10-QPeriod: Q2 FY2020

FISERV INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 6, 2020For Securities:FISV

Summary

Fiserv Inc. reported significant revenue growth in the second quarter and first six months of 2020, largely driven by the acquisition of First Data. Total revenue surged by 129% in Q2 2020 and 140% in the first six months of 2020 compared to the prior year periods. However, net income attributable to Fiserv, Inc. saw a substantial decrease, with net income falling by 99% in Q2 2020 and 12% in the first six months of 2020. This was primarily due to increased expenses, including amortization of acquired intangible assets and integration costs related to the First Data acquisition. The company experienced a significant impact from the COVID-19 pandemic, particularly in its merchant acquiring and payment-related businesses, which are transaction-based. While volumes began to recover in May and June 2020, the ongoing uncertainty remains a key factor. Despite revenue growth, the company's operating income and margin were negatively affected in the second quarter, though the six-month performance showed a slight increase in operating income. Fiserv also completed several smaller acquisitions in 2020 and divested a portion of its Investment Services business, generating a gain on sale. The company's liquidity remains strong, supported by operating cash flow and available credit facilities, though it is actively managing its debt and capital structure.

Financial Highlights

49 data points
Beta

Revenue

$3.46B

Net Income

$2.00M

0.1% Net Margin

EPS (Diluted)

$0.00

Total Assets

$77.09B

Cash & Equivalents

$907.00M

Free Cash Flow

$789.00M

Financial Statements
Beta
Revenue$3.46B
SG&A Expenses$1.38B
Operating Expenses$3.30B
Operating Income$165.00M
Interest Expense$176.00M
Net Income$2.00M
Shares Outstanding (Basic)670.00M
Shares Outstanding (Diluted)680.80M

Key Highlights

  • 1Total revenue increased by 129% to $3.465 billion in Q2 2020 and by 140% to $7.234 billion in the first six months of 2020, primarily due to the First Data acquisition.
  • 2Net income attributable to Fiserv, Inc. decreased by 99% to $2 million in Q2 2020 and by 12% to $394 million in the first six months of 2020.
  • 3Operating income decreased by 57% to $165 million in Q2 2020 but increased by 5% to $794 million in the first six months of 2020.
  • 4The company incurred significant integration costs and amortization expenses related to the First Data acquisition, impacting profitability.
  • 5COVID-19 pandemic negatively impacted transaction volumes, particularly in the merchant acquiring business, though recovery was noted in May and June 2020.
  • 6Fiserv completed several smaller acquisitions (MerchantPro, Bypass, Inlet) in early 2020 and divested a 60% interest in its Investment Services business, resulting in a $428 million pre-tax gain.
  • 7As of June 30, 2020, Fiserv had $869 million in cash and cash equivalents and $2.5 billion available under its revolving credit facility, indicating strong liquidity.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of First Data Corporation, which closed in July 2019. This acquisition significantly expanded Fiserv's scale and service offerings, contributing substantially to both processing and services, and product revenue.

The COVID-19 pandemic had a negative impact, particularly on Fiserv's merchant acquiring and payment-related businesses due to decreased transaction volumes and consumer spending. While there was a recovery in merchant acquiring volumes in May and June 2020, the overall economic uncertainty created by the pandemic continues to be a factor affecting financial results.

The First Data acquisition led to significant increases in expenses, including amortization of acquired intangible assets and integration-related costs. These higher expenses, coupled with the impact of the pandemic on certain revenue streams, led to a substantial decrease in net income attributable to Fiserv, Inc. in the second quarter of 2020, despite the strong revenue growth.

Yes, in February 2020, Fiserv completed the sale of a 60% controlling interest in its Investment Services business, generating a significant pre-tax gain of $428 million. The company also completed three smaller acquisitions in early 2020: MerchantPro Express LLC, Bypass Mobile, LLC, and Inlet, LLC, to further expand its merchant services and digital bill payment capabilities.