10-QPeriod: Q3 FY2008

FISERV INC Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 6, 2008For Securities:FISV

Summary

Fiserv Inc. (FISV) reported its third-quarter and nine-month results for 2008, demonstrating significant revenue growth driven by the acquisition of CheckFree Corporation. Total revenues increased by 17% to $1.08 billion for the quarter and 32% to $3.68 billion for the nine months, largely due to the Payments and Financial segments. However, the company also experienced increased expenses, particularly in selling, general, and administrative costs, and a substantial rise in interest expense, a direct consequence of the debt incurred for the CheckFree acquisition. Despite these cost pressures, operating income saw a notable increase of 11% for the quarter and 20% for the nine months, indicating underlying operational strength. The company continued its strategy of divesting non-core assets, notably completing the sale of a 51% stake in its Insurance Services segment, which contributed a pre-tax gain but also reduced segment revenue. Discontinued operations, primarily from the sales of Fiserv ISS and Fiserv Health, significantly boosted net income for the nine-month period. Fiserv ended the quarter with $472 million in cash and cash equivalents and ample liquidity, supported by strong operating cash flow and an available revolving credit facility, positioning it to manage its financial obligations.

Financial Highlights

26 data points
Beta

Revenue

$1.04B

84.4% Gross Margin

Net Income

$78.00M

7.5% Net Margin

EPS (Diluted)

$0.12

Cash & Equivalents

$468.00M

Free Cash Flow

$136.00M

Financial Statements
Beta
Revenue$1.04B
Cost of Revenue$162.00M
Gross Profit$876.00M
SG&A Expenses$199.00M
Operating Expenses$821.00M
Operating Income$217.00M
Net Income$78.00M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)650.00M
Shares Outstanding (Diluted)655.20M

Key Highlights

  • 1Total revenues grew 17% to $1.08 billion for Q3 2008 and 32% to $3.68 billion for the first nine months of 2008, primarily driven by the CheckFree acquisition.
  • 2Operating income increased by 11% to $214 million for Q3 2008 and by 20% to $671 million for the first nine months of 2008.
  • 3The company completed the sale of a 51% interest in its Insurance Services segment, recognizing a $19 million pre-tax gain.
  • 4Net income for the nine months was significantly boosted by gains from discontinued operations, totaling $232 million.
  • 5Interest expense rose substantially, increasing by $45 million in Q3 and $154 million year-to-date, due to debt financing the CheckFree acquisition.
  • 6Selling, general, and administrative expenses also increased significantly, up $84 million in Q3 and $260 million year-to-date, largely due to CheckFree integration costs and amortization of acquired intangibles.
  • 7The company ended the period with $472 million in cash and cash equivalents and had $634 million available under its revolving credit facility.

Frequently Asked Questions

The acquisition of CheckFree Corporation in December 2007 was a primary driver of Fiserv's revenue growth in the third quarter and first nine months of 2008. While it significantly increased total revenues, particularly in the Payments and Financial segments, it also led to higher expenses, including increased interest expense due to acquisition financing and higher selling, general, and administrative costs related to integration and amortization of intangible assets.

Fiserv completed the sale of a 51% interest in its Insurance Services segment on July 14, 2008. This transaction resulted in a $19 million pre-tax gain and reduced the segment's reported revenues and expenses from mid-July onwards. Consequently, the Insurance segment's contribution to revenues and operating income decreased significantly compared to the prior year periods.

Discontinued operations, primarily from the sales of Fiserv ISS and Fiserv Health, had a substantial positive impact on net income, particularly for the nine-month period. In the first nine months of 2008, after-tax gains of $232 million were recognized from these dispositions, significantly contributing to the overall net income of $507 million.

Fiserv maintained a strong liquidity position as of September 30, 2008, with $472 million in cash and cash equivalents. Additionally, it had $634 million available under its revolving credit facility. The company's operating cash flow from continuing operations was robust, increasing by 42% year-over-year. Management believes these resources are sufficient to fund operating expenses, capital expenditures, and debt obligations.