10-QPeriod: Q1 FY2005

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2005

Filed April 29, 2005For Securities:FISV

Summary

Fiserv Inc. (FISV) reported its first-quarter 2005 financial results, demonstrating solid top-line growth and improved operating income. Total revenues increased by 9% year-over-year, driven by strong performance in its Financial and Health segments, with internal revenue growth of 7% for the company overall. The company also achieved a significant $43.5 million realized gain from the sale of its investment in Bisys Group, Inc. common stock, which positively impacted net income. Operationally, Fiserv benefited from a 17% increase in operating income, largely due to a 16% rise in the Financial segment, which saw improved margins driven by cost synergies and strong sales. The company also successfully completed the sale of its securities clearing businesses, strengthening its balance sheet and allowing it to focus on core operations. Despite a decrease in free cash flow compared to the prior year, Fiserv maintained a strong liquidity position and remains in compliance with its debt covenants.

Key Highlights

  • 1Total revenues grew by 9% to $973.1 million for the first quarter of 2005, compared to $908.9 million in the prior year period.
  • 2Operating income increased by 17% to $188.0 million, demonstrating effective cost management and revenue growth.
  • 3The company recorded a significant one-time realized gain of $43.5 million from the sale of its investment in Bisys Group, Inc. common stock.
  • 4Fiserv completed the sale of its securities clearing businesses for $344.9 million, receiving a $68.0 million distribution prior to the sale.
  • 5The Financial segment showed robust growth, with revenues up 6% and operating income up 16%, driven by core software products and service bureau businesses.
  • 6Free cash flow for the quarter was $102.4 million, a decrease from the prior year, primarily due to an increase in accounts receivable.
  • 7The company reported that it was in compliance with all debt covenants as of March 31, 2005.

Frequently Asked Questions

The sale of the securities clearing businesses on March 24, 2005, for $344.9 million strengthened Fiserv's balance sheet and allowed management to focus on core operations. The company received a $68.0 million distribution prior to the sale and recorded a net loss on the sale of discontinued operations of $0.4 million, net of income taxes. This transaction also involved retaining a liability related to an SEC investigation, which was settled for $15.0 million.

Fiserv's continuing operations are categorized into Financial, Health, and Investment segments. The Financial segment saw a 6% revenue increase and a 16% operating income increase, driven by core software and service bureau businesses. The Health segment experienced strong revenue growth of 17%, though its operating income growth was 19% with margins stable. The Investment segment reported an 8% revenue increase and a 35% operating income increase, with improved margins due to cost efficiencies and rising interest rates.

Fiserv recorded a one-time realized gain of $43.5 million ($0.14 per share) from selling its remaining 3.2 million shares of Bisys Group, Inc. common stock during the first quarter of 2005. This gain positively impacted the company's net income for the period.

Free cash flow for the first quarter of 2005 was $102.4 million, a decrease of $27.9 million compared to the prior year. This decrease was primarily attributed to a $25.8 million increase in accounts receivable, linked to higher internal revenue growth in the Financial segment and the timing of collections. Both periods' free cash flow were also impacted by approximately $40 million in annual 401(k) contributions made in the first quarter.