Press Release Details

JACKSONVILLE, Fla., Oct 26, 2010 (BUSINESS WIRE) -- FIS^(TM) (NYSE:FIS), one of the world's largest global providers dedicated to banking and payments technologies, today reported financial results for the quarter ended September 30, 2010.

GAAP revenue in the third quarter of 2010 was $1.37 billion, compared to $828.7 million in the third quarter of 2009. GAAP net earnings from continuing operations attributable to common stockholders totaled $134.3 million, or $0.40 per diluted share, compared to $66.6 million, or $0.34 per diluted share, in the prior year quarter.

Adjusted revenue in the third quarter of 2010 increased 3.3% to $1.29 billion compared to pro forma revenue of $1.25 billion in the third quarter of 2009. Adjusted EBITDA increased 14.7% to $426.6 million, compared to pro forma adjusted EBITDA of $371.9 million in the 2009 quarter. The adjusted EBITDA margin expanded 320 basis points to 33.1%. Adjusted net earnings from continuing operations totaled $176.7 million or $0.52 per diluted share compared to adjusted net earnings from continuing operations of $89.2 million, or $0.46 per share, in the third quarter of 2009. Adjusted free cash flow increased to $220.4 million compared to adjusted free cash flow of $132.8 million in the prior year quarter. Definitions of non-GAAP financial measures and reconciliations of non-GAAP measures to related GAAP measures are provided in subsequent sections of the press release narrative and supplemental schedules.

"We are very encouraged by the positive momentum in top-line growth. Our discussions with clients continue to trend towards solutions that support their growth initiatives and expansion strategies," stated Frank Martire, president and chief executive officer of FIS. Martire continued, "On October 1, we celebrated the one-year anniversary of the combination of FIS and Metavante. We have made significant progress towards completing the integration, while remaining focused on serving our clients and executing our business plan."

Third Quarter Highlights and Recent Developments

A summary of FIS' recent key business developments and strategic initiatives include:

• The migration of Banco Bradesco's 14 million bankcard portfolio to the FIS proprietary Base2000 card processing platform, which was completed on October 2
• The signing of a memorandum of understanding ("MOU") with Banco Bradesco to continue the joint venture in Brazil
• A definitive agreement to acquire Capco, a global business and technology consultancy dedicated solely to the financial services industry
• The commencement of a process to pursue strategic alternatives for FIS' item processing and remittance services subsidiary in Brazil, Fidelity National Participacoes Ltda. (formerly known as Proservvi Empreendimentos e Servicos Ltda.)
• Completion of a $2.5 billion recapitalization including the repurchase of 86.2 million shares at $29 per share

Acquisitions and Discontinued Operations

On October 1, 2009, FIS completed the acquisition of Metavante Technologies, Inc. The transaction was treated as a purchase and the results of Metavante are included in the consolidated results of FIS beginning October 1, 2009. For comparative purposes, in accordance with management's desire to improve the understanding of the company's operating performance, the supplemental information provided below assumes the merger was completed on January 1, 2009 and combines Metavante's results with FIS's historical results on a pro forma basis.

During the third quarter of 2010, FIS determined that it will pursue strategic alternatives for its item processing and remittance services subsidiary in Brazil, Fidelity National Participacoes Ltda., and intensify its focus on expanding its card processing operation in the region. The results of Fidelity National Participacoes Ltda. are reported as discontinued operations for all periods presented, along with the previously disclosed ClearPar business divestiture (revenues and expenses from discontinued operations are collapsed and classified as a separate line item on the income statement).

Segment Information

The following segment information is presented on an adjusted pro forma basis, which management believes provides meaningful comparisons between the periods presented. Reconciliations of non-GAAP measures to related GAAP measures are provided in the attached schedules and in the Investor Relations section of the FIS Web site, http://www.fisglobal.com.

• Financial Solutions revenue increased 10.5% to $485.5 million compared to $439.3 million in the 2009 quarter, driven by growth in professional services, software license sales and account processing revenue. Financial Solutions EBITDA increased 16.9% to $218.8 million, while the margin improved 250 basis points to 45.1% compared to 42.6% in the prior year quarter.
• Payment Solutions revenue of $600.6 million declined 1.9% compared to $612.2 million in the 2009 quarter as growth in electronic payment solutions was offset by lower item processing and retail check activity. Payment Solutions EBITDA increased 2.3% to $230.9 million, and the margin increased 150 basis points to 38.4% compared to 36.9% in the prior year.
• International Solutions revenue increased 2.3% to $199.4 million in U.S. dollars compared to $194.9 million in the 2009 quarter. The growth was driven by increased payment volumes in Brazil and Asia Pacific. Software and professional services revenue was comparable to prior year. International EBITDA decreased 4.1% to $46.5 million. The reported EBITDA margin was 23.3%, compared to 24.9% in the prior year quarter.
• Corporate overhead, which included a $10 million pre-tax benefit related to the favorable resolution of a legal matter, totaled $69.6 million, compared to $89.5 million in the prior year quarter. Interest expense, net of interest income, was $60.9 million compared to $31.8 million in the 2009 quarter. The increase in interest expense was due to the recapitalization completed in the third quarter of 2010.

Balance Sheet

Cash and cash equivalents totaled $389.4 million as of September 30, 2010. FIS began the quarter with approximately $3.0 billion in debt and incurred an additional $2.5 billion related to the leveraged recapitalization. The company subsequently repaid approximately $400 million resulting in debt outstanding of approximately $5.1 billion as of September 30. Capital expenditures in the third quarter of 2010 totaled $93.1 million, compared to $90.7 million in pro forma capital expenditures in the prior year.

2010 Outlook

FIS anticipates 2010 adjusted revenue to be at the high end of its guidance for 1% to 3% growth in constant currency. The company anticipates adjusted earnings per share from continuing operations of $1.95 to $1.99 in 2010, which is consistent with previous guidance of $1.91 to $2.01 per share, and expects to generate adjusted free cash flow in excess of $700 million. FIS is projecting average diluted shares of 353 million for the full year, and 307 million in the fourth quarter.

"We are very pleased with the solid third quarter results and our financial performance through the first nine months of the year. We remain focused on our client relationships, growing the business and further extending our market leadership," Martire added.

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. 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, the company has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. These non-GAAP measures include adjusted revenue, adjusted earnings before interest, taxes and depreciation and amortization (EBITDA), adjusted net earnings, and adjusted free cash flow. Adjusted revenue excludes a settlement related to the card processing joint venture in Brazil and the impact of deferred revenue purchase accounting. Adjusted EBITDA excludes the impact of merger and acquisition and integration expenses, accelerated stock compensation charges associated with merger and acquisition activity, costs associated with the 2010 recapitalization plan, settlement revenue and an impairment charge related to the card processing joint venture in Brazil; deferred revenue purchase accounting and certain other costs. Adjusted net earnings exclude the after-tax impact of merger and acquisition and integration expenses, accelerated stock compensation charges associated with merger and acquisition activity, costs associated with the 2010 recapitalization plan, an impairment charge and settlement related to the card processing joint venture in Brazil, acquisition related amortization, deferred revenue purchase accounting and certain other costs. Adjusted free cash flow is GAAP operating cash flow less capital expenditures, acquisition related cash items and cash items associated with the 2010 recapitalization plan. 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 net earnings. 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 are provided in the attached schedules and in the Investor Relations section of the FIS Web site, http://www.fisglobal.com.

Conference Call and Webcast

FIS will host a call with investors and analysts to discuss third quarter 2010 results on Tuesday, October 26, 2010 beginning at 8:30 a.m. Eastern daylight time. To register for the live event and to access a supplemental slide presentation, go to the Investor Relations section at http://www.fisglobal.com and click on "News and Events." A webcast replay will be available on FIS' Investor Relations website, and a telephone replay will be available through November 9, 2010, by dialing 800-475-6701 (USA) or 320-365-3844 (International). The access code will be 173869. To access a PDF version of this release and accompanying financial tables, go to http://www.investor.fisglobal.com.

About FIS

FIS (NYSE: FIS) is one of the world's largest global providers dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 100 countries. Headquartered in Jacksonville, Fla., FIS employs more than 30,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions. FIS is a member of Standard & Poor's 500^(R) Index and consistently holds a leading ranking in the annual FinTech 100 list. For more information about FIS, visit http://www.fisglobal.com.

Forward-Looking Statements

This news release and today's conference call contain "forward-looking statements" within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about 2010 adjusted revenue, earnings per share, margin expansion and cash flow, as well as other statements about our expectations, hopes, 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: changes and conditions in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes and conditions in either or both the United States and international lending, capital and financial markets; the effect of legislative initiatives or proposals, statutory changes, governmental or other applicable regulations and/or changes in industry requirements, including privacy regulations; the effects of our substantial leverage which may limit the funds available to make acquisitions and invest in our business; 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 core processing, card issuer, and transaction processing services; failures to adapt our services and products to changes in technology or in the marketplace; internal or external security breaches of our systems, including those relating to the theft of personal information and computer viruses affecting our software; the failure to achieve some or all of the benefits that we expect from the Metavante Acquisition (as defined below), including the possibility that the Metavante Acquisition may not be accretive to our earnings due to undisclosed liabilities, management or integration issues, loss of customers, the inability to achieve targeted cost savings, or other factors; our potential inability to find suitable acquisition candidates or finance such acquisitions, which depends upon the availability of adequate cash reserves from operations or of acceptable financing terms and the variability of our stock price, or difficulties in integrating past and future acquired technology or business' operations, services, clients and personnel; competitive pressures on product pricing and services including the ability to attract new, or retain existing, customers; an operational or natural disaster at one of our major operations centers; and Other risks detailed in "Risk Factors" and other sections of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and other filings with the SEC. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition, results of operations and prospects. Accordingly, readers should not place undue reliance on these forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Except as required by applicable law or regulation, we do not undertake (and expressly disclaim) any obligation and do not intend to publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise.

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