10-QPeriod: Q2 FY2006

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2006

Filed July 28, 2006For Securities:FISV

Summary

Fiserv Inc. reported solid revenue growth for the six months ended June 30, 2006, with total revenues up 11% year-over-year to $2.19 billion, driven by a strong performance in product revenues (up 21%) and continued growth in processing and services (up 7%). The company experienced a slight dip in operating income for the quarter, down 2% year-over-year, primarily due to increased expenses from share-based compensation following the adoption of SFAS 123R and higher costs in Australian check processing operations. However, year-to-date operating income showed a modest increase of 1%. Despite increased investments and the impact of accounting changes, Fiserv's free cash flow increased by 3% to $187.3 million for the six-month period, supporting significant share repurchases of $349.5 million.

Key Highlights

  • 1Total revenues for the six months ended June 30, 2006, increased by 11% to $2.19 billion compared to the prior year period.
  • 2Product revenues saw a significant increase of 21% for the six months, contributing to overall revenue growth.
  • 3Operating income for the quarter decreased slightly by 2% ($3.1 million), but increased by 1% ($1.9 million) for the six-month period.
  • 4The company's free cash flow from continuing operations increased by 3% to $187.3 million for the first six months of 2006.
  • 5Fiserv actively repurchased $349.5 million of its common stock in the first six months of 2006.
  • 6The company adopted SFAS 123R on January 1, 2006, leading to increased share-based compensation expenses impacting operating margins.
  • 7A contingent payment of $10.6 million was recognized as a gain in the second quarter of 2006 related to the prior sale of securities clearing businesses.

Frequently Asked Questions

Fiserv reported a strong revenue increase of 11% for the first six months of 2006, reaching $2.19 billion, up from $1.97 billion in the same period last year. This growth was driven by both processing and services revenues (up 7%) and a significant surge in product revenues (up 21%).

Operating income saw a slight decrease of 2% in the second quarter compared to the prior year. This was primarily attributed to increased share-based compensation expenses due to the adoption of SFAS 123R, higher costs associated with Australian check processing operations, and reduced contract termination fees. These factors were partially offset by higher flood claims processing revenues.

Fiserv demonstrated healthy liquidity with free cash flow from continuing operations increasing by 3% to $187.3 million in the first six months of 2006. The company continues its aggressive share repurchase program, buying back $349.5 million of stock during the period. Fiserv currently retains earnings to support future business opportunities rather than paying dividends.

Yes, Fiserv adopted SFAS 123R, 'Share-Based Payment,' on January 1, 2006. This resulted in increased expenses for share-based compensation, which impacted operating margins. The company is also evaluating the impact of two new accounting pronouncements, FIN 48 and EITF 06-2, which will be effective in future periods.