10-QPeriod: Q1 FY2016

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:FISV

Summary

Fiserv, Inc. reported a strong first quarter for 2016, demonstrating significant revenue and net income growth compared to the prior year. Total revenue increased by 4% to $1.33 billion, driven primarily by an 8% surge in the Payments segment, which benefited from new clients, expanded offerings, and increased transaction volumes. The company also saw a notable increase in operating income, up 8% to $339 million, with operating margins improving to 25.5%. Diluted earnings per share (EPS) more than doubled to $1.27, largely influenced by a significant $146 million pre-tax gain from the company's investment in unconsolidated affiliate, StoneRiver Group. Operationally, Fiserv successfully integrated two acquisitions in early 2016 for a combined $265 million, aimed at expanding its digital banking and payment solutions. The company also generated substantial operating cash flow of $509 million, a 47% increase year-over-year, which was partly due to significant cash dividends received from StoneRiver. Despite increased debt from acquisitions, the company maintained compliance with its debt covenants. Fiserv's strategic focus on integrated technology and services, client relationship enhancement, and innovation appears to be driving positive financial results.

Financial Highlights

46 data points
Beta

Revenue

$1.33B

86.4% Gross Margin

Net Income

$289.00M

21.7% Net Margin

EPS (Diluted)

$0.64

Total Assets

$9.55B

Free Cash Flow

$437.00M

Financial Statements
Beta
Revenue$1.33B
Cost of Revenue$181.00M
Gross Profit$1.15B
SG&A Expenses$258.00M
Operating Expenses$992.00M
Operating Income$339.00M
Interest Expense$40.00M
Net Income$289.00M
EPS (Basic)$0.65
EPS (Diluted)$0.64
Shares Outstanding (Basic)447.00M
Shares Outstanding (Diluted)454.60M

Key Highlights

  • 1Total revenue grew 4% to $1.33 billion for the three months ended March 31, 2016, up from $1.27 billion in the prior year.
  • 2Operating income increased 8% to $339 million, with operating margin improving to 25.5% from 24.6% year-over-year.
  • 3Diluted earnings per share (EPS) surged to $1.27 from $0.73 in the prior year, significantly boosted by a $146 million gain from an investment in an unconsolidated affiliate.
  • 4Operating cash flow significantly increased by 47% to $509 million, driven by improved operating results and dividends received from an unconsolidated affiliate.
  • 5Fiserv completed two strategic acquisitions in Q1 2016 for a combined $265 million to bolster its payment and digital banking solutions.
  • 6The Payments segment showed robust growth with an 8% revenue increase, primarily from card services and electronic payments.
  • 7Long-term debt increased to $4.45 billion, reflecting financing for acquisitions, but the company remained in compliance with debt covenants.

Frequently Asked Questions

Fiserv's total revenue increased by 4% to $1.33 billion, primarily driven by an 8% revenue growth in its Payments segment. This growth was attributed to new clients, additional product offerings, increased transaction volumes in card services and electronic payments, and contributions from recent acquisitions. The Financial segment also saw a modest 1% increase.

Fiserv's 49% equity investment in StoneRiver Group resulted in a significant $146 million pre-tax gain recognized in the first quarter of 2016, stemming from StoneRiver's sale of a business interest. This gain substantially boosted Fiserv's net income and diluted EPS. Additionally, Fiserv received $140 million in cash dividends from StoneRiver, which positively impacted operating cash flow.

Fiserv acquired two businesses for a total of $265 million in the first quarter of 2016, aimed at expanding its biller solutions and digital banking offerings. These acquisitions contributed $13 million to the Payments segment's revenue. The acquisitions also led to an increase in long-term debt and associated integration costs, including a $10 million non-cash impairment charge related to software replacement.

Fiserv reported total debt of $4.45 billion at the end of Q1 2016. The company generated strong operating cash flow of $509 million, a 47% increase year-over-year, and had $1.5 billion available under its revolving credit facility. The company remains compliant with all its debt covenants and uses its operating cash flow primarily for debt repayment, capital expenditures, acquisitions, and share repurchases, rather than paying dividends.