10-QPeriod: Q3 FY2019

FISERV INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 7, 2019For Securities:FISV

Summary

Fiserv Inc.'s third quarter 2019 10-Q filing reveals significant changes driven by the completion of the First Data acquisition on July 29, 2019. This transformative event nearly tripled the company's total assets and substantially increased its revenue and operational scale. While this acquisition drove a large increase in total revenue, it also came with increased expenses, notably higher interest expense due to the debt financing used for the acquisition, and significant amortization of acquired intangible assets. Despite the integration challenges and increased debt load, the core Fiserv businesses (Payments and Financial segments) continued to show modest revenue growth. The company is focused on integrating First Data and realizing synergies, which will be critical for future profitability and debt reduction. Investors should monitor the integration progress and the company's ability to manage its enlarged debt and operational complexity.

Financial Highlights

50 data points
Beta

Revenue

$3.13B

Net Income

$198.00M

6.3% Net Margin

EPS (Diluted)

$0.33

Total Assets

$77.86B

Cash & Equivalents

$1.07B

Free Cash Flow

$817.00M

Financial Statements
Beta
Revenue$3.13B
SG&A Expenses$1.14B
Operating Expenses$2.75B
Operating Income$374.00M
Interest Expense$187.00M
Net Income$198.00M
EPS (Basic)$0.34
EPS (Diluted)$0.33
Shares Outstanding (Basic)584.80M
Shares Outstanding (Diluted)596.90M

Key Highlights

  • 1Completion of the transformative First Data acquisition on July 29, 2019, significantly expanding Fiserv's global reach and service offerings.
  • 2Total revenue surged by 122% to $3.13 billion in Q3 2019 and by 44% to $6.14 billion in the first nine months of 2019, primarily due to the inclusion of First Data's results.
  • 3Operating income for the quarter was $374 million, a slight increase of 5% over Q3 2018, but for the nine-month period, operating income decreased by 14% to $1.13 billion, largely due to increased expenses.
  • 4Net income attributable to Fiserv, Inc. decreased by 13% to $198 million in Q3 2019 and by 28% to $646 million for the nine months ended September 30, 2019.
  • 5Significant increase in long-term debt, reaching $22.12 billion as of September 30, 2019, primarily to fund the First Data acquisition, leading to a substantial rise in interest expense.
  • 6Goodwill and intangible assets increased significantly due to the First Data acquisition, now totaling $35.5 billion and $17.7 billion respectively, representing a large portion of the company's assets.
  • 7The company successfully integrated the results of First Data starting from the acquisition date, with First Data contributing $1.61 billion in revenue and $396 million in operating income in Q3 2019.

Frequently Asked Questions

The primary driver was the completion of the acquisition of First Data Corporation on July 29, 2019. This acquisition significantly expanded Fiserv's operations, contributing $1.61 billion in revenue for the third quarter alone.

The acquisition was largely financed through debt. As a result, Fiserv's long-term debt increased substantially to $22.12 billion as of September 30, 2019. This led to a significant rise in interest expense, which more than doubled for the three and nine-month periods compared to 2018.

The filing indicates that First Data's financial results have been included since the acquisition date and that Fiserv is actively integrating the acquired business. The company expects to realign its business segments in early 2020 as integration plans are finalized. Management is focused on realizing synergies and operational efficiencies from the acquisition.

While total revenue increased significantly, operating income saw a modest 5% increase in Q3 due to higher expenses, and a 14% decrease for the nine-month period. Net income attributable to Fiserv, Inc. decreased by 13% in Q3 and 28% for the nine-month period, primarily due to increased operating expenses, interest expenses, and amortization of acquisition-related intangible assets.