10-QPeriod: Q1 FY2010

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 6, 2010For Securities:FISV

Summary

Fiserv Inc. (FISV) reported its first-quarter 2010 financial results on May 6, 2010. The company demonstrated resilience with a slight decrease in total revenue to $1.008 billion, down 1% year-over-year, primarily driven by declines in product revenue within the Payments segment and in the Financial segment. Despite the revenue dip, operating income saw a healthy increase of 6% to $238 million, bolstered by a significant reduction in selling, general, and administrative expenses, which included lower severance and integration costs compared to the prior year. This operational efficiency, coupled with lower interest expense, led to a substantial 17% increase in net income from continuing operations to $123 million, or $0.80 per diluted share, compared to $0.68 per diluted share in the first quarter of 2009. From a liquidity perspective, Fiserv maintained a strong position with $416 million in cash and cash equivalents and $870 million in available borrowings under its revolving credit facility. The company generated $260 million in operating cash flow, a 13% increase from the prior year, which was primarily used to repay long-term debt and fund capital expenditures. Fiserv also continued its share repurchase program, buying back approximately 1.4 million shares in the quarter. Overall, the report indicates a company effectively managing costs and operations to deliver improved profitability despite a challenging revenue environment, while maintaining a solid financial foundation.

Financial Highlights

47 data points
Beta

Revenue

$1.01B

86.5% Gross Margin

Net Income

$121.00M

12.0% Net Margin

EPS (Diluted)

$0.20

Total Assets

$8.31B

Cash & Equivalents

$416.00M

Free Cash Flow

$218.00M

Financial Statements
Beta
Revenue$1.01B
Cost of Revenue$136.00M
Gross Profit$872.00M
SG&A Expenses$172.00M
Operating Expenses$770.00M
Operating Income$238.00M
Net Income$121.00M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)610.00M
Shares Outstanding (Diluted)614.80M

Key Highlights

  • 1Total revenue for the first quarter of 2010 was $1.008 billion, a 1% decrease compared to $1.023 billion in the prior year period.
  • 2Operating income increased by 6% to $238 million in Q1 2010 from $225 million in Q1 2009, driven by expense reductions.
  • 3Net income from continuing operations rose 17% to $123 million in Q1 2010, with diluted EPS from continuing operations at $0.80, up from $0.68 in Q1 2009.
  • 4Selling, general, and administrative expenses decreased by 13% ($26 million), largely due to lower severance and merger integration costs.
  • 5Interest expense decreased by 17% ($9 million) due to lower outstanding borrowings and interest rates.
  • 6Cash flow from operations from continuing operations increased by 13% to $260 million in Q1 2010.
  • 7Long-term debt was reduced to $3.514 billion from $3.641 billion at the end of the previous year.

Frequently Asked Questions

The increase in operating income was primarily driven by a significant reduction in total expenses, particularly selling, general, and administrative (SG&A) expenses. This decrease in SG&A was largely attributed to lower employee severance costs and reduced merger and integration expenses compared to the first quarter of 2009. Additionally, cost of product as a percentage of product revenue decreased, and interest expense also declined.

Fiserv generated $260 million in operating cash flow, a 13% increase year-over-year, and used a portion of this to repay approximately $125 million of long-term debt, reducing its total outstanding debt to $3.514 billion. The company maintained a strong liquidity position with $416 million in cash and cash equivalents and $870 million in available borrowings under its revolving credit facility.

Total revenue decreased by 1% year-over-year to $1.008 billion. The decrease was mainly due to lower product revenue in the Payments segment, including reduced output solutions and pass-through postage revenue, and in the Financial segment, driven by volume declines in check processing and lower specialty consulting and software license revenue. These decreases were partially offset by growth in electronic payments and bank/credit union account processing businesses.

Fiserv utilizes interest rate swap agreements (Swaps) to manage its exposure to fluctuations in interest rates. As of March 31, 2010, the company had total notional values of $1.2 billion in Swaps, which effectively fix interest rates on floating-rate term loan borrowings at an approximate weighted-average rate of 4.8% before financing spreads and fees. These Swaps have expiration dates through September 2012.