferred revenue adjustment to estimated fair value, determined as fulfillment cost plus a normal profit margin. The deferred revenue adjustment represents revenue that would have been recognized in the normal course of business by SunGard but was not recognized due to GAAP purchase accounting adjustments.
Constant currency revenue is reported revenue excluding the impact of fluctuations in foreign currency exchange rates in the current year.
Adjusted constant currency basis reflects adjusted revenue excluding the impact of fluctuations in foreign currency exchange rates.
EBITDA reflects earnings from continuing operations before interest, taxes, depreciation and amortization.
Adjusted EBITDA excludes certain costs and other transactions which management deems non-recurring or unusual in nature, the removal of which improves comparability of operating results across reporting periods.
Adjusted net earnings from continuing operations excludes the after tax impact of certain costs and other transactions which management deems non-recurring or unusual in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the after tax impact of acquisition-related purchase accounting amortization, which is recurring.
Adjusted net earnings per diluted share, or adjusted EPS, reflects adjusted net earnings 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-recurring or unusual in nature and not indicative of future operating cash flows.
Free cash flow reflects adjusted operating cash flow 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.
Organic revenue growth includes current period reported revenue excluding the impact of foreign currency translation over an adjusted prior period excluding impact of acquisitions and divestitures.
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.
About FIS
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, consulting, 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 55,000 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.
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Forward-Looking Statements
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, 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:
- the risk that our acquisition, completed on November 30, 2015 of SunGard (the “Acquisition”), disrupts current plans and operations;
- the effects of the Acquisition on our financial results;
- potential difficulties in employee retention as a result of the Acquisition;
- disruption from the Acquisition, making it difficult to maintain business and operational relationships;
- the risk that the acquired businesses will not be integrated successfully, may be more costly, 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 the Acquisition may not be fully realized or may take longer to realize than expected;
- the risk of doing business internationally;
- changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes 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 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 solutions to changes in technology or in the marketplace;
- internal or external security breaches of our systems, including those relating to the unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our and 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 may result in the corruption or loss of data or customer information, interruption of business operations, 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 our solutions 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 under “Risk Factors” and other sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 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.
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