10-QPeriod: Q2 FY2013

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 31, 2013For Securities:FISV

Summary

Fiserv Inc. reported its second-quarter and first-half 2013 financial results, showing a notable increase in total revenue driven by both its Payments and Financial segments. The acquisition of Open Solutions Inc. significantly contributed to the revenue growth in the Financial segment, adding substantial processing and services revenue. While overall revenue saw a healthy increase, total expenses also rose due to merger and integration costs related to the Open Solutions acquisition, as well as higher amortization of acquisition-related intangible assets. This resulted in a slight decrease in net income per diluted share from continuing operations for both the quarter and the first six months compared to the prior year. The company's operating cash flow remained strong, and its liquidity position is supported by its cash reserves and revolving credit facility, despite an increase in long-term debt primarily due to the Open Solutions acquisition financing.

Financial Highlights

50 data points
Beta

Revenue

$1.20B

86.9% Gross Margin

Net Income

$151.00M

12.6% Net Margin

EPS (Diluted)

$0.28

Total Assets

$9.43B

Cash & Equivalents

$320.00M

Free Cash Flow

$123.00M

Financial Statements
Beta
Revenue$1.20B
Cost of Revenue$157.00M
Gross Profit$1.04B
SG&A Expenses$245.00M
Operating Expenses$925.00M
Operating Income$273.00M
Interest Expense$41.00M
Net Income$151.00M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)530.20M
Shares Outstanding (Diluted)537.20M

Key Highlights

  • 1Total revenue increased by 10% in Q2 2013 and 8% in the first six months of 2013 compared to the prior year, driven by growth in both Payments and Financial segments.
  • 2The acquisition of Open Solutions Inc. contributed $76 million to Q2 2013 revenue and $135 million to year-to-date revenue in the Financial segment.
  • 3Total expenses increased by 11% in Q2 and 11% in the first six months of 2013, largely due to $16 million and $56 million in merger and integration costs related to the Open Solutions acquisition.
  • 4Operating income increased by 6% in Q2 2013 but decreased by 2% in the first six months of 2013, with operating margins declining year-over-year.
  • 5Net income per diluted share from continuing operations decreased to $1.13 in Q2 2013 and $2.00 in the first six months of 2013, compared to $1.17 and $2.11 in the respective prior-year periods.
  • 6Operating cash flow increased slightly by 4% to $397 million for the first six months of 2013.
  • 7Long-term debt increased to $3.95 billion as of June 30, 2013, primarily due to approximately $1.0 billion in borrowings under the revolving credit facility to fund debt assumed in the Open Solutions acquisition.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of Open Solutions Inc., which significantly contributed to the Financial segment's revenue. Both the Payments and Financial segments also saw organic growth in processing and services revenue.

The Open Solutions acquisition led to increased expenses, primarily due to $16 million in merger and integration costs in the second quarter and a $30 million non-cash impairment charge related to the Acumen platform. These costs, along with higher amortization of acquisition-related intangible assets, negatively impacted operating margins and diluted earnings per share.

Fiserv maintained a solid liquidity position with $320 million in cash and cash equivalents and $1.0 billion in borrowings under its $2.0 billion revolving credit facility. The company believes these resources, along with operating cash flow, are sufficient to meet its operating expenses, debt obligations, and capital expenditure needs.

Yes, Fiserv repurchased a total of 2.331 million shares of its common stock during the second quarter of 2013 under its existing share repurchase authorization. These shares are generally held for issuance in connection with equity plans.