10-QPeriod: Q2 FY2014

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed July 30, 2014For Securities:FISV

Summary

Fiserv Inc. reported solid financial performance for the second quarter and first six months of 2014, with notable revenue growth driven by both its Payments and Financial segments. Total revenue increased by 5% and 6% for the respective periods, reflecting an increase in recurring revenue streams and product sales. The company demonstrated improved operational efficiency, leading to a significant rise in operating income and a stronger operating margin, partly due to the successful integration of the Open Solutions acquisition and reduced integration expenses compared to the prior year. Diluted earnings per share from continuing operations also saw a substantial increase, indicating a positive trend in profitability. The company's balance sheet remains stable with total assets of $9.4 billion. While debt levels were consistent year-over-year, Fiserv continued to generate strong operating cash flow, up 43% year-over-year for the first six months, which was utilized for debt repayment, capital expenditures, and share repurchases. Management expressed confidence in the company's ability to meet its liquidity needs through operating cash flow and its revolving credit facility. The company's strategic focus on integrated technology solutions, client relationship enhancement, and innovation appears to be driving positive financial outcomes.

Financial Highlights

49 data points
Beta

Revenue

$1.25B

86.4% Gross Margin

Net Income

$166.00M

13.2% Net Margin

EPS (Diluted)

$0.33

Total Assets

$9.40B

Cash & Equivalents

$329.00M

Free Cash Flow

$197.00M

Financial Statements
Beta
Revenue$1.25B
Cost of Revenue$171.00M
Gross Profit$1.08B
SG&A Expenses$243.00M
Operating Expenses$946.00M
Operating Income$307.00M
Interest Expense$41.00M
Net Income$166.00M
EPS (Basic)$0.33
EPS (Diluted)$0.33
Shares Outstanding (Basic)498.60M
Shares Outstanding (Diluted)506.80M

Key Highlights

  • 1Total revenue increased by 5% for Q2 2014 and 6% for the first six months of 2014 compared to the prior year periods.
  • 2Operating income saw a significant increase of 12% for Q2 and 19% for the first six months of 2014, with operating margins expanding by 170 and 260 basis points, respectively.
  • 3Diluted EPS from continuing operations increased to $0.65 in Q2 2014 and $1.31 in the first six months of 2014, up from $0.57 and $1.00 respectively in the prior year.
  • 4Operating cash flow significantly improved, growing by 43% to $569 million for the first six months of 2014 compared to the same period in 2013.
  • 5The company maintained a strong operating margin in its Financial segment, increasing to 34.1% in Q2 2014, while the Payments segment saw a slight decrease in margin due to specific business investments and cost dynamics.
  • 6Fiserv continued to manage its debt effectively, with total debt remaining stable, and had no borrowings outstanding under its revolving credit facility as of June 30, 2014.

Frequently Asked Questions

Revenue growth was driven by increases in both the Payments and Financial segments. The Payments segment saw growth from new clients and increased transaction volumes in card services and bill payment, as well as digital channels. The Financial segment benefited from higher processing and services revenue in account processing and lending, including contract termination fees, partially offset by a decline in its international business.

The acquisition of Open Solutions in January 2013 continued to contribute to Fiserv's performance. In the second quarter and first six months of 2014, the company experienced lower merger and integration expenses compared to the prior year, which positively impacted operating margins and diluted earnings per share from continuing operations. Synergies from the acquisition also contributed to improved operating income and margins in the Financial segment.

Fiserv maintained a strong liquidity position with $329 million in cash and cash equivalents as of June 30, 2014, and ample availability under its revolving credit facility (no borrowings were outstanding). Total debt remained stable at approximately $3.85 billion. The company's robust operating cash flow, which increased by 43% year-over-year for the first six months, is being used for debt repayment, capital expenditures, and share repurchases, indicating proactive debt and cash management.

Total expenses increased moderately, but as a percentage of revenue, total expenses decreased due to improved operating leverage and lower merger and integration expenses related to the Open Solutions acquisition in 2013. Cost of processing and services as a percentage of revenue also decreased, reflecting increased operating leverage in recurring revenue businesses. A significant factor affecting cost of product was the absence of a non-cash impairment charge recorded in Q1 2013.