Fidelity National Information Services, Inc., a leading global provider of technology services to financial institutions, announced financial results for the third quarter of 2006. Consolidated revenue increased to $1.08 billion, Net earnings increased to $78.6 million and Net earnings per diluted share was $0.41. In accordance with Generally Accepted Accounting Principles (“GAAP”), these results reflect the combination between FIS and Certegy Inc. as of February 1, 2006, the effective date of the merger.
“FIS reported excellent third quarter results with pro forma revenue growth of 10.2%, EBITDA growth of 10.5% and adjusted cash earnings of $0.57 per diluted share,” stated FIS Chairman William P. Foley, II. “With continued strong market share gains and cross sales to existing customers, we now expect to achieve revenue growth of 7% to 8% and cash earnings per diluted share of $2.08 to $2.12.”
FIS’ operating results are presented on a GAAP and on an adjusted pro forma basis, which management believes provides more meaningful comparisons between the periods presented. FIS’ pro forma results reflect a January 1, 2005, effective date for the merger between FIS and Certegy, the March 2005 recapitalization and the sale of minority interests by FIS. Additionally, the adjusted pro forma results exclude merger and acquisition and integration expenses. Reconciliations between GAAP and pro forma results are provided in the attachments to this press release, which are posted on the company’s website at http://www.fidelityinfoservices.com.
FIS presents its financial results in accordance with GAAP. However, in order to provide the investment community with a broader means of evaluating the operating performance of its operations, FIS also reports several non-GAAP measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), net earnings plus depreciation and amortization less capital expenditures (“Free Cash Flow”) and net earnings plus other intangible amortization, net of income tax (“Cash Earnings”). 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 net earnings.
Pro Forma Segment Information
FIS’ Transaction Processing Services generated revenue of $650.4 million, or 14.1% over the prior-year period, driven by 36.8% growth in International, 10.0% growth in Enterprise Solutions and 9.8% growth in Integrated Financial Solutions. The company’s new item processing operation in Brazil, new account wins and deeper penetration of the existing customer base contributed to the strong growth rate. EBITDA increased 14.7% to $157.2 million, and the EBITDA margin increased to 24.2%.
Lender Processing Services revenue increased 4.7% to $432.9 million, driven by a 5.5% increase in the number of mortgage loans processed, and strong results within the Default Solutions and Appraisal product lines. The $4.5 million, or 2.9% decrease in EBITDA is attributable to strong results in the comparable prior year quarter, a change in product mix and a longer deferral period for the company’s life of loan tax services. The 34.5% EBITDA margin was comparable to the second quarter 2006 margin.
Additional segment and pro forma information is provided in the following table:
Pro forma corporate expense for the third quarter of 2006 totaled $20.3 million. The $11.6 million, or 36.3%, decline from the prior-year quarter was primarily attributable to the consolidation of duplicate administrative functions. Pro forma interest expense for the quarter increased $9.0 million to $49.7 million, due primarily to higher interest rates. The increase in interest expense was partially offset by a lower effective tax rate of 35.8%.
Outlook
Management updated its full year 2006 outlook as follows:
* Revenue growth of 7% to 8% compared to its previous outlook for 5% to 7%;
* Pro forma earnings per diluted share of $1.51 to $1.55;
* Pro forma cash earnings per diluted share of $2.08 to $2.12;
* Pro forma EBITDA growth of 10% to 12%;
* Capital expenditures of approximately $300 million, including anticipated investments in the Brazilian credit card processing joint venture and the newly launched item processing and business process outsourcing operation;
* Pro forma free cash flow of $440 million to $470 million, which includes the aforementioned capital investments in Brazil.
This guidance excludes pre-tax merger and acquisition and integration costs associated with the February 1, 2006, combination of FIS and Certegy Inc.; pre-tax expense associated with the accelerated vesting of performance based options in the first quarter of 2006; and merger and acquisition costs associated with the completion of the merger with Fidelity National Financial, Inc., in November 2006.
About Fidelity National Information Services, Inc.
Fidelity National Information Services, Inc. (NYSE:FIS) is a leading provider of core processing for financial institutions; card issuer and transaction processing services; mortgage loan processing and mortgage-related information products; and outsourcing services to financial institutions, retailers, mortgage lenders and real estate professionals. FIS has processing and technology relationships with 35 of the top 50 global banks, including nine of the top ten. Approximately 50 percent of all U.S. residential mortgages are processed using FIS software. Headquartered in Jacksonville, Florida, FIS maintains a strong global presence, serving over 7,800 financial institutions in more than 60 countries worldwide. For more information on Fidelity National Information Services, please visit www.fidelityinfoservices.com.
FIS is a majority-owned subsidiary of Fidelity National Financial Inc. (NYSE:FNF), number 248 on the Fortune 500 and a provider of outsourced products and services to a variety of industries. More information about FNF can be found at www.fnf.com.
For complete details on FIS’s latest results visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
