Fidelity National Information Services, Inc. (FIS)
Q2 2010 Earnings Call
July 20, 2010 5:00 p.m. ET
Mary Waggoner – Senior Vice President of Investor Relations
Frank Martire – President, Chief Executive Officer
Mike Hayford – Chief Financial Officer
Gary Norcross – Chief Operating Officer
David Koning - Robert W. Baird & Co., Inc.
Glenn Greene - Oppenheimer & Co.
Greg Smith - Duncan Williams Inc.
Brett Huff – Stephens, Inc.
Kartik Mehta - Northcoast Research
James Kissane - BofA Merrill Lynch
Tien-Tsin Huang - J. P. Morgan
David Parker - Lazard Capital Markets
Karl Keirstead - Kaufman Bros.
Kartik Mehta – Northcoast Research
John Williams – Goldman Sachs
Karl Keirstead – Kaufman Brothers
Ashburn Schiviker – Citi
Brian King – Credit Suisse
Ladies and gentlemen, thank you for standing by and welcome to the FIS Second Quarter Earnings Conference Call. (Operator Instructions)
Previous Statements by FIS
» Fidelity National Information Services, Inc. Q1 2010 Earnings Call Transcript
» Fidelity National Information Services, Inc. Q4 2009 Earnings Call Transcript
» Fidelity National Information Services, Inc. Q3 2009 Earnings Call Transcript
Thanks to everyone joining us on the line. Today’s Earnings Press Release and Supplemental Slide Presentation have been posted to our website at www.FISGlobal.com, and a webcast replay of the audio portion of this call will also be available on the website shortly afterwards.
Joining us today on today’s call are Frank Martire, President and Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer.
Frank will lead today’s discussion with an overview of the leveraged recapitalization plan and a summary of second quarter results.
Gary will follow with the operations review and Mike will conclude with the detailed financial reports.
Please refer to the Safe Harbor Language on Page 2 of the Presentation. Today’s discussion will contain forward-looking statements. These statements are subject to risk and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Today’s comments will also include references to non-GAAP results in order to provide a more meaningful comparison between the periods presented. Reconciliations between GAAP and non-GAAP results are provided in the attachments to the press release. Unless otherwise stated, references on this call to revenue and EBITDA Growth Rates will be on a proforma basis to include results from Metavante in all periods.
I will now turn the call over to Frank Martire.
Thanks Mary. Good afternoon everyone, and thanks for joining us on today’s call.
I’ll begin with a brief summary of our recapitalization and share repurchase plan. On May 25, FIS announced a levity capitalization plan under which the company will repurchase 2.5 billion of common stock at a price between $29.00 and $31.00 per share through a modified Dutch auction.
As previously disclosed, the FIS Board of Directors received a proposal regarding a potential leverage buy out of the Company and appointed an independent special committee to [inaudible] additional alternatives as part of the due diligence process.
After a thorough evaluation, the Board concluded that the recapitalization plan is the best alternative to return value to shareholders today, and to also preserve future upside potential.
We officially launched the offer to purchase on July 6, and expect to complete the share repurchase the week of August 9th. We have completed the financing needed for the tender offer, and we’re very pleased with the increase financial commitment from our existing lenders in the highly-successful marketing effort for the Term-Loan B and the Senior Notes, which closed last Friday.
The new debt structure provides FIS with the capacity to complete the tender offer and manage the business on an ongoing basis.
Now, I will continue with the business report.
Overall, we are pleased with the solid second quarter results, which were in line with our expectations. Second quarter revenue increased 2.4% to $1.29 billion compared to $1.26 billion in the prior year, and increased 1.7% in constant currency.
The EBITDA Margin expanded 140 basis points to 29.9%, driven primarily by synergy cost savings. Adjusted earnings came in at $0.46 per share, and free-cash flow totaled $108 million for the quarter.
We continue to make good progress on our integration plan, and we remain on track to achieve the synergy cost savings of $260 million.
Year-to-date sales have been solid, and the pipeline remains strong. We have been especially pleased with the number of new core processing agreements. We have signed 39 competitive core deals in the first six months of 2010, compared to a total of 50 for all of 2009.
We are clearly gaining market share and we continue to expand our presence in the mid-tier market where our product capability and scale provides us with a significant competitive advantage.
In addition, the demand for Professional Services has increased considerably as banks turn to FIS to support their IT efforts, and for assistance with acquisition and consolidation-related activity.
In May, we hosted two very successful user conferences in Milwaukee and Orlando, with more than 2,000 existing and prospective clients in attendance.
The outlook expressed by clients has improved considerably compared to last year. And their discussions with us has shifted towards investing for growth and better competitive positioning in 2010, and away from bank failures and survival of the industry.
Before turning the call over to Gary, I would like to provide an update on our Brazilian Card Operation. I am pleased to report that we have agreed to terms and are working with Banco Bradesco to finalize the definitive agreement.