Certegy Inc. reported first quarter 2004 diluted earnings per share of $0.32 on revenue of $263.4 million and operating income of $35.5 million.
FIRST QUARTER FINANCIAL HIGHLIGHTS
Highlights of the 2004 first quarter results, as compared to the prior year quarter (the 2003 quarter included $12.6 million, or $0.12 per diluted share, of contract termination, severance and other charges) are as follows:
– Revenue increased 9.7% to $263.4 million.
– Operating income of $35.5 million increased $14.6 million.
– Net income increased $8.5 million to $20.7 million.
– Diluted earnings per share of $0.32 increased $0.14 per share.
On a non-GAAP basis (which excludes the $12.6 million charge from the 2003 first quarter results) first quarter 2004 operating income increased 5.8%, net income increased 2.7%, and diluted earnings per share increased 6.7%.
“We are very pleased with our first quarter results,” stated Lee Kennedy, chairman, president and chief executive officer of Certegy Inc. “We are particularly encouraged by the performance of Check Services, which achieved double-digit revenue and profit growth. Our North American card business also generated strong, consistent results.”
Card Services generated revenue of $162.7 million in the first quarter of 2004, an increase of 3.5% above the 2003 quarter. Strong revenue growth of 10.8% in the Company’s North American card issuing operation resulted from growth in transactions, new sales of e-banking services and card loyalty programs, and one month of revenue from the acquisition of Crittson Financial LLC (“Crittson”). Merchant processing revenue increased by 7.4%, driven by strong retail sales and one month of revenue from the acquisition of Crittson. International card issuing revenue declined 17.8%, caused primarily by the deconversion of Banco Real in the prior year first quarter. Card Services operating income of $32.4 million increased $12.4 million compared to $20.0 million in the first quarter of 2003. The prior year quarter included an $11.5 million charge for contract termination and severance costs. Excluding this charge, operating income increased 3.0%.
Check Services generated revenue of $100.7 million in the first quarter of 2004, an increase of 21.3% over the 2003 quarter. The strong revenue growth was driven by higher retail sales, new customer signings and continued migration of verification volume to guarantee volume. These results also include one month of revenue from the acquisition of Game Financial Corporation. Check Services operating income of $8.8 million increased by $2.8 million, compared to $6.0 million in the corresponding 2003 quarter. The prior year quarter included a $1.0 million charge for contract termination and severance costs. Excluding this charge, operating income increased by 25.3%.
Corporate expense of $5.6 million increased by $0.6 million compared to $5.0 million in the first quarter of 2003.
Certegy’s global card base was 46.8 million at quarter-end. A 16.4% increase in debit transactions contributed to overall domestic card transaction growth of 9.6%. Recent new customer announcements include agreements to provide credit card processing services to American Airlines Credit Union and e-banking and electronic bill payment services to Travis Credit Union.
Check guarantee volumes increased 12.7% compared to the prior year quarter, driven by strong retail sales. New check customer signings include DSW Shoe Warehouse and the Sharper Image.
The Company completed two strategic acquisitions in early March. The acquisition of Crittson Financial LLC further strengthens Certegy’s U.S. market share as the leading third party credit card processor for community banks and credit unions. The acquisition of Game Financial Corporation positions Certegy as a leading provider of comprehensive cash access services in the fast-growing gaming industry, and broadens the Company’s check risk management product line and customer base.
Certegy revised its full year 2004 guidance as follows, to reflect its acquisitions and stronger than expected financial results in the first quarter:
– Revenue is expected to grow by 13% to 15% in 2004, compared with prior year.
– Operating income is expected to grow by 12% to 15% in 2004, compared with prior year non-GAAP results which exclude 2003 charges of $12.2 million.
– Diluted earnings per share is expected to range from $1.69 to $1.73.
The Company expects to achieve diluted earnings per share of $0.37 to $0.38 in the second quarter of 2004, with revenue growth in the mid-teens, as compared with the prior year second quarter.
Certegy (NYSE: CEY) provides credit and debit processing, check risk management and check cashing services, merchant processing and e-banking services to nearly 7,000 financial institutions, 117,000 retailers and 100 million consumers worldwide. Headquartered in Alpharetta, Georgia, Certegy maintains a strong global presence with operations in the United States, United Kingdom, Ireland, France, Chile, Brazil, Australia and New Zealand. As a leading payment services provider, Certegy offers a comprehensive range of transaction processing services, check risk management solutions and integrated customer support programs that facilitate the exchange of business and consumer payments. Certegy generated over $1.0 billion in revenue in 2003.
For more information on Certegy’s first quarter performance visit CardData ([www.carddata.com]).