10-QPeriod: Q1 FY2017

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 27, 2017For Securities:FISV

Summary

Fiserv Inc. (FISV) reported its first-quarter results for 2017, showing solid revenue growth and improved operating income. Total revenue increased by 5% to $1,394 million, driven by a 6% increase in the Payments segment and a 4% increase in the Financial segment. This growth was supported by contributions from acquired businesses and organic increases in transaction volumes and product sales. Despite a slight increase in selling, general, and administrative expenses as a percentage of revenue, the company managed to improve its overall operating income by 8% to $365 million, with an expanded operating margin of 26.2%. Net income, however, saw a decrease to $247 million from $289 million in the prior year, primarily due to a significant one-time gain from an unconsolidated affiliate in the prior year's first quarter. Diluted earnings per share were $1.13, down from $1.27 in the prior year, also impacted by the prior year's affiliate gain. The company maintained a strong liquidity position with ample cash and availability under its revolving credit facility.

Financial Highlights

46 data points
Beta

Revenue

$1.39B

86.9% Gross Margin

Net Income

$247.00M

17.7% Net Margin

EPS (Diluted)

$0.56

Total Assets

$9.70B

Free Cash Flow

$387.00M

Financial Statements
Beta
Revenue$1.39B
Cost of Revenue$182.00M
Gross Profit$1.21B
SG&A Expenses$277.00M
Operating Expenses$1.03B
Operating Income$365.00M
Interest Expense$42.00M
Net Income$247.00M
EPS (Basic)$0.58
EPS (Diluted)$0.56
Shares Outstanding (Basic)429.10M
Shares Outstanding (Diluted)438.50M

Key Highlights

  • 1Total revenue increased 5% to $1,394 million in Q1 2017 compared to Q1 2016.
  • 2Operating income grew 8% to $365 million, with operating margin expanding by 70 basis points to 26.2%.
  • 3Payments segment revenue increased 6% and Financial segment revenue increased 4%.
  • 4Net income decreased to $247 million from $289 million, largely due to a significant gain from an unconsolidated affiliate in the prior year.
  • 5Diluted EPS decreased to $1.13 from $1.27, impacted by the prior year's affiliate gain.
  • 6The company acquired Online Banking Solutions, Inc. for $78 million in January 2017.
  • 7Fiserv maintained a strong liquidity position, with $308 million in cash and cash equivalents and $1.3 billion available under its revolving credit facility.

Frequently Asked Questions

Revenue growth was primarily driven by a 5% increase in total revenue, with the Payments segment growing by 6% and the Financial segment by 4%. This growth was supported by contributions from recent acquisitions and organic increases in transaction volumes and product sales.

The decrease in net income was primarily due to a significant one-time gain of $146 million (pre-tax) recognized from an investment in an unconsolidated affiliate (StoneRiver) in the first quarter of 2016. This gain was not present in the first quarter of 2017, which had a smaller gain of $26 million from the same affiliate, but also included a $44 million impairment charge in the prior year.

Fiserv reported a strong liquidity position with $308 million in cash and cash equivalents and $1.3 billion available under its revolving credit facility as of March 31, 2017. Operating cash flow was $463 million, a decrease from the prior year primarily due to lower dividends received from the StoneRiver joint venture. The company's policy is to use operating cash flow for capital expenditures, share repurchases, acquisitions, and debt repayment.

Yes, Fiserv acquired Online Banking Solutions, Inc. ('OBS') for $78 million, net of cash acquired, with potential earn-out provisions. This acquisition is expected to enhance its cash management and digital business banking capabilities.