Fidelity National Information Services, Inc. (FIS)

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Fidelity National Information Services (FIS)

Q3 2011 Earnings Call

November 01, 2011 8:30 am ET

Executives

Michael D. Hayford - Chief Financial Officer and Corporate Executive Vice President

Mary K. Waggoner - Senior Vice President of Investor Relations

Gary Norcross - Chief Operating Officer and Corporate Executive Vice President

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

Analysts

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

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

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

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Brett Huff - Stephens Inc., Research Division

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

David Togut - Evercore Partners Inc., Research Division

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

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the FIS Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. Your host and speaker, Senior Vice President, Investor Relations, Mary Waggoner. Please go ahead.

Mary K. Waggoner

Thank you, Kevin, and welcome to everyone joining us this morning.

With me today are Frank Martire, President and Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer.

Before we begin, we ask that you please mark your calendar for our Analyst Day, which is being planned for February 14, 2012, in Orlando, Florida. The event will coincide with our fourth quarter earnings release. And we will be sending out registration details in the next few weeks.

Now we will proceed with the third quarter earnings report. Today's news release and supplemental slide presentation have been posted to our website at fisglobal.com. A replay of this webcast will be available shortly after the call.

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 risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Today's comments will focus on results from continuing operations and will include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. Reconciliations between GAAP and non-GAAP results are provided in the attachment to the press release and the supplemental slide presentation.

I will now turn the call over to Frank Martire for an overview of third quarter results.

Frank Martire

Thanks, Mary. Good morning, everyone, and thank you for joining us on today's call. I will keep my remarks brief to allow plenty of time for your questions. I will begin the discussion with a brief summary of our third quarter financial results and business highlights. Gary will follow with the operations report, and Mike will provide additional insight into our financial results and our outlook for the remainder of 2011. We will also share some preliminary thoughts on 2012.

Overall, we are pleased with our solid top line performance and strong growth in earnings per share. Revenue increased to $1.4 billion in the quarter, representing organic growth of 4.1%. Our results were driven by continued strong performance in our International business, which grew 21.9% on an organic basis. Earnings per share increased 19.2% to $0.62 in the third quarter, and free cash flow were strong at $193 million.

We continue to compete very well on the strength of our solutions. We added several new clients during the quarter, including KeyBank and Berkshire Bank in North America, as well as new clients in Germany. Gary will provide additional sales highlights a little later on the call.

We believe that our growing global footprint and our International business in particular provide us with a strategic advantage over our competitors. We also continue to look for opportunities to augment organic growth to internal investment and targeted acquisitions. As in the past, we will be disciplined in our approach, and we will apply our cash and debt repayment or share repurchases if we cannot find deals that fit strategically, financially and operationally.

We repurchased approximately $181 million of stock in the third quarter and have another 7 million shares remaining under the February 2010 authorization. Additionally, as we announced this morning, our board has approved a new $500 million share repurchase plan, which at yesterday's closing price represents approximately 19 million additional shares.

Looking back on the first 9 months of the year, the team has driven solid organic revenue growth and managed the business very well in a difficult economic environment. We are proud to be ranked as the #1 provider on the 2011 FinTech 100, which is a result of the continued confidence that our clients have in us.

As we look ahead to the fourth quarter and 2012, we remain focused on helping our clients meet their overall business objectives and on driving higher revenue and earnings growth and a strong free cash flow.

Now Gary will continue with the business report. Gary?

Gary Norcross

Thank you, Frank, and thanks to everyone on the call. I'll begin today's review with an overview of the global sales climate, followed by the operating highlights. We see continued investment spending by financial institutions despite persistent economic and regulatory challenges. We are pleased with the progress we are making to gain additional share in the large financial institutions and International markets. The demand for our professional services remains strong and continues to grow on a consecutive quarter basis. We are also seeing increased interest in back-office outsourcing and managed IP services.

For example, a top-tier bank in North America recently opted to outsource a substantial portion of its statement production and mail services to FIS, which will drive meaningful cost savings for the bank and generate a reoccurring revenue stream for FIS. This services growth is offsetting the declines in license sales as our clients seek to leverage our global scale and processing capabilities to execute their business strategies.

Earlier this year, we discussed the brand's strength of our TouchPoint channel solution in the large bank market, including a new agreement with the Bank of Oklahoma. I am pleased to announce that the First National Bank of Omaha, with $17 billion in assets, will deploy TouchPoint in its more than 140 branches in 7 states in 2012, replacing its existing in-house teller platform.

As Frank mentioned, our International business continues to perform very well, providing FIS with a strategic advantage over other providers. We are now seeing increased demands for both core and Payment Solutions outside North America and experience growth across all major international regions in the third quarter, including Europe.

We continue to make good progress in diversifying our International client base and product offerings in EMEA, Latin America and Asia Pacific. Over the past year, we have announced reciprocal ATM agreements with China UnionPay, Korea Financial Telecom and the U.K. LINK network. While we do not expect to generate significant revenue from this relationships in the near-term, we are hopeful that the increased visibility will open the door to expanded relationships in the future.

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