10-QPeriod: Q1 FY2004

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2004

Filed April 22, 2004For Securities:FISV

Summary

Fiserv, Inc. reported strong performance for the first quarter ended March 31, 2004, with total revenues increasing significantly by 39% year-over-year to $937.5 million. This growth was driven by robust performance across its segments, particularly the Health plan management services segment, which saw a substantial 199% revenue increase due to the expansion into pharmacy services. Net income rose to $92.8 million, or $0.47 per diluted share, up from $74.2 million, or $0.38 per diluted share, in the prior year period, reflecting improved profitability and operational efficiencies. The company also demonstrated solid cash flow generation, with free cash flow increasing by 57% to $126.3 million. This financial strength allowed Fiserv to maintain compliance with its debt covenants and strategically repay long-term debt. Despite a notable increase in operating expenses, partly due to investments in growth areas and the integration of acquired businesses, the overall operating income saw a healthy 26% increase. Investors can note the company's continued focus on growth through acquisitions and internal initiatives, particularly in the Health segment.

Key Highlights

  • 1Total revenues increased by 39% to $937.5 million in Q1 2004 compared to Q1 2003.
  • 2Net income grew to $92.8 million ($0.47/share diluted) from $74.2 million ($0.38/share diluted) year-over-year.
  • 3The Health segment revenue surged by 199% due to the inclusion of pharmacy services businesses.
  • 4Internal revenue growth accelerated to 10% in Q1 2004, up from 2% in Q1 2003, driven by the Health segment.
  • 5Free cash flow saw a significant increase of 57% to $126.3 million, supporting debt repayment.
  • 6A new $700 million credit facility was established, providing robust liquidity.
  • 7Operating income increased by 26% to $156.9 million, despite higher operating expenses.

Frequently Asked Questions

The substantial 199% revenue growth in the Health segment was primarily driven by the company's entry into the pharmacy services business in the second quarter of 2003. This includes the recognition of prescription ingredient costs in both revenues and cost of revenues, accounting for $95.0 million of the total segment revenue increase.

Fiserv entered into a new $700 million credit facility on March 31, 2004, replacing its previous facility. This provides significant liquidity, with a $465.3 million five-year revolving credit facility and a $234.7 million 364-day revolving credit facility. The company's strong free cash flow of $126.3 million in the quarter was used to repay $107.0 million in long-term debt, and they remain in compliance with all debt covenants.

Yes, in the Investment Services segment, operating income was negatively impacted by a $6.0 million charge related to additional costs and reserves associated with Fiserv Securities, Inc. (FSI) due to ongoing industry-wide reviews by the SEC concerning mutual fund trading practices. Additionally, the Financial segment recognized a one-time $8.0 million fee from a customer due to early contract termination.

Fiserv reported an acceleration in internal revenue growth, which reached 10% for the first quarter of 2004, up from 2% in the prior year's first quarter. This acceleration was primarily fueled by strong performance in the Health segment, along with positive contributions from other segments like Other and Investment Services.