FIS Reports Second Quarter 2019 Results for FIS and Worldpay, and Issues Combined Company Guidance for 2019

  • FIS GAAP revenue flat; organic revenue increased 5 percent
  • FIS Diluted EPS of $0.47; Adjusted EPS of $1.78
  • Worldpay GAAP revenue increased 7 percent; constant currency revenue increased 8 percent
  • Worldpay Diluted EPS of $0.46; Adjusted EPS of $1.24
  • FIS issues consolidated guidance for third and fourth quarter 2019, including the impact of the Worldpay acquisition, which closed on July 31, 2019

JACKSONVILLE, Fla.–(BUSINESS WIRE)–FIS™ (NYSE:FIS), a global leader in financial services technology, today reported its second quarter 2019 results and also reported second quarter 2019 results for Worldpay, Inc. (Worldpay) following the July 31, 2019 acquisition of Worldpay by FIS.

FIS Second Quarter 2019 Results

We are very pleased with our strong quarter, which was underpinned by robust sales and continued operational execution,” said Gary Norcross, FIS chairman, president and chief executive officer. “Our recent closing of the Worldpay acquisition is a demonstrable proof point in our overall growth strategy. We are confident that our focus on innovating with purpose to advance the way the world pays, banks and invests will continue to deliver long-term value to our clients and shareholders.”

On a GAAP basis, revenue was flat at $2,112 million from $2,106 million in the prior year quarter driven by solid growth in the continuing operations, partially offset by the impact of divestitures in 2018. Net earnings attributable to common stockholders was $154 million for the quarter, or $0.47 per diluted share, compared to $0.64 per diluted share in the prior year quarter, a decrease of 27 percent.

On an adjusted basis, organic revenue increased 5 percent, excluding the impact of divestitures and foreign currency fluctuations. Adjusted EBITDA margin expanded 170 basis points to 37.6 percent. Adjusted net earnings was $582 million, or $1.78 per diluted share, compared to $1.63 per diluted share in the prior year quarter, an increase of 9 percent.

($ millions, except per share data, unaudited)

Three Months Ended June 30,

 

2019

 

2018

 

%

Change

Organic

Growth

 

 

 

 

 

 

 

Revenue

$

2,112

 

 

$

2,106

 

 

5%

Integrated Financial Solutions

1,179

 

 

1,124

 

 

5%

6%

Global Financial Solutions

865

 

 

899

 

 

(4)%

4%

Corporate and Other

68

 

 

83

 

 

(18)%

3%

 

 

 

 

 

 

 

Adjusted EBITDA

$

794

 

 

$

757

 

 

5%

 

Adjusted EBITDA Margin

37.6

%

 

35.9

%

 

170 bps

 

 

 

 

 

 

 

 

Net earnings attributable to FIS common stockholders (GAAP)

$

154

 

 

$

212

 

 

(27)%

 

Diluted EPS (GAAP)

$

0.47

 

 

$

0.64

 

 

(27)%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings

$

582

 

 

$

544

 

 

7%

 

Adjusted EPS

$

1.78

 

 

$

1.63

 

 

9%

 

FIS Segment Information

  • Integrated Financial Solutions (IFS):

    Second quarter GAAP revenue increased 5 percent versus prior year reflecting broad-based growth, partially offset by the impact of divestiture activity at year-end 2018. Organic revenue increased 6 percent, illustrating the ongoing strength of the continuing operations in the segment. Adjusted EBITDA margin was 45.3 percent, representing expansion of 150 basis points from the prior year quarter.

  • Global Financial Solutions (GFS):

    Second quarter GAAP revenue decreased 4 percent versus prior year reflecting the negative impact of the Brazilian JV unwind offsetting growth in the continuing operations. Organic revenue increased 4 percent, enhanced by a return to growth in the Institutional & Wholesale business. Adjusted EBITDA margin was 36.1 percent, representing expansion of 120 basis points from the prior year quarter.

  • Corporate and Other:

    Second quarter GAAP revenue decreased 18 percent to $68 million compared to $83 million in the prior year quarter, driven primarily by divestiture of the Certegy Check Services business in Q3 2018. Organic revenue increased 3 percent. Adjusted EBITDA loss was $53 million and is inclusive of $66 million of corporate expenses.

FIS Balance Sheet and Cash Flows

As of June 30, 2019, cash and cash equivalents totaled $9,756 million and debt outstanding totaled $18,242 million with an effective weighted average interest rate of 2.5 percent. The increase in cash and cash equivalents and debt was primarily driven by the successful US and European based debt financing in conjunction with the Worldpay transaction. Net cash provided by operating activities was $526 million and free cash flow was $413 million for the quarter. FIS paid dividends of $113 million in the quarter.

Worldpay Second Quarter 2019 Results

I am excited about the strengths and new opportunities available through the combination of Worldpay and FIS,” said Charles Drucker, vice chairman of FIS. “Worldpay continues to deliver strong new sales due to our colleagues’ focus on execution and dedication to client service. Now with FIS, the two companies are uniquely positioned to capitalize on the most significant areas of secular growth.”

On a GAAP basis, revenue increased 7 percent to $1,073 million from $1,007 million in the prior year quarter. Net income (loss) attributable to Worldpay was $143 million for the quarter, or $0.46 per diluted share, compared to $(0.01) per diluted share in the prior year quarter.

On an adjusted basis, constant currency revenue increased 8 percent. Excluding cryptocurrency and foreign currency headwinds, Worldpay revenue increased by 9 percent. Adjusted EBITDA increased to $561 million from $493 million in the prior year quarter, while adjusted EBITDA margin expanded by 330 basis points to 52.3 percent. Adjusted net income was $387 million, or $1.24 per diluted share, compared to $1.04 per diluted share in the prior year quarter, an increase of 19 percent.

($ millions, except per share data, unaudited)

Three Months Ended June 30,

 

2019

 

2018

 

%

Change

CC %

Change

 

 

 

 

 

 

 

Revenue

$

1,073

 

 

$

1,007

 

 

7%

8%

Technology Solutions

466

 

 

402

 

 

16%

18%

Merchant Solutions

520

 

 

520

 

 

2%

Issuer Solutions

87

 

 

85

 

 

2%

2%

 

 

 

 

 

 

 

Adjusted EBITDA

$

561

 

 

$

493

 

 

14%

 

Adjusted EBITDA Margin

52.3

%

 

49.0

%

 

330 bps

 

 

 

 

 

 

 

 

Net income (loss) attributable to Worldpay (GAAP)

$

143

 

 

$

(3)

 

 

NM

 

Net income (loss) per diluted share attributable to Worldpay (GAAP)

$

0.46

 

 

$

(0.01)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income

$

387

 

 

$

327

 

 

18%

 

Adjusted net income per share

$

1.24

 

 

$

1.04

 

 

19%

 

Worldpay Segment Information

  • Technology Solutions:

    Second quarter GAAP revenue increased 16 percent to $466 million from $402 million in the prior year quarter. Constant currency revenue increased 18 percent. Excluding cryptocurrency and foreign currency headwinds, Technology Solutions revenue increased by 19 percent. Segment profit increased 13 percent to $342 million from $303 million in the prior year quarter.

  • Merchant Solutions:

    Second quarter GAAP revenue was flat at $520 million, compared to the prior year quarter. Constant currency revenue increased 2 percent. Segment profit increased 2 percent to $347 million from $341 million in the prior year quarter.

  • Issuer Solutions:

    Second quarter GAAP revenue increased 2 percent to $87 million from $85 million in the prior year quarter. Constant currency revenue increased 2 percent. Segment profit increased 2% to $80 million from $78 million in the prior year quarter.

Adjusted Combined Second Quarter 2019 Results

Adjusted combined results are representative of FIS and Worldpay as a combined entity in the second quarter of 2019.

On a go forward basis, the Company will operate and report three operating segments. These segments are based on the markets and clients served, aligned with the solutions they provide. The new operating segments will be: Merchant Solutions, Banking Solutions and Capital Market Solutions.

($ millions, unaudited)

Three Months Ended June 30,

 

2019

 

2018

 

%

Change

Organic

Growth

 

 

 

 

 

 

 

Adjusted combined revenue

$

3,185

 

 

$

3,114

 

 

2%

6%

Merchant Solutions

1,098

 

 

1,017

 

 

8%

10%

Banking Solutions

1,493

 

 

1,495

 

 

5%

Capital Market Solutions

594

 

 

584

 

 

2%

3%

Corporate and Other

 

 

18

 

 

NM

NM

 

 

 

 

 

 

 

Adjusted combined EBITDA

$

1,330

 

 

$

1,211

 

 

10%

 

Adjusted combined EBITDA margin

41.8

%

 

38.9

%

 

290 bps

 

Adjusted Net Earnings and Adjusted Earnings Per Share Update

Following discussions with the Staff of the Securities and Exchange Commission, FIS will revert to the Prior Method of reporting Adjusted Net Earnings and Adjusted Earnings Per Share in the third quarter of 2019. These non-GAAP measures will exclude the cost of amortization of purchase accounting intangibles as opposed to excluding all depreciation and amortization.

Third and fourth quarter 2019 Adjusted EPS guidance is calculated based on the Prior Method definition of Adjusted EPS. For transition purposes in this release, we have also provided what we previously named the New Method for this release only.

Third and Fourth Quarter 2019 GAAP Guidance

($ millions, except share data)

Q3 2019

Q4 2019

Revenue

$2,775 – $2,800

$3,285 – $3,330

Net earnings

$75 – $300

$300 – $510

Diluted EPS

$0.14 – $0.57

$0.48 – $0.82

 

Third and Fourth Quarter 2019 Non-GAAP Guidance

($ millions, except share data)

Q3 2019

Q4 2019

Revenue (GAAP)

$2,775 – $2,800

$3,285 – $3,330

Adjusted EBITDA

$1,145 – $1,160

$1,470 – $1,500

Adjusted EPS (Prior Method): Excludes amortization of purchase accounting intangibles only

$1.33 – $1.37

$1.47 – $1.53

Adjusted EPS (New Method): Excludes all depreciation and amortization

$1.69 – $1.72

$1.80 – $1.84

Webcast

FIS will sponsor a live webcast of its earnings conference call with the investment community beginning at 8:30 a.m. (EDT) Tues., August 6, 2019. To access the webcast, go to the Investor Relations section of FIS’ homepage, www.fisglobal.com. A replay will be available after the conclusion of the live webcast.

About FIS

FIS is a global leader in technology, solutions and services for merchants, banks and capital markets that helps businesses and communities thrive by advancing commerce and the financial world. For over 50 years, FIS has continued to drive growth for clients around the world by creating tomorrow’s technology, solutions and services to modernize today’s businesses and customer experiences. By connecting merchants, banks and capital markets, we use our scale, apply our deep expertise and data-driven insights, innovate with purpose to solve for our clients’ future, and deliver experiences that are more simple, seamless and secure to advance the way the world pays, banks and invests.

Headquartered in Jacksonville, Florida, FIS employs about 55,000 people worldwide dedicated to helping our clients solve for the future. FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.

To learn more, visit www.fisglobal.com. Follow FIS on Facebook, LinkedIn and Twitter (@FISGlobal).

FIS Use of Non-GAAP Financial Information

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, we have provided certain non-GAAP financial measures.

These non-GAAP measures include adjusted revenue, constant currency revenue, organic revenue increase/decrease, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings (including per share amounts), adjusted cash flows from operations and free cash flow. These non-GAAP measures may be used in this release and/or in the attached supplemental financial information.

We believe these non-GAAP measures help investors better understand the underlying fundamentals of our business. As further described below, the non-GAAP revenue and earnings measures presented eliminate items management believes are not indicative of FIS’ operating performance. The constant currency and organic revenue increase/decrease measures adjust for the effects of exchange rate fluctuations, while organic revenue increase/decrease also adjusts for acquisitions and divestitures, giving investors further insight into our performance. Finally, the non-GAAP cash flow measures provide further information about the ability of our business to generate cash. For these reasons, management also uses these non-GAAP measures in its assessment and management of FIS’ performance.

Adjusted revenue consists of revenue, increased to reverse the purchase accounting deferred revenue adjustment made upon the acquisition of SunGard. The deferred revenue adjustment represents revenue that would have been recognized in the normal course of business by SunGard under GAAP but was not recognized due to GAAP purchase accounting adjustments. The deferred revenue adjustment in purchase accounting was made entirely in the Corporate and Other segment; reported GAAP results for the IFS and GFS segments are not affected by this adjustment and, therefore, no adjusted revenue is presented for these segments.

Constant currency revenue represents (i) adjusted revenue, as defined above, in respect of the consolidated results and the Corporate and Other segment and (ii) reported revenue in respect of the IFS and GFS segments, in each case excluding the impact of fluctuations in foreign currency exchange rates in the current period.

Organic revenue increase/decrease is constant currency revenue, as defined above, for the current period compared to an adjusted revenue base for the prior period, which is further adjusted to add pre-acquisition revenue of acquired businesses for a portion of the prior year matching the portion of the current year for which the business was owned, and subtract pre-divestiture revenue for divested businesses for the portion of the prior year matching the portion of the current year for which the business was not owned, for any acquisitions or divestitures by FIS.

EBITDA reflects earnings from continuing operations before interest, taxes, depreciation and amortization.

Adjusted EBITDA is EBITDA, as defined above, excluding certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, adjusted EBITDA, as it relates to our segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission’s Regulation G and Item 10(e) of Regulation S-K.

Adjusted EBITDA margin reflects adjusted EBITDA divided by adjusted revenue.

Adjusted net earnings (New Method) excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of depreciation and amortization and equity method investment earnings (loss), both of which are recurring.

Adjusted net earnings (Prior Method) excludes the impact of certain costs and other transactions which management deems non-operational in nature, the removal of which improves comparability of operating results across reporting periods. It also excludes the impact of acquisition-related purchase accounting amortization and equity method investment earnings (loss), both of which are recurring.

Adjusted net earnings per diluted share, or Adjusted EPS (New Method), reflects adjusted net earnings from continuing operations (New Method) divided by weighted average diluted shares outstanding.

Adjusted net earnings per diluted share, or Adjusted EPS (Prior Method), reflects adjusted net earnings from continuing operations (Prior Method) divided by weighted average diluted shares outstanding.

Adjusted cash flows from operations reflect net cash provided by operating activities adjusted for the net change in settlement assets and obligations and exclude certain transactions that are closely associated with non-operating activities or are otherwise non-operational in nature and not indicative of future operating cash flows.

Free cash flow reflects adjusted cash flows from operations less capital expenditures. Free cash flow does not represent our residual cash flow available for discretionary expenditures, since we have mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure.

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 measures. Further, FIS’ non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures, including footnotes describing the specific adjustments, are provided in the attached schedules and in the Investor Relations section of the FIS website, www.fisglobal.com.

Worldpay Use of Non-GAAP Financial Information

This earnings release presents non-GAAP and pro forma financial information including adjusted EBITDA, adjusted net income, and adjusted net income per share. These have been important financial performance measures for Worldpay, but are not financial measures as defined by GAAP. The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Worldpay has used these non-GAAP and adjusted financial performance measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Worldpay believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Reconciliations of these measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

Forward-Looking Statements

This earnings release and today’s webcast contain “forward-looking statements” within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about anticipated financial outcomes, including any earnings guidance of the Company, business and market conditions, outlook, foreign currency exchange rates, expected dividends and share repurchases, the Company’s sales pipeline and anticipated profitability and growth, as well as other statements about our expectations, beliefs, intentions, or strategies regarding the future, are forward-looking statements. These statements relate to future events and our future results, and involve a number of risks and uncertainties. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Any statements that refer to beliefs, expectations, projections or other characterizations of future events or circumstances and other statements that are not historical facts are forward-looking statements.

Actual results, performance or achievement could differ materially from those contained in these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to include, without limitation:

  • the risk that the Worldpay transaction will not provide the expected benefits, or that we will not be able to achieve the cost or revenue synergies anticipated;
  • the risk that the integration of FIS and Worldpay will be more difficult, time-consuming or expensive than anticipated;
  • the risk of customer loss or other business disruption in connection with the Worldpay transaction, or of the loss of key employees;
  • the fact that unforeseen liabilities of FIS or Worldpay may exist;
  • the risk that acquired businesses will not be integrated successfully, or that the integration will be more costly or more time-consuming and complex than anticipated;
  • the risk that cost savings and other synergies anticipated to be realized from acquisitions may not be fully realized or may take longer to realize than expected;
  • the risks of doing business internationally;
  • changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, changes in either or both the United States and international lending, capital and financial markets, and currency fluctuations;
  • the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy and cybersecurity laws and regulations;
  • the risks of reduction in revenue from the elimination of existing and potential customers due to consolidation in, or new laws or regulations affecting, the banking, retail and financial services industries or due to financial failures or other setbacks suffered by firms in those industries;
  • changes in the growth rates of the markets for our solutions;
  • failures to adapt our solutions to changes in technology or in the marketplace;
  • internal or external security breaches of our systems, including those relating to unauthorized access, theft, corruption or loss of personal information and computer viruses and other malware affecting our software or platforms, and the reactions of customers, card associations, government regulators and others to any such events;
  • the risk that implementation of software (including software updates) for customers or at customer locations or employee error in monitoring our software and platforms may result in the corruption or loss of data or customer information, interruption of business operations, outages, exposure to liability claims or loss of customers;
  • the reaction of current and potential customers to communications from us or regulators regarding information security, risk management, internal audit or other matters;
  • competitive pressures on pricing related to the decreasing number of community banks in the U.S., the development of new disruptive technologies competing with one or more of our solutions, increasing presence of international competitors in the U.S. market and the entry into the market by global banks and global companies with respect to certain competitive solutions, each of which may have the impact of unbundling individual solutions from a comprehensive suite of solutions we provide to many of our customers;
  • the failure to innovate in order to keep up with new emerging technologies, which could impact our solutions and our ability to attract new, or retain existing, customers;
  • the failure to meet financial goals to grow the business in Brazil after the unwinding of the Brazilian Venture;
  • the risks of reduction in revenue from the loss of existing and/or potential customers in Brazil after the unwinding of the Brazilian Venture;
  • an operational or natural disaster at one of our major operations centers;
  • failure to comply with applicable requirements of payment networks or card schemes or changes in those requirements;
  • fraud by merchants or bad actors; and
  • other risks detailed in the “Risk Factors” and other sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in our other filings with the Securities and Exchange Commission.

Contacts

Ellyn Raftery, 904.438.6083

Chief Marketing Officer

FIS Global Marketing and Corporate Communications

[email protected]

Nathan Rozof, CFA, 866.254.4811

Executive Vice President

FIS Investor Relations

[email protected]

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