Fidelity National Information Services, Inc. (FIS)

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Fidelity National Information Services (FIS)

Q4 2011 Earnings Call

February 14, 2012 8:30 am ET


Mary K. Waggoner - Senior Vice President of Investor Relations

Frank Martire - Chief Executive Officer, President, Director and Member of Executive Committee

Gary Norcross - Chief Operating Officer

Mark Owen Davey - Executive Vice President of International Operations

James Susoreny - Executive Vice President of Business Development

Rob Heyvaert - Corporate Executive Vice President


David Togut - Evercore Partners Inc., Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Barton B. Hooper - Wallace R. Weitz & Co.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Greg Smith - Sterne Agee & Leach Inc., Research Division

Kartik Mehta - Northcoast Research

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Unknown Analyst


Mary K. Waggoner

Good morning. If we could have everyone take their seats, we'll get started. My name is Mary Waggoner, I'm Senior Vice President of Investor Relations for FIS. I'd like to welcome all of you who have gathered with us in Orlando this morning. Thank you for making the trip. We'd also like to welcome, and thank those of you who are participating via webcast. We've modified the format of this year's event in a couple of ways. First, we are hosting FIS Investor Day 2012 in conjunction with our Global Leadership Summit. So in addition to our guests from the investment community, we are joined by more than 300 of our leaders from around the world. We're very excited to have all you with us and hope that you will find today's presentation insightful and informative. Second, we will begin the day with a discussion of fourth quarter and full year 2011 results. The earnings press release and supplemental slide presentation have been posted on our website at The 2012 presentation will be posted on the website in approximately 30 or 40 minutes, and we'll make copies available in the room at that time.

Joining me on stage are Frank Martire, Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer. The next 30 minutes or so will include prepared remarks read by Frank, Mike and Gary on our -- covering our 2011 operating and financial results. Then we will transition to the 2012 strategy discussion and financial outlook. There will be a 30-minute Q&A session for the investment community at the end of both presentations, and we ask that you hold your questions until that time. We'll take questions from the leadership team later this afternoon and tomorrow. And we will conclude today's -- this morning's event with a topic table reception, where members of the investment community will have an opportunity to interact with several additional members of our leadership team. And that will be in the Crystal Ballroom, just immediately across the hall, where you all were for breakfast this morning.

Now I'd like to direct your attention to Slide 4 for the Safe Harbor commentary. Please note that today's discussion will contain forward-looking statements. The statements are subject to risk and uncertainties as described in our filings with the SEC. FIS undertakes no obligation to update any forward-looking statements, whether as a result of new information, future or otherwise, except as required by law. In addition, today's discussion will include comments and references to non-GAAP financial results in order to provide you with more meaningful comparisons for the periods presented. Reconciliations of GAAP to non-GAAP results are available in the earnings press release, which is located on the tables in front of you, and are also posted on our website,

Now, I'll turn the presentation over to our CEO, Frank Martire. Frank?

Frank Martire

Thank you, Mary. Sorry, I didn’t leave time for the applause there. Thanks, Mary. Good morning. I'd like to welcome you to the event, the investment community to Orlando. Thank you for being here. Those on the webcast, all the FIS global leaders out there, welcome. We hope you find it to be, as Mary said, very informative and insightful. We're pretty excited about our company and our future, and we hope you will be too. I will begin the presentation with a quick overview of our financial results and business highlights for 2011. Gary will follow with the operations report, and Mike will provide additional insight into our fourth quarter and full year results.

2011 was another strong year for FIS, and I'm pleased with the progress we are making to execute our global business strategy. We continue to build global scale, finishing the year with more than $5.7 billion in revenue and $1.7 billion in EBITDA. We generated adjusted net earnings of $698 million and $1.2 billion in operating cash. The team is doing a nice job executing our business plan, as evidenced by 5% organic top line growth and 12% growth in earnings per share in 2011. Organic growth has steadily improved since 2009, led by strong results within our international business. International revenue increased to $1.2 billion in 2011, and grew 22% organically for the year driven by strong performance in both the FIS and Capco businesses. Our international business continues to play a key role in our growth strategy, and we are excited to have surpassed the $1 billion milestone.

Importantly, we maintained our focus, generating new sales and expanding existing client relationships. We are very pleased to announce our new agreement with the Royal Bank of Canada to establish this new direct bank in the U.S. This is the first of what we believe will be many joint initiatives between FIS and Capco. Gary will provide more detail on the project later in the presentation. FIS has consistently delivered strong financial results in one of the most challenging environments in banking history. Revenue has increased from $3.4 billion in 2008 to more than $5.7 billion in 2011, or approximately 20% per year on a compounded basis. EBITDA has increased by 27% on average, and the EBITDA margin has increased 480 basis points during that time. And we have consistently delivered mid-teens EPS growth. These strong results illustrate the strength of our business model and our ability to execute. We have also been very disciplined in allocating capital. While we continue to invest for growth, our ability to leverage investments across our global enterprise has resulted in more efficient use of capital. We also continue to strengthen our balance sheet. We've reduced our debt by $382 million in 2011, and improved the leverage ratio to approximately 2.8x at year end. And our strong free cash flow enabled us to return approximately $460 million in cash to shareholders through share repurchases and dividends in 2011. As noted in yesterday's press release, our Board of Directors increased the annual dividend to $0.80 per share and also approved the new $1 billion share repurchase program. These actions reflect our confidence in our business outlook and our commitment to further enhancing shareholder returns.

We continue to feel very good about our business. As you will hear throughout today's presentation, we are highly focused on driving growth and margin expansion, while continuing to invest in the future. We will continue to be very disciplined in managing our capital, and we are committed to enhancing shareholder value. Our success is tied directly to the hard work, dedication of our employees and how well we serve our clients. I would like to take this opportunity to personally thank our leadership team, many of whom are with us this morning, and our 33,000 employees worldwide. I would also like to thank our clients, who depend on us and trust us to keep their business running every day.

Now, I will turn it over to Gary for the operating highlights. Gary?

Gary Norcross

Thanks, Frank, and thanks to everyone for being with us today. We have a lot of material to cover, so I'll provide a brief overview of the fourth quarter operating highlights in order to spend more time discussing our business strategies in the next presentation.

Overall buying decisions strengthened in the fourth quarter both on a sequential and year-over-year basis. We continue to experience solid demand for outsourced processing, back office support and professional services as clients seek to leverage our scale and broad service capabilities. As we discussed during last year's investor update and all throughout the year, we think we have a great opportunity to gain more share in the large financial institution market space. We experienced strong sales growth within this market in the fourth quarter on a year-over-year and sequential basis, which points that the investments in our sales force for this market are paying off. We continue to be the provider of choice for direct banks in North America. Barclays Bank, one of our large outsourced clients in the U.K., will use our core solution for their new direct bank in the U.S. And as Frank mentioned earlier, we are very pleased to announce that FIS and Capco were selected by RBC to assist in establishing its new direct bank to serve its cross-border clients in the U.S. The project scope, which included defining the targeted operating model, building interfaces between multiple internal and external systems and operating the core banking platform on an outsourced basis, demonstrates our ability to deliver transformation in the market and clearly differentiates FIS from other technology providers and large-scale system integrators. Both RBC and Barclays are great examples of the power of our global go-to-market strategy.

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