10-QPeriod: Q2 FY2007

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 3, 2007For Securities:FISV

Summary

Fiserv, Inc. reported its financial results for the quarterly period ended June 30, 2007. The company demonstrated solid revenue growth, with total revenues increasing by 12% year-over-year for both the quarter and the first six months, reaching $1.18 billion and $2.37 billion, respectively. This growth was driven by both acquisitions and strong internal revenue growth across its Financial and Insurance segments, although the Insurance segment experienced a significant decline in operating income due to specific charges and a decrease in high-margin flood claims processing revenues. While net income saw a slight decrease compared to the prior year period, primarily due to discontinued operations, the company's continuing operations remained robust. Fiserv also highlighted an increase in free cash flow, which was utilized for share repurchases and funding acquisitions. The company continues to strategically manage its portfolio, with plans to sell its Investment Support Services segment, and is actively pursuing further acquisition opportunities.

Key Highlights

  • 1Total revenues grew 12% to $1.18 billion for the three months ended June 30, 2007, and 12% to $2.37 billion for the six months ended June 30, 2007.
  • 2Internal revenue growth was 8% for both the three and six-month periods, with the remaining growth attributed to acquisitions.
  • 3The Financial segment showed strong performance with revenue up 6% and operating income up 14% (18% for six months), with improved operating margins.
  • 4The Insurance segment saw significant revenue growth of 22% (19% for six months) but a sharp decline in operating income and margins, impacted by specific charges and a drop in flood claims processing revenue.
  • 5Net income decreased year-over-year, largely influenced by lower income from discontinued operations, which included a gain in the prior year from a business sale.
  • 6Free cash flow increased by 14% to $208.8 million for the first six months of 2007, supporting share repurchases and acquisitions.
  • 7Fiserv is in the process of selling its Investment Support Services segment, with expected closing in late 2007 or early 2008, and reported these operations as discontinued for all periods presented.

Frequently Asked Questions

Fiserv demonstrates robust revenue growth driven by both organic expansion and strategic acquisitions. While net income saw a slight decrease, this was primarily due to the impact of discontinued operations and prior-year gains. The company's continuing operations remain strong, supported by healthy free cash flow generation, which is being used for share repurchases and future investments.

Revenue growth is driven by two main factors: acquisitions and internal revenue growth. Internal growth stems from acquiring new clients, cross-selling to existing clients, and increased transaction volumes across its Financial and Insurance segments. Product revenues, particularly in pharmacy management and workers' compensation, saw significant increases.

The Insurance segment's profitability was significantly impacted by a decrease in high-margin flood claims processing revenues that were primarily earned in the prior year's first quarter. Additionally, charges related to ceasing an investment in a new technology platform and other facility shutdown/severance expenses in the second quarter of 2007 negatively affected operating income. Growth in lower-margin pharmacy management and workers' compensation businesses also played a role.

Fiserv generated a significant increase in free cash flow in the first six months of 2007, which was primarily used for share repurchases totaling $321.8 million and funding acquisitions. The company maintains substantial access to liquidity through its revolving credit facility and commercial paper program, with ample capacity for borrowings. Fiserv also noted its intention to continue pursuing strategic acquisitions.