Fidelity National Information Services, Inc. (FIS)

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Fidelity National Information Services (FIS)

Q3 2012 Earnings Call

November 05, 2012 5:00 pm ET

Executives

Mary K. Waggoner - Senior Vice President of Investor Relations

Frank R. Martire - Chairman, Chief Executive Officer and Member of Executive Committee

Gary A. Norcross - President and Chief Operating Officer

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

Analysts

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

Ashwin Shirvaikar - Citigroup Inc, Research Division

Brett Huff - Stephens Inc., Research Division

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

Bryan Keane - Deutsche Bank AG, Research Division

Roman Leal - Goldman Sachs Group Inc., Research Division

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

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

David Togut - Evercore Partners Inc., Research Division

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

John Kraft - D.A. Davidson & Co., Research Division

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

Kartik Mehta - Northcoast Research

Presentation

Operator

Ladies and gentlemen, thank you very much for standing by. Welcome to today's FIS Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to our host today, Senior Vice President investor Relations, Ms. Mary Waggoner. Please go ahead, ma'am.

Mary K. Waggoner

Thank you, Dave. We'd like to welcome everyone joining us this afternoon for the Third Quarter Earnings Report. With me today are Frank Martire, Chairman and Chief Executive Officer; Gary Norcross, President and Chief Operating Officer; and Mike Hayford, Chief Financial Officer.

Before we get started, I would like to ask you to please mark your calendars for our 2013 Investor Day, which is scheduled for Tuesday, February 12, in New York. Similar to our 2012 event, we will begin the day with the discussion of our fourth quarter and full year results followed by the business outlook and financial guidance for 2013. We look forward to seeing you there.

Now, onto the third quarter earnings report. Please -- I'm sorry, today's news release and supplemental slide presentation have been posted to our website at www.fisglobal.com. A replay of today's presentation will be available shortly after the call. Please refer to the Safe Harbor language on Slide 3 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 statements whether as a result of new information, future events or otherwise, except as required by law. As a reminder, we will focus on results from continuing operations, reflecting the reclassification of our healthcare business as a discontinued operation. Also included in discontinued operations are expenses related our former BPO operations in Brazil.

Please turn to Slide 4. Our commentary 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 for the press release and the supplemental slide presentation. Now, if you will turn to Slide 6, I will turn the call over the Frank Martire. Frank?

Frank R. Martire

Thanks, Mary. Good afternoon, everyone, and thank you for joining us on today's call. I'll begin today's business review with a brief summary of our financial performance and business highlights for the third quarter. Gary will follow with the operations report, and Mike will provide additional insight into our financial performance and our outlook for the remainder of the year.

Our third quarter results were very strong, including organic revenue which grew 5%. We are consistently delivering on our strategic commitments to maximize performance through organic revenue growth, margin expansion and returning cash to shareholders. As we move away from acquiring and integrating large companies, our results underscore that our change in strategy is working.

As shown on Slide 7, organic growth has rebounded nicely since 2009, fueled by strong sales execution and the ongoing market recovery. As you can see on the right, we have maintained our momentum and consistently delivered organic growth of 5% or higher in 7 of the last 8 quarters.

Turning to Slide 8, we are achieving the financial targets that we communicated earlier this year. They included organic revenue growth of 3% to 5%, EBITDA growth of 5% to 7%, margin expansion of 40 to 80 basis points and double-digit growth in earnings per share.

Through the first 9 months of 2012, besides generating 5% organic revenue growth, we've registered a 7% rise in EBITDA, expanded the margin by 90 basis points and increased earnings per share by 15%. Today's results position us very well to achieve our goals for the year.

Additionally, our strong cash flow and disciplined capital management enabled us to return $427 million to our shareholders in the form of dividends and shareholder repurchases through the first 9 months of the year.

Now on Slide 9. Our strong third quarter performance reflected 12% organic growth in our international business and 7% organic growth in Financial Solutions. The EBITDA margin was 30.8%, and adjusted earnings per share increased to $0.63 from $0.60 in the prior year.

In mid-August, we've completed the previously announced sale of our healthcare business, which is aligned with our primary focus to serve financial institutions and operate in markets where we have meaningful scale. Mike will provide additional details regarding this transaction later on the call.

To continue with Slide 10, I will highlight a few additional accomplishments. Long-standing client relationships that grow over time serve as the foundation of our business. Earlier today, we announced the completion of a new and expanded 5-year agreement with BMO Harris. FIS and BMO Harris have maintained an excellent relationship for many years, and we are pleased to continue our strategic partnership. We will provide more detail on the new agreement later on the call.

In addition, last week, Gary and I met with the most senior executives from Bank of Montreal. The discussion was positive, and we are very optimistic that we will have opportunities to further grow our relationship with Bank of Montreal.

We continue to invest for growth with a strong focus on innovation, including supporting American Express on its new Bluebird initiative. We are also focused on increasing our footprint in high-potential markets, including India where we are significantly expanding our existing ATM operations.

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