Fidelity National Information Services Inc. said Thursday that its strong fourth-quarter results were due, in part, to a product line the company says is not vulnerable to the economic turbulence that has slammed so many banking companies.
The Jacksonville, Fla., banking technology company reported strong gains in both revenue and earnings, though profit fell short of Wall Street's expectations by a penny. It also gave more details of its plan to spin off its lender processing division.
"These excellent results were achieved despite unprecedented turmoil," William P. Foley 2nd, Fidelity's executive chairman, said in a conference call Thursday.
Lee Kennedy, Fidelity's president and chief executive, said during the call that bankers' desire to drive down costs is spurring interest in Fidelity's products. "There are also several significant market factors which are driving additional growth opportunities," he said, including the growing importance of reducing loan servicing costs, increased use of data analytics to improve portfolio profitability, and strong interest in bundled integrated products that reduce operating costs.
He also stressed that, despite banks' cost-cutting efforts, Fidelity's products and services are unlikely to be on the chopping block.
"The vast majority of our bank and payment service products and support are not discretionary in nature," he said. "A bank cannot operate without these services."
Fidelity announced in October that it would spin off its lender processing unit, and on Wednesday it said the new company would be named Lender Processing Services Inc.
Jeff Carbiener, Fidelity's chief financial officer, is to be the president and chief executive of Lender Processing. The spinoff is expected to be completed by late June.
"The separation of LPS into a stand-alone public company and the acquisition of eFunds will strengthen our competitive position," Mr. Foley said.
The lender processing unit's revenue grew 9.5%, to $454.8 million, in the fourth quarter from a year earlier. One factor was 8.7% growth in mortgage processing revenues; this line also gets some revenue from termination fees.
Fidelity's revenue rose 20%, to $1.3 billion, in the quarter compared to the year earlier. Its debit processing unit, eFunds Corp., which it bought for $1.8 billion in September, contributed $140 million of revenue. Fidelity's net earnings rose 44%, to $108.4 million.
For the full year, Fidelity's revenue rose 18%, to almost $4.8 billion, from the prior year. Its net earnings rose 117%, to $561.2 million.
Another factor that could boost results this year is bill payment. "During the past two years we have added significant new functionality to our bill payment product line," Mr. Kennedy said, and more than two-thirds of Fidelity's bill-pay clients have upgraded to the new product.
It announced last week that it would offer its Premium Online Bill Pay and Presentment product to clients of Intuit Inc.'s online banking unit, Digital Insight.
Fidelity said it expects revenue to grow 14% to 16% this year. Without eFunds' impact, it said, it would expect gains of 6% to 8%. It forecast that earnings before interest, taxes, depreciation, and amortization would grow 15% to 17% this year.
These projections exclude about $25 million of integration expenses and about $25 million of integration capital related to the eFunds purchase; they also exclude the costs of the Lender Processing spinoff.
For the first quarter, Fidelity said, it expects cash earnings per diluted share of 57 to 60 cents.
Tien-tsin Huang, an analyst at JPMorgan Chase & Co.'s JPMorgan Securities Inc., wrote in a research note Thursday that some Fidelity forecasts fell short of his own, including his prediction that EBITDA would grow 19% this year. He has predicted revenue growth this year, excluding eFunds, of 8%.
