August 06, 2019
JACKSONVILLE Fla., August 6, 2019 – FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its second quarter 2019 results and also reported second quarter 2019 results for Worldpay, Inc. (Worldpay) following the July 31, 2019 acquisition of Worldpay by FIS.
FIS Second Quarter 2019 Results
“We are very pleased with our strong quarter, which was underpinned by robust sales and continued operational execution,” said Gary Norcross, FIS chairman, president and chief executive officer. “Our recent closing of the Worldpay acquisition is a demonstrable proof point in our overall growth strategy. We are confident that our focus on innovating with purpose to advance the way the world pays, banks and invests will continue to deliver long-term value to our clients and shareholders.”
On a GAAP basis, revenue was flat at $2,112 million from $2,106 million in the prior year quarter driven by solid growth in the continuing operations, partially offset by the impact of divestitures in 2018. Net earnings attributable to common stockholders was $154 million for the quarter, or $0.47 per diluted share, compared to $0.64 per diluted share in the prior year quarter, a decrease of 27 percent.
On an adjusted basis, organic revenue increased 5 percent, excluding the impact of divestitures and foreign currency fluctuations. Adjusted EBITDA margin expanded 170 basis points to 37.6 percent. Adjusted net earnings was $582 million, or $1.78 per diluted share, compared to $1.63 per diluted share in the prior year quarter, an increase of 9 percent.
FIS Segment Information
FIS Balance Sheet and Cash Flows
As of June 30, 2019, cash and cash equivalents totaled $9,756 million and debt outstanding totaled $18,242 million with an effective weighted average interest rate of 2.5 percent. The increase in cash and cash equivalents and debt was primarily driven by the successful US and European based debt financing in conjunction with the Worldpay transaction. Net cash provided by operating activities was $526 million and free cash flow was $413 million for the quarter. FIS paid dividends of $113 million in the quarter.
Worldpay Second Quarter 2019 Results
“I am excited about the strengths and new opportunities available through the combination of Worldpay and FIS,” said Charles Drucker, vice chairman of FIS. “Worldpay continues to deliver strong new sales due to our colleagues’ focus on execution and dedication to client service. Now with FIS, the two companies are uniquely positioned to capitalize on the most significant areas of secular growth.”
On a GAAP basis, revenue increased 7 percent to $1,073 million from $1,007 million in the prior year quarter. Net income (loss) attributable to Worldpay was $143 million for the quarter, or $0.46 per diluted share, compared to $(0.01) per diluted share in the prior year quarter.
On an adjusted basis, constant currency revenue increased 8 percent. Excluding cryptocurrency and foreign currency headwinds, Worldpay revenue increased by 9 percent. Adjusted EBITDA increased to $561 million from $493 million in the prior year quarter, while adjusted EBITDA margin expanded by 330 basis points to 52.3 percent. Adjusted net income was $387 million, or $1.24 per diluted share, compared to $1.04 per diluted share in the prior year quarter, an increase of 19 percent.
Worldpay Segment Information
Adjusted Combined Second Quarter 2019 Results
Adjusted combined results are representative of FIS and Worldpay as a combined entity in the second quarter of 2019.
On a go forward basis, the Company will operate and report three operating segments. These segments are based on the markets and clients served, aligned with the solutions they provide. The new operating segments will be: Merchant Solutions, Banking Solutions and Capital Market Solutions.
Adjusted Net Earnings and Adjusted Earnings Per Share Update
Following discussions with the Staff of the Securities and Exchange Commission, FIS will revert to the Prior Method of reporting Adjusted Net Earnings and Adjusted Earnings Per Share in the third quarter of 2019. These non-GAAP measures will exclude the cost of amortization of purchase accounting intangibles as opposed to excluding all depreciation and amortization.
Third and fourth quarter 2019 Adjusted EPS guidance is calculated based on the Prior Method definition of Adjusted EPS. For transition purposes in this release, we have also provided what we previously named the New Method for this release only.
Third and Fourth Quarter 2019 GAAP Guidance
Third and Fourth Quarter 2019 Non-GAAP Guidance
FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EDT) Tues., August 6, 2019. 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 global leader in technology, solutions and services for merchants, banks and capital markets that helps businesses and communities thrive by advancing commerce and the financial world. For over 50 years, FIS has continued to drive growth for clients around the world by creating tomorrow’s technology, solutions and services to modernize today’s businesses and customer experiences. By connecting merchants, banks and capital markets, we use our scale, apply our deep expertise and data-driven insights, innovate with purpose to solve for our clients’ future, and deliver experiences that are more simple, seamless and secure to advance the way the world pays, banks and invests.
Headquartered in Jacksonville, Florida, FIS employs about 55,000 people worldwide dedicated to helping our clients solve for the future. 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.
Worldpay Use of Non-GAAP Financial Information
This earnings release presents non-GAAP and pro forma financial information including adjusted EBITDA, adjusted net income, and adjusted net income per share. These have been important financial performance measures for Worldpay, but are not financial measures as defined by GAAP. The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Worldpay has used these non-GAAP and adjusted financial performance measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Worldpay believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Reconciliations of these measures to the most directly comparable GAAP financial measures are presented in the attached schedules.
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:
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