10-QPeriod: Q3 FY2014

FISERV INC Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 29, 2014For Securities:FISV

Summary

Fiserv Inc. (FISV) reported a strong third quarter and first nine months of 2014, demonstrating robust revenue growth and improved profitability. Total revenue increased by 5% to $1.26 billion for the quarter and 6% to $3.75 billion for the nine-month period, driven by solid performance in both the Payments and Financial segments. Profitability saw significant improvement, with operating income up 13% and 17% for the respective periods, and operating margin expanding by 1.6% and 2.3%. This was partly due to lower merger and integration costs compared to the prior year's Open Solutions acquisition. Net income per diluted share from continuing operations also showed a substantial increase, benefiting from strong operational performance and a one-time gain from an unconsolidated affiliate. The company maintained a healthy liquidity position and remained compliant with its debt covenants.

Financial Highlights

49 data points
Beta

Revenue

$1.26B

86.7% Gross Margin

Net Income

$239.00M

18.9% Net Margin

EPS (Diluted)

$0.47

Total Assets

$9.44B

Cash & Equivalents

$409.00M

Free Cash Flow

$316.00M

Financial Statements
Beta
Revenue$1.26B
Cost of Revenue$168.00M
Gross Profit$1.09B
SG&A Expenses$243.00M
Operating Expenses$948.00M
Operating Income$315.00M
Interest Expense$41.00M
Net Income$239.00M
EPS (Basic)$0.48
EPS (Diluted)$0.47
Shares Outstanding (Basic)495.20M
Shares Outstanding (Diluted)503.60M

Key Highlights

  • 1Total revenue for the third quarter of 2014 was $1.26 billion, a 5% increase year-over-year.
  • 2Total revenue for the first nine months of 2014 was $3.75 billion, a 6% increase year-over-year.
  • 3Operating income for the third quarter of 2014 increased by 13% to $315 million, with operating margin expanding to 24.9%.
  • 4Operating income for the first nine months of 2014 increased by 17% to $893 million, with operating margin expanding to 23.8%.
  • 5Net income per diluted share from continuing operations for the third quarter of 2014 was $0.95, a significant increase from $0.61 in the prior year.
  • 6The company's Payments segment showed strong revenue growth of 9% in Q3 and 8% for the nine months.
  • 7Fiserv maintained a strong liquidity position with $409 million in cash and cash equivalents as of September 30, 2014, and adequate availability under its revolving credit facility.

Frequently Asked Questions

Revenue growth was driven by both the Payments and Financial segments. The Payments segment saw strong growth from its recurring revenue businesses, particularly card services and bill payment, as well as digital channels. The Financial segment benefited from increased processing and services revenue in account processing and lending businesses, including higher contract termination fees.

The acquisition of Open Solutions in January 2013 provided a strategic advantage by adding a key account processing system (DNA) and expanding the client base. While the acquisition incurred significant merger and integration costs in 2013, these costs were lower in 2014, contributing to improved operating income and margins in the current year by comparison. A non-cash impairment charge related to this acquisition was also recorded in Q1 2013.

Fiserv has a 49% interest in StoneRiver Group, L.P. In the third quarter of 2014, Fiserv recorded $85 million in income from this investment, representing its share of a gain from StoneRiver's sale of a subsidiary. This significantly boosted net income and diluted earnings per share for the period. The company also receives cash dividends from StoneRiver, which are recorded as operating cash flow to the extent they represent a return on investment.

As of September 30, 2014, Fiserv's total debt remained consistent at $3.85 billion, comprised mainly of senior notes and a term loan. The company was in compliance with all financial debt covenants. There were no borrowings outstanding under its revolving credit facility at that time.