10-QPeriod: Q1 FY2007

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 3, 2007For Securities:FISV

Summary

Fiserv Inc. reported its first quarter 2007 results, showcasing a 11% increase in total revenues to $1.22 billion, driven by strong performance in its Processing and Services segment and significant growth in Product revenues. Despite a notable increase in total expenses, operating income remained relatively flat year-over-year at $193.4 million, impacted by a shift in revenue mix and a decrease in high-margin flood claims processing revenues. Net income saw a slight decrease to $113.6 million from $116.2 million in the prior year, with diluted EPS at $0.66 compared to $0.64. The company continues to emphasize strategic acquisitions, which contributed to a portion of its revenue growth. Fiserv's financial position remains robust, with substantial cash and cash equivalents and available credit facilities. Management is focused on internal revenue growth, operational efficiencies, and pursuing complementary acquisitions, while actively engaging in share repurchases as a means of returning value to shareholders.

Key Highlights

  • 1Total revenues increased by 11% to $1.22 billion in Q1 2007 compared to Q1 2006.
  • 2Product revenues saw a significant increase of 31%, primarily driven by growth in pharmacy management and workers' compensation businesses.
  • 3Operating income remained nearly flat at $193.4 million, with a slight decrease in operating margin to 15.9% from 17.6%.
  • 4Net income slightly decreased to $113.6 million, with diluted EPS rising to $0.66 from $0.64.
  • 5The Financial segment showed strong performance with a 10% revenue increase and improved operating margins.
  • 6The Insurance segment experienced a significant drop in operating income and margins, largely due to a decrease in high-margin flood claims processing revenues.
  • 7Fiserv continued its share repurchase program, buying back approximately 2.7 million shares in Q1 2007.

Frequently Asked Questions

Fiserv's Financial segment demonstrated robust revenue growth of 10%, driven by increased volumes, new clients, and cross-sales. The Insurance segment also saw revenue growth of 15%, largely due to new clients in pharmacy management and workers' compensation, but was impacted by a significant decrease in flood claims processing revenues. The Investment segment's revenues remained relatively consistent.

Operating income was flat year-over-year. The overall operating margin decreased due to a $29.7 million reduction in high-margin flood claims processing revenues and a significant increase in lower-margin pharmacy management and workers' compensation revenues. These impacts were partially offset by increased higher-margin revenues in other areas and improved operating efficiencies.

Fiserv maintained a strong liquidity position with $201 million in cash and cash equivalents and approximately $370 million available under its credit and commercial paper facilities at the end of Q1 2007. The company primarily used its free cash flow and borrowings to repurchase shares of its common stock and fund acquisitions. Fiserv does not currently pay dividends, focusing instead on share repurchases and funding future business opportunities.

Fiserv adopted FASB Interpretation No. 48 (FIN 48) for accounting for uncertainty in income taxes effective January 1, 2007, which did not result in a cumulative adjustment to retained earnings. The company is also assessing the impact of SFAS 157 (Fair Value Measurements) and SFAS 159 (Fair Value Option), both effective for fiscal years beginning after November 15, 2007.