10-QPeriod: Q2 FY2016

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 3, 2016For Securities:FISV

Summary

Fiserv, Inc. reported solid financial performance for the six months ended June 30, 2016, demonstrating revenue growth and improved operating income. Total revenue increased by 5% year-over-year, primarily driven by the Payments segment, which saw a 8% increase. This growth was attributed to higher transaction volumes and contributions from recent acquisitions. The company also reported a significant increase in net income, more than doubling compared to the prior year, largely due to a substantial gain from its investment in an unconsolidated affiliate, StoneRiver Group, L.P., partially offset by an impairment charge. Operating income also showed a healthy 10% increase, reflecting operational efficiencies and revenue growth, particularly in the Payments segment. The company continues to manage its debt effectively, with interest expense decreasing. From an operational standpoint, Fiserv successfully integrated two acquisitions during the first half of the year, expanding its biller solution and digital banking offerings. The company's strategic focus on digital channels and outsourced solutions aligns well with industry trends. Despite a slight decrease in the Financial segment's operating income, overall performance indicates a company executing on its strategic priorities and capitalizing on market opportunities.

Financial Highlights

46 data points
Beta

Revenue

$1.36B

86.8% Gross Margin

Net Income

$212.00M

15.6% Net Margin

EPS (Diluted)

$0.47

Total Assets

$9.53B

Free Cash Flow

$105.00M

Financial Statements
Beta
Revenue$1.36B
Cost of Revenue$180.00M
Gross Profit$1.18B
SG&A Expenses$274.00M
Operating Expenses$1.00B
Operating Income$362.00M
Interest Expense$40.00M
Net Income$212.00M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)444.00M
Shares Outstanding (Diluted)451.20M

Key Highlights

  • 1Total revenue grew 5% to $2.694 billion for the first six months of 2016, driven by a strong 8% increase in the Payments segment.
  • 2Net income more than doubled to $501 million for the first six months of 2016, significantly boosted by a $146 million gain from the sale of a business interest by its affiliate, StoneRiver.
  • 3Operating income increased by 10% to $701 million for the first six months of 2016, with the Payments segment showing robust 16% growth.
  • 4The company successfully completed two acquisitions in the first quarter of 2016 for $265 million, enhancing its biller and digital banking solutions.
  • 5Operating expenses as a percentage of revenue decreased to 74.0% for the first six months of 2016 from 75.1% in the prior year, indicating improved operational efficiency.
  • 6Despite a 15% increase in cash from operations to $687 million, capital expenditures decreased by 29% to $145 million.
  • 7The company repurchased $604 million of its common stock in the first six months of 2016, reflecting a commitment to shareholder returns.

Frequently Asked Questions

The substantial increase in net income to $501 million was primarily driven by a significant gain of $146 million from Fiserv's share of the net gain on the sale of a business interest by its unconsolidated affiliate, StoneRiver Group, L.P. This was partially offset by a $44 million impairment loss on the investment in StoneRiver.

Fiserv acquired two businesses in the first quarter of 2016 for a total of $265 million. These acquisitions contributed $38 million to revenue in the first six months of 2016 and enhanced its biller solution and digital banking offerings. While they led to some integration costs, including a $10 million non-cash impairment charge, they are expected to contribute to future growth.

The Payments segment showed strong performance, with revenue up 8% and operating income up 16% in the first six months of 2016, driven by increased transaction volumes and recent acquisitions. The Financial segment experienced slower growth, with revenue up only 1% and a slight decrease in operating income, attributed to factors like foreign currency fluctuations and increased investments in innovation. Overall, the Payments segment is the primary growth engine.

Fiserv maintained a strong liquidity position with $263 million in cash and cash equivalents and $1.4 billion available under its revolving credit facility as of June 30, 2016. Net cash provided by operating activities increased by 15% to $687 million for the first six months of 2016. Interest expense decreased due to debt repayments and the reclassification of certain hedge costs. The company's debt levels remained stable, and it was in compliance with all financial debt covenants.