Fidelity National Information Services Inc. said its second-quarter earnings fell by half from a year earlier as the company prepared to spin off the mortgage servicer Lender Processing Services Inc.
LPS, which, like Fidelity, has headquarters in Jacksonville, Fla., reported 5% profit growth, despite the mortgage market's struggles. In fact, Jeffrey S. Carbiener, Fidelity's former chief financial officer and now the chief executive of LPS, said he expects it to continue to grow, regardless of market conditions. (The spinoff was completed after the quarter ended.)
"LPS is well positioned to not only weather these challenging times, but in fact benefit from them," Mr. Carbiener said.
His said he expects strong growth in its mortgage default management business to continue to offset weakness in its loan facilitation line.
In a joint conference call by the two companies, Fidelity executives described ways in which they plan to continue to revamp the company.
Lee Kennedy, Fidelity's president and CEO, said it is putting on hold its plans to sell certain business units it acquired in the January 2006 merger with the St. Petersburg payment processor Certegy Inc. Fidelity had been reviewing the sale of those units, which are part of its retail check risk management business, since August of last year.
"While we were encouraged with the strong interest in this business, the offers received were substantially less than what we believed the business is worth," Mr. Kennedy said. "Therefore, we will continue to operate the business for the foreseeable future, and we will reevaluate our options when market conditions improve."
Fidelity sold two other units, FIS Credit Services and Certegy Gaming Services, in the first half, and it announced an agreement last month to sell the assets of Certegy Australia Ltd. Mr. Kennedy said he expects that deal to close next quarter.
He also said his company is making "good progress" in integrating the operations of eFunds Corp., the Scottsdale, Ariz., transaction processor it acquired in September.
Fidelity is on schedule to report $35 million of cost savings for this year, he said.
For the second quarter,
Fidelity said its earnings fell 51.4%, to $71.9 million, largely because of increased interest expenses related to the LPS spinoff. For the quarter, Fidelity reported $58.7 million of interest expenses, compared with interest income of $50.4 million in the same quarter last year.
Revenue grew 19%, to $1.3 billion, including $137.2 million of revenue from eFunds.
Fidelity reported earnings of 38 a share from continuing operations, topping the average analyst estimate of 34 cents.
Revenue from international transaction processing rose 34.2%, to $192.3 million, driven by growth in core bank processing and related services, Fidelity's Brazilian card processing joint venture, and favorable currency exchange rates, the company said.
It raised its full-year earnings outlook to $1.51 to $1.57 per diluted share, compared with guidance of $1.48 to $1.54 offered at a May investor meeting. Fidelity cited a lower than expected tax rate
LPS reported earnings of $63.5 million, which Mr. Carbiener said was in line with his company's expectations. Its revenue grew 8.3% from a year earlier, to $460.4 million.
Because the company issued fewer shares outstanding than it anticipated, LPS raised its full-year earnings guidance to a range of $2.36 to $2.48 a share, compared with a range of $2.34 to $2.46 offered at the May investor meeting.
