10-KPeriod: FY2006

FISERV INC Annual Report, Year Ended Dec 31, 2006

Filed February 28, 2007For Securities:FISV

Summary

Fiserv, Inc. reported solid revenue growth in 2006, with total revenues increasing by 12% to $4.54 billion. This growth was driven by both organic expansion (9% internal revenue growth) and strategic acquisitions. The company operates across three key segments: Financial Institution Services, Insurance Services, and Investment Support Services. The Financial segment showed steady performance, while the Insurance segment experienced significant revenue acceleration, partly due to strong growth in pharmacy management and workers' compensation businesses. Profitability saw some pressure in 2006 compared to 2005, with operating income remaining flat and operating margins declining slightly, influenced by factors such as a decrease in contract termination fees, increased share-based compensation expense due to new accounting standards, and lower-margin revenue growth in certain areas. Management is implementing a "Fiserv 2.0" initiative to refine its strategy, focusing on areas of deep industry expertise, strong competitive positions, and differentiated solutions. The company remains active in pursuing acquisitions to complement its existing offerings and expand its market reach. Fiserv continues to generate robust free cash flow, which is being used for acquisitions, share repurchases, and capital investments, rather than dividends. The company's financial position remains strong, with ample liquidity and access to credit facilities to support its growth initiatives.

Key Highlights

  • 1Total revenues grew 12% to $4.54 billion in 2006, driven by 9% internal revenue growth and acquisitions.
  • 2The company operates in three main segments: Financial Institution Services, Insurance Services, and Investment Support Services.
  • 3The Insurance segment saw significant revenue growth, particularly in pharmacy management and workers' compensation.
  • 4Operating income remained flat year-over-year, with operating margins declining slightly to 16% in 2006 due to various factors including lower contract termination fees and increased share-based compensation.
  • 5Fiserv acquired seven businesses in 2006 with combined annual revenues exceeding $115 million.
  • 6The company generated strong free cash flow of $447.5 million in 2006.
  • 7Fiserv repurchased approximately 12.7 million shares of its common stock for $560.1 million in 2006.

Frequently Asked Questions

Fiserv provides integrated information management systems and services, including transaction processing, business process outsourcing, document distribution, and software solutions, serving financial institutions, insurance companies, and investment services providers.

Profitability in 2006 was impacted by a decrease in higher-margin contract termination fees, increased share-based compensation expense due to the adoption of SFAS 123R, operating losses in Australian check processing, and charges related to asset write-downs in the lending division. These were partially offset by strong performance in electronic payments and flood insurance processing.

Fiserv acquired seven businesses in 2006, contributing over $115 million in annual revenues. Acquisitions are a key part of their growth strategy, focusing on complementary businesses and technologies to enhance market position.

Fiserv 2.0 is a refined business strategy focused on operating in areas where Fiserv has deep industry expertise, a strong competitive position, long-term client relationships, differentiated solutions, and strong management. It emphasizes tighter integration across product groups, strategic acquisitions, innovation, operational excellence, and greater capital discipline.