10-QPeriod: Q1 FY2018

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 2, 2018For Securities:FISV

Summary

Fiserv, Inc. (FISV) reported strong financial performance for the first quarter ended March 31, 2018. Total revenue increased by 3% year-over-year to $1,440 million. This growth was primarily driven by a 6% increase in the Payments segment, supported by higher transaction volumes and recent acquisitions. The Financial segment experienced a slight 1% revenue decline, impacted by a prior year divestiture and lower software license revenue. Net income saw a substantial increase of 74% to $563 million before income taxes, significantly boosted by a $232 million gain from the sale of a 55% interest in its Lending Solutions business. Diluted earnings per share (EPS) more than doubled to $1.00, up from $0.56 in the prior year, also benefiting from the gain on sale. The company continues to execute on its strategic priorities, focusing on high-quality revenue growth, enhancing client relationships, and driving innovation. Operating cash flow, while down 20% year-over-year to $372 million, remains robust, providing ample resources for operations and strategic investments. The company also announced a two-for-one stock split effective in March 2018, with all historical share and per share data retroactively adjusted.

Financial Highlights

47 data points
Beta

Revenue

$1.44B

86.7% Gross Margin

Net Income

$423.00M

29.4% Net Margin

EPS (Diluted)

$1.00

Total Assets

$10.17B

Free Cash Flow

$295.00M

Financial Statements
Beta
Revenue$1.44B
Cost of Revenue$191.00M
Gross Profit$1.25B
SG&A Expenses$305.00M
Operating Expenses$832.00M
Operating Income$608.00M
Interest Expense$45.00M
Net Income$423.00M
EPS (Basic)$1.02
EPS (Diluted)$1.00
Shares Outstanding (Basic)413.10M
Shares Outstanding (Diluted)421.60M

Key Highlights

  • 1Total revenue increased by 3% to $1,440 million in Q1 2018 compared to Q1 2017.
  • 2Net income before income taxes increased significantly by 74% to $563 million, largely due to a $232 million gain on the sale of a Lending Solutions business interest.
  • 3Diluted Earnings Per Share (EPS) more than doubled to $1.00, up from $0.56 in the prior year, reflecting the impact of the sale gain.
  • 4The Payments segment demonstrated strong growth with a 6% revenue increase, driven by card services and biller solutions.
  • 5Operating cash flow was $372 million, a decrease of 20% from the prior year, primarily due to unfavorable working capital changes.
  • 6The company adopted new accounting standard ASC 606 (Revenue from Contracts with Customers) effective January 1, 2018, using a modified retrospective approach.
  • 7Fiserv completed a two-for-one stock split in March 2018, with all historical share and per share data retroactively adjusted.

Frequently Asked Questions

The substantial increase in net income was primarily driven by a $232 million pre-tax gain recognized from the sale of a 55% interest in Fiserv's Lending Solutions business in March 2018.

The adoption of ASC 606, effective January 1, 2018, led to a cumulative-effect increase in retained earnings of $208 million, primarily related to capitalizing incremental sales commissions. It also resulted in adjustments to revenue and expenses in the first quarter of 2018, with a net negative impact of $16 million on reported net income for the quarter.

The company expects continued revenue growth in its Payments segment, which saw a 6% increase driven by transaction volumes and acquisitions. The Financial segment experienced a slight decline, but growth in account processing businesses is expected to offset some of these pressures.

Fiserv's debt primarily consists of senior notes, a term loan, and revolving credit facility borrowings. As of March 31, 2018, total debt was $4.6 billion. The company was in compliance with all debt covenants and has a strong liquidity position with $382 million in cash and cash equivalents and $1.2 billion available under its revolving credit facility.