FIS Road Show Presentation June 2008

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FIS Road Show Presentation June 2008

  1. 1. Fidelity National Information Services Equity Roadshow Investor Presentation June 2008
  2. 2. Forward-Looking Statements This presentation contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward- looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: risks associated with the proposed spin-off of the Lender Processing Services (LPS) segment by FIS, including the ability of FIS to contribute certain LPS assets and liabilities to the entity to be spun off, the ability of LPS to obtain debt on acceptable terms and exchange that debt with certain holders of the FIS debt, obtaining government approvals, obtaining FIS Board of Directors approval, market conditions for the spin-off, and the risk that the spin-off will not be beneficial once accomplished, including as a result of unexpected dis-synergies resulting from the separation or unfavorable reaction from customers, rating agencies or other constituencies; changes in general economic, business and political conditions, including changes in the financial markets; the effects of our substantial leverage (both at FIS prior to the spin-off and at the separate companies after the spin-off), 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 the banking, retail and financial services industries; failures to adapt our services to changes in technology or in the marketplace; adverse changes in the level of real estate activity, which would adversely affect certain of our businesses; our potential inability to find suitable acquisition candidates or difficulties in integrating acquisitions; significant competition that our operating subsidiaries face; the possibility that our acquisition of EFD/eFunds 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; and other risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and other filings with the Securities and Exchange Commission. 22
  3. 3. Overview 3
  4. 4. Spin-Off Transaction Overview Description Rationale • Unique and distinct businesses with different • Announced plan to spin-off Lender Processing customers, markets and management Services (“LPS”) on 10/25/07 • FIS will contribute assets of its LPS business into a newly formed subsidiary (“SpinCo”) in • Limited ability to leverage operations, technology exchange for 100% of SpinCo common stock and product development and ~$1.6bn of SpinCo debt • Targeting effective date of July 1st • Eliminates competing investment and resource – Pro Forma FIS debt of $2.5bn needs FIS • Pure play advantages and reduced complexity Shareholders • Improved ability for investors to optimize holdings based on investment criteria FIS SpinCo FIS (TPS) LPS Each Business Well-Positioned to Succeed 44
  5. 5. Strong Management Team Lee A. Kennedy President & CEO Gary Norcross Frank Sanchez George Scanlon Ron Cook Mike Oates Chief Operating Officer Strategic Development Chief Financial Officer General Counsel Human Resources Services Continuity of Management with 165 Years of Combined Industry Experience 55
  6. 6. FIS Overview 2007 Revenue Breakdown • 40 years of global market leadership in financial technology services • Leading market positions Payment Core Processing – Payment processing services Processing 37% Services Services – Core banking services 51% – Risk management services • Significant scale – $2.9 billion in annual revenues 11% – $724 million in Adjusted EBITDA¹ – 13,000+ financial institutions clients in over 80 Other countries – Over 23,000 employees 2007 Revenue: $2.9bn • Broad geographic reach • S&P 500 Stock Index ¹ Pro Forma for carve out and allocation of corporate expense Focused Payments and Core Processing Company 66
  7. 7. Priorities Improve Increase Strengthen Operating Efficiency Organic Growth Competitive Position • Integrate sales organizations • Execute eFunds integration • Leverage eFunds product capability and scale • Expand existing customer – $35M in-year savings relationships – ATM/Debit/Prepaid • Eliminate redundant costs • Extend product capabilities – Risk – $30M in-year savings across market segments and • Drive product innovation customer base • Optimize technology across product lines and – Channel solutions geographies – Core transformation • Reduce capital spending solutions 77
  8. 8. Investment Highlights Competitive Positioning Operating Model • Stable and highly recurring • Attractive global payment revenue model services and bank technology markets • Diversified customer base and market segments • Most comprehensive range of industry specific integrated • Strong organic growth through products and services international expansion and cross selling to established • Broad geographical range client-base • Experienced management team • Significant opportunity for margin expansion through scale efficiencies and cost synergies 88
  9. 9. Business Overview 9
  10. 10. Strong Industry Fundamentals Payment Transaction Growth US Core Banking IT Spending ($mm) (’06-’12 CAGR) 20% ~ 4% 10 CAGR 2005—20 17% 14% Global 11% 11% 8% 8% Source: Financial Insights and IDC Company 2006 Source: The Nilson Report Issue #885 (August 2007) Majority of Spending Concentrated with Global Focus Increases Growth Opportunity Large Tier Institutions 10 10
  11. 11. Industry Transformation Past Present Future Competitive Market Mono-line Companies Single Product Capability Imperative Drivers • Rapidly changing consumer • Core Processing • Integrated Data preferences • Card Services • Integrated Processing • Bank economics • Item Processing • Integrated Delivery • Accelerating trend towards • ATM Services • Scale outsourcing • E-banking • Globalization • Bill Payment Accelerated Market Evolution 11 11
  12. 12. Focused Acquisition Strategy Payments/Risk 2003 2003 2004 Core Deposits/Loan 2004 Ancillary FIS 2004 2005 2006 2007 2007 Channels & Integration 2007 Targeted, Disciplined and Successfully Integrated Acquisitions 12 12
  13. 13. Most Integrated and Comprehensive Products and Services Core Payments Services Core Decision Credit Card Debit Card Prepaid Card Item Internet IT/BPO Technology Processing Solutions Processing Processing Processing Processing Banking/ Services Bill Pay FIS FDC FISV JKHY Temenos TSYS MV Leadership Presence Limited/Not Served 13 13
  14. 14. Significant Processing Scale • Domestic: – 34 percent of all consumer debt – 25 percent of all demand accounts – 9 million+ credit card accounts – 3.5 billion+ checks – 8 million+ loyalty accounts – 43 million+ debit cards and 18,000 ATMs • International: – 5 of the top 5 world banks – 47 of the top 100 world banks – More than 35 million cards Across Six Domestic and Four International Technology Centers 14 14
  15. 15. Diverse Customer Base Markets Served Asset Size of Largest Core Bank Customers Markets Served                         FIS has the Greatest Proven Scalability 15 15
  16. 16. Strong Global Relationships 16 16
  17. 17. Branded Financial Services Institutions 17 17
  18. 18. Strong International Market Position 2007 International Revenue by Region • Unique inventory of core banking assets Asia Pacific – Core bank processing & Other 18% – Card issuer/acquiring services Latin – Risk management America 35% EMEA – Business process outsourcing 47% • FIS scale and experience • Active in established and emerging Total Revenue: $628mm markets Revenue growth • Banking and card cross-sell opportunities • Serving customers in more than 80 $750 R: 73% 07 CAG 2004-20 countries $500 $250 $0 2004 2005 2006 2007 Significant Competitive Presence Provides Comparative Advantage 18 18
  19. 19. Organization Aligned to Capture Cross-Sell Opportunity New Operating Model • Operating objectives – Accountability and ownership – Product domain focus – Entrepreneurialism within the business lines – Increase sales of product and technology assets across multiple market segments Customer – Eliminate redundant expenses across divisions – Decrease capital expenditures by eliminating duplication across market segments Product Development • Announced November 2007 and fully implemented in February 2008 Functionally Integrated Organization 19 19
  20. 20. Strategic Growth Drivers Leverage Existing Customer Relationships Expand Addressable Market Integrated Products and Delivery Strategic Product Development Disciplined Global Expansion 20 20
  21. 21. Financial Overview 21
  22. 22. Strong Growth Trajectory Revenue EBITDA CAGR = 12.5%* CAGR = 9.8%* CAGR $750 $3,000 $700 29.8% $2,500 $650 $2,000 $600 3.0% $1,500 $550 $1,000 $500 7.2% $500 $450 $- $400 2005 2006 2007 2005 2006 2007 Integrated Financial Solutions Enterprise Solutions International *Excludes 9/12/07 acquisition of eFunds, discontinued operations, carve-out and corporate expense allocation 22 22
  23. 23. Diverse and Recurring Revenue 2007 Revenue by Type 2007 Revenue by Vertical Total Revenue: $2.9bn Community Institutions $1.2bn 44% Mid- and Top-Tier U.S. Institutions 86% Professional 24% $704mm Services $224mm Processing and 8% Maintenance - $2.5bn • Processing Services • Software Maintenance 6% Other 11% • Network/Interchange 21% $168mm Fees Retail Point-of-Sale International $306mm $628mm Other: Softw are 4% Equipment Sales 1% Termination Fees 1% Diverse Customer Base 86% Recurring Revenue 23 23
  24. 24. Margin Expansion Revenue and Margins Sources of Margin Expansion 8% –1 $3,500 16% • Increase international scale 29% $3,000 27% 25.5% • Improve sales productivity 24.6% $2,500 25% 23.6% $2,000 23% • Execute eFunds integration 21.4% $1,500 21% • Leverage infrastructure $1,000 19% $500 17% 2005 2006 2007 2008 (e) FIS Revenue FIS EBITDA Margin 24 24
  25. 25. Capital Expenditures $273 12% $275 $245 11% $221 10% $225 (In millions) 9% $175 8% 7% $125 6% $75 5% $25 4% 2006 2007 2008E IFS EBS FTS Int'l % of Revenue Reduced Capital Intensity in 2008 25 25
  26. 26. Free Cash Flow TPS Adjusted Estimated Estimated FIS Adjusted 2008 2007 2007 2008 Low High (1,2) Net Earnings $ 528.0 $ 196.0 $ 208.0 Add: D&A 379.6 425.0 425.0 Other, net (468.9) (56.0) (48.0) Cash flow from operations $ 438.7 565.0 585.0 (3) Capital expenditures (272.7) (250.0) (240.0) Net free cash flow $ 166.0 $ 315.0 $ 345.0 (1) Refer to page 36 for reconciliation of GAAP to non-GAAP free cash flow. (2) Excludes acquisition related integration costs and restructuring expense. (3) Includes PP&E, purchased software, capitalized software and approximately $25 million in 2008 for eFunds integration capital. 26 26
  27. 27. Cash Flow Priorities • Invest in organic growth initiatives • Maintain dividend • Reduce debt • Pursue targeted acquisitions • Share repurchase 27 27
  28. 28. Growth Objectives Short-Term Longer-Term 2008 2009 - 2011 Guidance Growth Objectives Organic Revenue 4% - 6% 6% - 9% (1) 16% - 18% 6% - 9% Total Revenue Adjusted EBITDA 21% - 23% 9% - 12% Adjusted Earnings Per Share $1.48 - $1.54 15% - 20% Capital Expenditures (% Revenue) ~ 7% 5% - 7% (1) Includes 9/12/2007 acquisition of eFunds. 28 28
  29. 29. Investment Highlights Competitive Positioning Operating Model • Stable and highly recurring • Attractive global payment revenue model services and bank technology markets • Diversified customer base and market segments • Most comprehensive range of industry specific integrated • Strong organic growth through products and services international expansion and cross selling to established • Broad geographical range client-base • Continuity of experienced • Significant opportunity for management team margin expansion through scale efficiencies and cost synergies 29 29
  30. 30. Supplemental Financial Information 30
  31. 31. Use of Non-GAAP Measures FIS reports several non -GAAP measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted net earnings. The adjusted results exclude the after -tax impact of merger and acquisition and integration expenses, ce rtain stock compensation charges, debt restructuring and other costs, gains (losses) on the sale of certain non - strategic assets and acquisition related amortization. Any non -GAAP measures should be considered in context with the GAAP financial presentat ion and should not be considered in isolation or as a substitute for GAAP net earnings. A reconciliation of these non -GAAP measures to related GAAP measures is incl uded in the FIS earnings press release dated April 28, 2008, for the quarter ended March 31 , 2008, and in the following supplemental schedules . 31 31 31
  32. 32. Adjustments to 2007 Results of Operations “TPS” and “LPS” represent the historical Transaction Processing Services and Lender Processing Services operating segments within FIS Non- Net Free Revenue EBIT DA EBIT Operating Pre-tax Earnings Cash Flow (1) Non-GAAP Adjustments: Eliminate TPS Non-GAAP Items & Adjust Working Capital $0.0 $4.6 $18.1 $1.0 $19.1 $12.1 $51.5 Eliminate LPS Non-GAAP Items & Adjust Working Capital - 6.8 7.9 - 7.9 5.0 5.0 Eliminate Corporate Non-GAAP Items & Adjust Working Capital - 2.8 2.8 (330.0) (327.3) (206.2) 145.9 Total Non-GAAP Adjustm ents – Historical FIS $0.0 $14.2 $28.8 ($329.0) ($300.3) ($189.2) $202.4 Carveout Adjustments: Transfer Managed Ops Contracts to TPS $45.6 $7.0 $6.5 $0.0 $6.5 $4.1 $0.0 Transfer Technology Depreciation to TPS - 30.6 - - - - - Transfer Technology Ops to TPS - (16.9) (16.9) - (16.9) (10.7) - Allocate Interest Expense to LPS - - - 91.0 91.0 55.8 55.8 Total Carveout Adjustm ents – New FIS $45.6 $20.7 ($10.4) $91.0 $80.6 $49.3 $55.8 (1) Adjustments to free cash flow primarily represent the payment of tax liabilities associated with the disposition of non-strategic investments, as well as the after-tax impact of non-recurring integration costs. Refer to page 36 of this presentation and Exhibit F of the first quarter 2008 earnings release for additional details. 32 32
  33. 33. 2007 Income Statement Reconciliation (1 of 2) Historical TPS LPS Corp FIS Revenue: Revenue, as reported $2,888.7 $1,736.2 $11.8 $4,636.7 Non-GAAP adj - - - - Carveout 45.6 (45.6) - - Corporate allocation 11.8 - (11.8) - Pro Forma 2,946.1 1,690.6 - 4,636.7 EBITDA: EBITDA, as reported 754.4 571.6 (89.8) 1,236.2 Non-GAAP adj 4.6 6.8 2.8 14.2 Carveout 20.7 (20.7) - - Corporate allocation (56.1) (31.0) 87.1 - Pro Forma 723.6 526.7 - 1,250.3 EBITDA Margin 24.6% 31.2% 27.0% EBIT: EBIT, as reported 415.6 441.9 (111.9) 745.6 Non-GAAP adj 18.1 7.9 2.8 28.8 Carveout (10.4) 10.4 - - Corporate allocation (73.1) (36.1) 109.2 - Pro Forma 350.3 424.1 - 774.4 EBIT Margin 11.9% 25.1% 16.7% 33 33
  34. 34. 2007 Income Statement Reconciliation (2 of 2) Historical TPS LPS Corp FIS Net Earnings: Net Earnings (1) $310.9 $250.3 - $561.2 Non-GAAP adj, net of tax (189.2) - - (189.2) Carveout adj, net of tax 49.3 (49.3) - - Pro Forma $171.0 $201.0 - $372.0 Adjusted Earnings: Adjusted Earnings (1) $391.0 $276.4 - $667.4 Non-GAAP adj, net of tax (189.2) - - (189.2) Carveout adj, net of tax 49.3 (49.3) - - Pro Forma $251.1 $227.1 - $478.2 Adjusted EPS – Diluted Adjusted EPS - Diluted (1) $2.01 $1.41 - $3.40 Non-GAAP adj (0.96) - - (0.96) Carveout 0.25 (0.25) - - Pro Forma $1.30 $1.16 - $2.44 Free Cash Flow: Free Cash Flow (1) ($92.2) $212.4 - $120.3 Non-GAAP adj, net of tax 202.4 - - 202.4 Carveout adj, net of tax 55.8 (55.8) - - Pro Forma $166.0 $156.6 - $322.6 (2) (1) • Earnings by operating segment have not been previously disclosed. These results reflect the allocation of the corporate segment to the TPS and LPS operating segments. • Reflects free cash flow for LPS as included in the Company's Form 10 for year ended December 31, 2007, (2) adjusted to include a pro forma allocation of interest expense. 34 34
  35. 35. 2007 EBITDA Margin Pro Forma FIS Revenue EBITDA EBITDA % 2007 TPS, excluding charges $ 2,888.7 $ 759.0 26.3% Carve out adjustments: Transfer of managed operations contract 45.6 7.0 -0.2% Transfer technology depreciation - 30.6 1.1% Transfer technology operations (16.9) -0.6% (1) Corporate allocation - leasing contracts 11.8 11.4 0.3% Corporate expense allocation - (67.5) -2.3% 2007 pro forma FIS, as adjusted $ 2,946.1 $ 723.6 24.6% (1) Leasing contracts sold 9/30/07 35 35
  36. 36. Free Cash Flow Reconciliation (in millions) 2007 Pro Forma, Historical FIS as adjusted 2007 as Less: Non- 2007 Non- Less: LPS New Reported GAAP adj GAAP Carveout FIS Net Earnings $ 561.2 $ 167.8 $ 729.0 $ (201.0) $ 528.0 (1) Add: D&A 496.8 (14.6) 482.2 (102.6) 379.6 (2) Other, net (594.5) 49.2 (545.3) 76.4 (468.9) (3) Cash flow from operations 463.6 202.4 665.9 (227.2) 438.7 Capital expenditures (343.3) - (343.3) 70.6 (272.7) Net free cash flow $ 120.3 $ 202.4 $ 322.6 $ (156.6) $ 166.0 Eliminate tax liabilities associated with disposition of non-strategic assets (Covansys stock, Property Insight) – (1) $145.6 million and after-tax impact of non-recurring integration costs – $7.8 million. Eliminate depreciation and amortization primarily associated with non-strategic assets. (2) Adjustments to working capital reflect elimination of settlement of various acquisition related liabilities. (3) 36 36
  37. 37. 2008 Outlook New FIS FIS 2007 Pro Forma, Estimated 2008 (in millions, except per share amounts) as adjusted Low High Revenue $ 2,946 16.0% – 18.0% (1) Adjusted EBITDA, excluding other costs 724 21.5% – 23.5% D&A 373 425 425 Interest expense and other, net 106 145 145 Minority interest expense (income) (3) 5 5 (2) (2) Acquisition related amortization, net of tax 80 89 89 Adjusted Net Earnings - continuing operations 242 287 299 Adjusted Net Earnings Per Share - continuing operations $ 1.23 $ 1.48 $ 1.54 Estim a te d 2008 Q1 Q2 Q3 Q4 2008 (1) Me rge r & inte gra tion costs, ne t of ta x $ 10 $ 2 $ 1 $ 1 $ 13 LPS spin-off costs, ne t of ta x 2 13 - - 15 Re structuring costs, ne t of ta x - 7 - - 7 $ 11 $ 22 $ 1 $ 1 $ 35 (2) Acquistion re la te d a m ortiza tion, ne t of ta x $ 23 $ 23 $ 22 $ 21 $ 89 37 37
  38. 38. 2008 Estimated Revenue New FIS 2007 2008 Growth Excluding eFunds (2) Pro Forma Low High IFS $ 1,254.3 20% 22% (1) EBS 1,010.6 11% 13% Int'l 628.5 22% 24% Other (4.8) -25% -25% As reported 2,888.7 17% 19% 4% - 6% Carve out adjustment 45.6 -4% -4% Leasing contracts (3) 11.8 -100% -100% As adjusted $ 2,946.1 16% 18% (1) EBS growth would approximate 20% excluding Retail POS Check Services (2) eFunds acquisition completed 9/12/07 (3) Leasing contracts sold 9/30/07 38 38
  39. 39. Estimated Free Cash Flow New FIS 2007 Pro Forma 2008 Estimated as adjusted New FIS Low High (1,2) Net Earnings $ 528.0 $ 196.0 $ 208.0 Add: D&A 379.6 425.0 425.0 Other, net (468.9) (56.0) (48.0) Cash flow from operations $ 438.7 565.0 585.0 (3) Capital expenditures (272.7) (250.0) (240.0) Net free cash flow $ 166.0 $ 315.0 $ 345.0 Refer to page 36 for reconciliation of GAAP to non-GAAP free cash flow. (1) (2) Excludes acquisition related integration costs and restructuring expense. (3) Includes PP&E, purchased software, capitalized software and approximately $25 million for eFunds integration capital. 39 39

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