Fiserv, Inc.
Apr 27, 2011
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Fiserv Reports First Quarter 2011 Results

3 percent adjusted internal revenue growth,
Payments segment growth of 5 percent;
Adjusted earnings per share increases 7 percent to $1.02;
Company affirms 2011 revenue and earnings guidance

BROOKFIELD, Wis.--(BUSINESS WIRE)-- Fiserv, Inc. (NASDAQ: FISV), the leading global provider of financial services technology solutions, today reported financial results for the first quarter of 2011.

GAAP revenue in the first quarter of 2011 was $1.05 billion compared with $1.01 billion in the first quarter of 2010. Adjusted revenue increased 3 percent to $982 million in the first quarter compared with $954 million in 2010.

GAAP earnings per share from continuing operations for the first quarter of 2011 was $0.77, which includes severance expenses of $0.08 per share, compared with $0.80 in 2010. Adjusted earnings per share from continuing operations in the first quarter of 2011 increased 7 percent to $1.02 compared with $0.95 in 2010.

"Our first quarter revenue growth is kicking off a good start to the year led by strong performance in our Payments segment," said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. "We are enhancing our sustainable revenue growth profile through a strong business model, market leading technologies and solid sales execution."

First Quarter 2011

Outlook for 2011

Fiserv continues to expect 2011 adjusted internal revenue growth to be in a range of 2 to 4 percent. The company also expects 2011 adjusted earnings per share to be in a range of $4.42 to $4.54, which represents growth of 9 to 12 percent compared with $4.05 in 2010.

"Given our results in the quarter and visibility into the remainder of the year, we are on-track to achieve our 2011 guidance," said Yabuki.

Earnings Conference Call

The company will discuss its first quarter 2011 results on a conference call and webcast at 4 p.m. CDT on Wednesday, April 27, 2011. To register for the event, go to www.fiserv.com and click on the Q1 Earnings Webcast icon. Supplemental materials will be available in the "Investor Relations" section of the website.

About Fiserv

Fiserv, Inc. (NASDAQ: FISV) is the leading global provider of information management and electronic commerce systems for the financial services industry, driving innovation that transforms experiences for financial institutions and their customers. Fiserv is ranked No. 1 on the FinTech 100 survey of top technology partners to the financial services industry. For more information, visit www.fiserv.com.

Use of Non-GAAP Financial Measures

We supplement our reporting of revenue, operating income, income from continuing operations and earnings per share information determined in accordance with GAAP by using "adjusted revenue," "adjusted operating income," "adjusted income from continuing operations," "adjusted earnings per share," "adjusted operating margin," "free cash flow" and "adjusted internal revenue growth" in this earnings release. Management believes that adjustments for certain non-cash or other expenses and the exclusion of certain pass-through revenue and expenses enhance our shareholders' ability to evaluate our performance because such items do not reflect how we manage our operations. Therefore, we exclude these items from GAAP revenue, operating income, income from continuing operations and earnings per share to calculate these non-GAAP measures.

Examples of non-cash or other items may include, but are not limited to, non-cash intangible asset amortization expense associated with acquisitions, severance costs, merger costs, and certain integration expenses related to acquisitions and the achievement of the company's operational effectiveness objectives. We exclude these items to more clearly focus on the factors we believe are pertinent to the management of our operations, and we use this information to allocate resources to our various businesses.

Free cash flow and adjusted internal revenue growth are non-GAAP financial measures and are described on page 12. We believe free cash flow is useful to measure the funds generated in a given period that are available for strategic capital decisions. We believe adjusted internal revenue growth is useful because it presents revenue growth excluding acquired revenue and postage reimbursements in our Output Solutions business. We believe this supplemental information enhances our shareholders' ability to evaluate and understand our core business performance.

These non-GAAP measures should be considered in addition to, and not as a substitute for, revenue, operating income, income from continuing operations and earnings per share or any other amount determined in accordance with GAAP. These non-GAAP measures reflect management's judgment of particular items and may not be comparable to similarly titled measures reported by other companies.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated adjusted earnings per share and adjusted internal revenue growth. Statements can generally be identified as forward-looking because they include words such as "believes," "anticipates," "expects," "could," "should" or words of similar meaning. Statements that describe the company's future plans, objectives or goals are also forward-looking statements. Forward-looking statements are subject to assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that may affect the company's results include, among others: the impact on the company's business of the current state of the economy, including the risk of reduction in revenue resulting from decreased spending on the products and services that the company offers or from the elimination of existing or potential clients due to consolidation or financial failures in the financial services industry; legislative and regulatory actions in the United States, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations, and internationally; changes in client demand for the company's products or services; pricing or other actions by competitors; the impact of the company's strategic initiatives; the company's ability to comply with government regulations, including privacy regulations; and other factors included in the company's filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2010 and in other documents that the company files with the SEC. You should consider these factors carefully in evaluating forward-looking statements, and are cautioned not to place undue reliance on such statements. The company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

 
Fiserv, Inc.
Condensed Consolidated Statements of Income
(In millions, except per share amounts, unaudited)
   
Three Months Ended
March 31,
2011 2010
Revenue
Processing and services $ 862 $ 831
Product   186     177  
Total revenue   1,048     1,008  
 
Expenses
Cost of processing and services 474 462
Cost of product 150 136
Selling, general and administrative (1)   203     172  
Total expenses   827     770  
 
Operating income 221 238
Interest expense - net   (45 )   (45 )
 
Income from continuing operations before income taxes
and income from investment in unconsolidated affiliate 176 193
Income tax provision (64 ) (73 )
Income from investment in unconsolidated affiliate   2     3  
Income from continuing operations 114 123
Loss from discontinued operations   (2 )   (2 )
 
Net income $ 112   $ 121  
 
GAAP earnings (loss) per share - diluted:
Continuing operations $ 0.77 $ 0.80
Discontinued operations   (0.01 )   (0.01 )
Total $ 0.76   $ 0.79  
 
Diluted shares used in computing earnings (loss) per share 147.7 153.7

(1) Selling, general and administrative expenses include an $18 million pre-tax charge ($0.08 per share) in the first quarter of 2011 for employee severance and related expenses.

   
Fiserv, Inc.
Reconciliation of GAAP to Adjusted Income and
Earnings Per Share from Continuing Operations
(In millions, except per share amounts, unaudited)
 
Three Months Ended
March 31,
2011 2010
 
GAAP income from continuing operations $ 114 $ 123
Adjustments:
Merger and integration costs 2 -
Severance costs (1) 18 -
Amortization of acquisition-related intangible assets 38 37
Tax impact of adjustments   (21 )   (14 )
Adjusted income from continuing operations $ 151   $ 146  
 
GAAP earnings per share - continuing operations $ 0.77 $ 0.80
Adjustments - net of income taxes:
Merger and integration costs 0.01 -
Severance costs (1) 0.08 -
Amortization of acquisition-related intangible assets   0.16     0.15  
Adjusted earnings per share $ 1.02   $ 0.95  

(1) See footnote 1 on page 7.

See page 5 for disclosures related to the use of non-GAAP financial information.

   
Fiserv, Inc.
Financial Results by Segment
(In millions, unaudited)
 
Three Months Ended
March 31,
2011 2010
Total Company
Revenue $ 1,048 $ 1,008
Output Solutions postage reimbursements   (66 )   (54 )
Adjusted revenue $ 982   $ 954  
Operating income $ 221 $ 238
Merger and integration costs 2 -
Severance costs 18 -
Amortization of acquisition-related intangible assets   38     37  
Adjusted operating income $ 279   $ 275  
Operating margin 21.1 % 23.7 %
Adjusted operating margin 28.3 % 28.9 %
 
Payments and Industry Products ("Payments")
Revenue $ 580 $ 540
Output Solutions postage reimbursements   (66 )   (54 )
Adjusted revenue $ 514   $ 486  
Operating income $ 156   $ 148  
Operating margin 26.8 % 27.5 %
Adjusted operating margin 30.3 % 30.5 %
 
Financial Institution Services ("Financial")
Revenue $ 480   $ 472  
Operating income $ 139   $ 136  
Operating margin 28.9 % 28.8 %
 
Corporate and Other
Revenue $ (12 ) $ (4 )
Operating loss $ (74 ) $ (46 )
Merger and integration costs 2 -
Severance costs 18 -
Amortization of acquisition-related intangible assets   38     37  
Adjusted operating loss $ (16 ) $ (9 )

See page 5 for disclosures related to the use of non-GAAP financial information. Operating margin percentages are calculated using actual, unrounded amounts.

   
Fiserv, Inc.
Condensed Consolidated Statements of Cash Flows - Continuing Operations
(In millions, unaudited)
   
Three Months Ended
March 31,
2011 2010
Cash flows from operating activities
Net income $ 112 $ 121
Adjustment for discontinued operations 2 2
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and other amortization 47 47
Amortization of acquisition-related intangible assets 38 37
Share-based compensation 12 10
Deferred income taxes 4 5
Other non-cash items (9 ) (10 )
Changes in assets and liabilities, net of effects from acquisitions:
Trade accounts receivable 48 39
Prepaid expenses and other assets (24 ) (12 )
Accounts payable and other liabilities 57 11
Deferred revenue   (4 )   10  
Net cash provided by operating activities   283     260  
 
Cash flows from investing activities
Capital expenditures, including capitalization of software costs (56 ) (42 )
Payments for acquisitions of businesses, net of cash acquired (49 ) -
Other investing activities   (6 )   7  
Net cash used in investing activities   (111 )   (35 )
 
Cash flows from financing activities
Repayments of long-term debt (1 ) (126 )
Issuance of common stock and treasury stock 32 21
Purchases of treasury stock (252 ) (71 )
Other financing activities   3     5  
Net cash used in financing activities   (218 )   (171 )
 
Change in cash and cash equivalents (46 ) 54
Net cash transactions from discontinued operations - (1 )
Beginning balance   563     363  
Ending balance $ 517   $ 416  
   
Fiserv, Inc.
Condensed Consolidated Balance Sheets
(In millions, unaudited)
 
March 31, December 31,
2011 2010
Assets
Cash and cash equivalents $ 517 $ 563
Trade accounts receivable — net 528 572
Deferred income taxes 40 37
Prepaid expenses and other current assets   261   245
Total current assets 1,346 1,417
 
Property and equipment — net 276 267
Intangible assets — net 1,895 1,879
Goodwill 4,388 4,377
Other long-term assets   352   341
Total assets $ 8,257 $ 8,281
 
Liabilities and Shareholders' Equity
Accounts payable and accrued expenses $ 594 $ 537
Current maturities of long-term debt 3 3
Deferred revenue   349   351
Total current liabilities 946 891
 
Long-term debt 3,352 3,353
Deferred income taxes 648 627
Other long-term liabilities   173   181
Total liabilities 5,119 5,052
Shareholders' equity   3,138   3,229
Total liabilities and shareholders' equity $ 8,257 $ 8,281
 

Fiserv, Inc.

Selected Financial Measures

       

Free Cash Flow (1)
(In millions, unaudited)

 

    Three Months Ended

March 31,

2011   2010
Net cash provided by operating activities $ 283 $ 260
Capital expenditures (56 ) (42 )
Other adjustments   17     7  
Free cash flow $ 244   $ 225  

(1) Free cash flow is calculated as net cash provided by operating activities less capital expenditures and excludes the net change in settlement assets and obligations and tax-effected severance, merger and integration payments.

       
Adjusted Internal Revenue Growth (1)     Three Months Ended

March 31, 2011

Payments Segment 5%
Financial Segment 2%
Total Company 3%

(1) Adjusted internal revenue growth is measured as the increase or decrease in adjusted revenue (see page 9), excluding acquired revenue, for the current period divided by adjusted revenue from the prior year period. Acquired revenue in the Payments segment, and for the total company, was $2 million in the first quarter of 2011.

See page 5 for disclosures related to the use of non-GAAP financial information.

FISV-E

Media Relations:
Judy DeRango Wicks
Vice President Communications
Fiserv, Inc.
678-375-1595
judy.wicks@fiserv.com
or
Investor Relations:
Peter Holbrook
Vice President Investor Relations
Fiserv, Inc.
262-879-5055
peter.holbrook@fiserv.com

Source: Fiserv, Inc.

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