10-QPeriod: Q1 FY2013

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 1, 2013For Securities:FISV

Summary

Fiserv Inc. reported first-quarter 2013 results showing a 5% increase in total revenue to $1.152 billion, driven by a 10% rise in the Financial segment, largely due to the acquisition of Open Solutions Inc. However, net income decreased by 11.4% to $117 million, or $0.86 per diluted share, compared to $132 million, or $0.94 per diluted share, in the prior year. This decline in profitability was primarily influenced by increased expenses related to the Open Solutions integration, including a $30 million non-cash impairment charge. The company also divested its Club Solutions business during the quarter. Despite the reported decrease in net income, Fiserv demonstrated continued strategic execution with the significant acquisition of Open Solutions, which is expected to bolster its account processing capabilities and client base. The company maintained a strong focus on generating operating cash flow, which was $222 million, and managed its debt levels, with $1.1 billion drawn on its $2.0 billion revolving credit facility. Investors should monitor the successful integration of Open Solutions and the impact of related expenses on future profitability.

Financial Highlights

51 data points
Beta

Revenue

$1.15B

83.5% Gross Margin

Net Income

$117.00M

10.2% Net Margin

EPS (Diluted)

$0.21

Total Assets

$9.56B

Cash & Equivalents

$356.00M

Free Cash Flow

$164.00M

Financial Statements
Beta
Revenue$1.15B
Cost of Revenue$190.00M
Gross Profit$962.00M
SG&A Expenses$229.00M
Operating Expenses$941.00M
Operating Income$211.00M
Interest Expense$41.00M
Net Income$117.00M
EPS (Basic)$0.22
EPS (Diluted)$0.21
Shares Outstanding (Basic)533.60M
Shares Outstanding (Diluted)540.60M

Key Highlights

  • 1Total revenue increased by 5% to $1.152 billion in Q1 2013.
  • 2Net income decreased by 11.4% to $117 million ($0.86/share diluted) in Q1 2013.
  • 3Acquisition of Open Solutions Inc. on January 14, 2013, for approximately $55 million cash and assumed debt of $960 million.
  • 4Divested the Club Solutions business on March 14, 2013.
  • 5Operating income declined 12% to $211 million, impacted by $40 million in merger and integration expenses, including a $30 million non-cash impairment charge.
  • 6Operating cash flow from continuing operations was $222 million.
  • 7Long-term debt stood at $4.05 billion at March 31, 2013, with $1.1 billion drawn on the revolving credit facility.

Frequently Asked Questions

The acquisition of Open Solutions Inc. on January 14, 2013, contributed approximately $60 million in revenue to the Financial segment in the first quarter of 2013, driving a 10% increase in segment revenue. However, the acquisition also resulted in significant merger and integration expenses, including a $30 million non-cash impairment charge, which negatively impacted overall profitability and operating income.

Net income decreased by 11.4% primarily due to increased operating expenses. These included $40 million in merger and integration costs related to the Open Solutions acquisition, a $30 million non-cash impairment charge, and higher amortization of acquisition-related intangible assets. These factors, particularly those in the Corporate and Other segment, offset the revenue growth and led to a lower operating margin.

The Club Solutions business was reported as discontinued operations for all periods presented. While it generated some revenue and a small operating income before taxes in Q1 2013 and 2012, its overall financial impact on the continuing operations was minimal. The divestiture was completed on March 14, 2013.

Fiserv maintained a revolving credit facility of $2.0 billion, with $1.1 billion drawn as of March 31, 2013, primarily to fund debt assumed in the Open Solutions acquisition. Total long-term debt was $4.05 billion. The company generated $222 million in operating cash flow, which it believes is sufficient to cover operating expenses, debt servicing, and capital expenditures, indicating adequate liquidity.