10-QPeriod: Q1 FY2020

FISERV INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 8, 2020For Securities:FISV

Summary

Fiserv Inc.'s first quarter 2020 report (filed May 8, 2020) shows a significant increase in total revenue, up 151% year-over-year to $3.77 billion. This substantial growth was primarily driven by the acquisition of First Data Corporation in July 2019, which contributed $2.275 billion in revenue. Despite the revenue surge, net income attributable to Fiserv, Inc. rose more modestly to $392 million from $225 million in the prior year's quarter. The company experienced a significant increase in expenses, including higher cost of processing and services, cost of product, and selling, general, and administrative expenses, largely due to the integration of First Data and related amortization of acquired intangible assets. The company also noted a $431 million gain on the sale of its Investment Services business, which boosted net income, but also incurred significant restructuring charges related to the First Data integration. The report also highlights the emerging impact of the COVID-19 pandemic, noting a decrease in payment volumes in the latter half of March 2020. Investors should note the substantial revenue growth powered by the First Data acquisition, alongside the associated increase in operating expenses and integration costs. The company's ability to manage these costs and realize synergies from the acquisition will be crucial. Furthermore, the impact of the COVID-19 pandemic on transaction volumes and economic activity remains a key area of focus for the near future.

Financial Highlights

49 data points
Beta

Revenue

$3.77B

Net Income

$392.00M

10.4% Net Margin

EPS (Diluted)

$0.57

Total Assets

$72.60B

Cash & Equivalents

$934.00M

Free Cash Flow

$642.00M

Financial Statements
Beta
Revenue$3.77B
SG&A Expenses$1.40B
Operating Expenses$3.14B
Operating Income$629.00M
Interest Expense$189.00M
Net Income$392.00M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)678.10M
Shares Outstanding (Diluted)691.20M

Key Highlights

  • 1Total revenue surged by 151% to $3.77 billion, largely due to the acquisition of First Data Corporation.
  • 2Net income attributable to Fiserv, Inc. increased to $392 million from $225 million in the prior year quarter.
  • 3Operating income grew by 69% to $629 million, though the operating margin decreased to 16.7% from 24.8% year-over-year.
  • 4The company recognized a significant $431 million pre-tax gain on the sale of a 60% interest in its Investment Services business.
  • 5Restructuring charges of $48 million were recorded, primarily related to First Data integration efforts, including employee termination costs.
  • 6The report acknowledges the negative impact of the COVID-19 pandemic on payment volumes in late March 2020.
  • 7Interest expense more than doubled to $187 million, driven by debt incurred to finance the First Data acquisition.

Frequently Asked Questions

The primary driver of the significant 151% increase in total revenue to $3.77 billion was the acquisition of First Data Corporation on July 29, 2019. First Data contributed approximately $2.275 billion to the total revenue in the first quarter of 2020.

While revenue significantly increased due to the First Data acquisition, expenses also rose substantially. This included higher costs of services, product costs, and SG&A expenses, largely due to the integration of First Data and the associated amortization of acquired intangible assets. Restructuring charges related to integration were also significant. Despite a large gain from divesting the Investment Services business, the operating margin compressed year-over-year.

Fiserv noted a significant decrease in payments volume and transactions during the last two weeks of March 2020 due to the COVID-19 pandemic. The company acknowledges the uncertainty surrounding the duration and intensity of the pandemic and its impact on future operational and financial performance. They have taken actions to manage discretionary costs and are reassessing capital expenditures. The full extent of the impact remains unknown and is subject to ongoing monitoring.

In addition to the First Data acquisition, Fiserv completed the sale of a 60% controlling interest in its Investment Services business in February 2020, realizing a $431 million pre-tax gain. They also acquired two smaller businesses, MerchantPro Express and Bypass Mobile, in March 2020. The company also announced a leadership transition, with Frank J. Bisignano set to become CEO on July 1, 2020.