fisv-20200930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File Number 1-38962

FISERV, INC.

(Exact Name of Registrant as Specified in Its Charter)


Wisconsin						39-1506125
(State or Other Jurisdiction of Incorporation or Organization)						(I. R. S. Employer Identification No.)

255 Fiserv Drive, Brookfield, WI 53045

(Address of Principal Executive Offices and zip code)

(262) 879-5000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FISV

The NASDAQ Stock Market LLC

0.375% Senior Notes due 2023

FISV23

The NASDAQ Stock Market LLC

1.125% Senior Notes due 2027

FISV27

The NASDAQ Stock Market LLC

1.625% Senior Notes due 2030

FISV30

The NASDAQ Stock Market LLC

2.250% Senior Notes due 2025

FISV25

The NASDAQ Stock Market LLC

3.000% Senior Notes due 2031

FISV31

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 23, 2020, there were 670,437,918 shares of common stock, $.01 par value, of the registrant outstanding.

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INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Balance Sheets	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	50

	Exhibit Index
	Signatures

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Fiserv, Inc.

Consolidated Statements of Income

(In millions, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue:
Processing and services (1)	$	3,153	$	2,608	$	9,118	$	5,229
Product	633		520		1,902		913
Total revenue	3,786		3,128		11,020		6,142
Expenses:
Cost of processing and services	1,387		1,204		4,488		2,445
Cost of product	481		413		1,467		755
Selling, general and administrative	1,412		1,137		4,193		1,821
Gain on sale of businesses	(36)		—		(464)		(10)
Total expenses	3,244		2,754		9,684		5,011
Operating income	542		374		1,336		1,131
Interest expense, net	(174)		(164)		(535)		(279)
Debt financing activities	—		49		—		(47)
Other income (expense)	13		(3)		34		—
Income before income taxes and income from investments in unconsolidated affiliates	381		256		835		805
Income tax provision	(124)		(53)		(176)		(144)
Income from investments in unconsolidated affiliates	19		22		3		12
Net income	276		225		662		673
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	12		27		4		27
Net income attributable to Fiserv, Inc.	$	264	$	198	$	658	$	646

Net income attributable to Fiserv, Inc. per share – basic	$	0.39	$	0.34	$	0.98	$	1.42
Net income attributable to Fiserv, Inc. per share – diluted	$	0.39	$	0.33	$	0.96	$	1.39

Shares used in computing net income attributable to Fiserv, Inc. per share:
Basic	669.8		584.8		672.6		456.3
Diluted	680.3		596.9		684.1		465.2

(1)Includes processing and other fees charged to related party investments accounted for under the equity method of $62 million and $40 million for the three months ended September 30, 2020 and 2019, respectively, and $174 million and $58 million for the nine months ended September 30, 2020 and 2019, respectively (see Note 21).

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	276	$	225	$	662	$	673
Other comprehensive (loss) income:
Fair market value adjustment on cash flow hedges, net of income tax (provision) benefit of ($2 million), $1 million, $0 million and $46 million	6		(4)		1		(134)

Reclassification adjustment for net realized losses on cash flow hedges included in net interest expense, net of income tax provision of $1 million, $1 million, $4 million and $2 million	4		4		12		6

Foreign currency translation	(180)		(186)		(636)		(184)
Total other comprehensive loss	(170)		(186)		(623)		(312)
Comprehensive income	$	106	$	39	$	39	$	361
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	12		27		4		27
Less: other comprehensive income attributable to noncontrolling interests	17		—		28		—
Comprehensive income attributable to Fiserv, Inc.	$	77	$	12	$	7	$	334

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Balance Sheets

(In millions)

(Unaudited)


	September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	937	$	893
Trade accounts receivable, less allowance for doubtful accounts	2,323		2,782
Prepaid expenses and other current assets	1,362		1,503
Settlement assets	9,403		11,868

Total current assets	14,025		17,046
Property and equipment, net	1,630		1,606
Customer relationships, net	11,907		14,042
Other intangible assets, net	3,742		3,600
Goodwill	35,908		36,038
Contract costs, net	647		533
Investments in unconsolidated affiliates	2,772		2,720
Other long-term assets	1,741		1,954
Total assets	$	72,372	$	77,539
Liabilities and Equity
Accounts payable and accrued expenses	$	3,044	$	3,080
Short-term and current maturities of long-term debt	365		287
Contract liabilities	451		492
Settlement obligations	9,403		11,868
Total current liabilities	13,263		15,727
Long-term debt	20,894		21,612
Deferred income taxes	4,532		4,247
Long-term contract liabilities	170		155
Other long-term liabilities	824		941
Total liabilities	39,683		42,682
Commitments and Contingencies (see Note 20)
Redeemable Noncontrolling Interests	260		262
Fiserv, Inc. Shareholders’ Equity:
Preferred stock, no par value: 25.0 million shares authorized; none issued	—		—
Common stock, $0.01 par value: 1,800.0 million shares authorized; 791.4 million shares issued	8		8
Additional paid-in capital	23,771		23,741
Accumulated other comprehensive loss	(831)		(180)
Retained earnings	13,141		12,528
Treasury stock, at cost, 121.1 million and 111.5 million shares	(4,397)		(3,118)
Total Fiserv, Inc. shareholders’ equity	31,692		32,979
Noncontrolling interests	737		1,616
Total equity	32,429		34,595
Total liabilities and equity	$	72,372	$	77,539

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income	$	662	$	673
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	833		386
Amortization of acquisition-related intangible assets	1,603		476
Amortization of financing costs, debt discounts and other	36		116
Net foreign currency gain on financing activities	—		(50)
Share-based compensation	286		121

Deferred income taxes	(125)		26
Gain on sale of businesses	(464)		(10)
Income from investments in unconsolidated affiliates	(3)		(12)
Distributions from unconsolidated affiliates	12		6
Settlement of interest rate hedge contracts	—		(183)
Non-cash impairment charge	44		—
Other operating activities	(4)		(3)
Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Trade accounts receivable	460		151
Prepaid expenses and other assets	(150)		(41)
Contract costs	(229)		(141)
Accounts payable and other liabilities	34		117
Contract liabilities	(34)		(15)
Net cash provided by operating activities	2,961		1,617
Cash flows from investing activities:
Capital expenditures, including capitalized software and other intangibles	(689)		(431)
Proceeds from sale of businesses	578		39
Payments for acquisition of businesses, net of cash acquired and including working capital adjustments	(137)		(16,004)
Distributions from unconsolidated affiliates	94		85
Purchases of investments	—		(4)
Other investing activities	—		6
Net cash used in investing activities	(154)		(16,309)
Cash flows from financing activities:
Debt proceeds	8,125		18,855
Debt repayments	(9,307)		(3,051)
Short-term borrowings, net	(28)		—
Payments of debt financing, redemption and other costs	(16)		(247)
Proceeds from issuance of treasury stock	108		116
Purchases of treasury stock, including employee shares withheld for tax obligations	(1,612)		(271)

Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(61)		(46)
Other financing activities	6		(5)
Net cash (used in) provided by financing activities	(2,785)		15,351
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4)		(4)
Net change in cash, cash equivalents and restricted cash	18		655

Cash, cash equivalents and restricted cash, beginning balance	933		415
Cash, cash equivalents and restricted cash, ending balance	$	951	$	1,070

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and accompanying notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and accompanying notes of Fiserv, Inc. (the “Company”). These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

On July 29, 2019, the Company acquired First Data Corporation (“First Data”) by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition for a total purchase price of $46.5 billion (see Note 4). First Data provides a wide-range of solutions to merchants, including retail point-of sale (“POS”) merchant transaction processing and acquiring, e-commerce services, mobile payment services and the cloud-based Clover® point-of-sale operating system, as well as technology solutions for bank and non-bank issuers. The consolidated financial statements include the financial results of First Data from the date of acquisition.

Segment Realignment

Effective in the first quarter of 2020, the Company realigned its reportable segments to correspond with changes to its operating model to reflect its new management structure and organizational responsibilities (“Segment Realignment”) following the acquisition of First Data. The Company’s new reportable segments are: Merchant Acceptance (“Acceptance”), Financial Technology (“Fintech”) and Payments and Network (“Payments”). Segment results for the three and nine months ended September 30, 2019 have been restated to reflect the Segment Realignment. See Note 22 for additional information.

Principles of Consolidation

The consolidated financial statements include the accounts of Fiserv, Inc. and its subsidiaries in which the Company holds a controlling financial interest. Control is normally established when ownership and voting interests in an entity are greater than 50%. Investments in which the Company has significant influence but not control are accounted for using the equity method of accounting, for which the Company’s share of net income or loss is reported within income from investments in unconsolidated affiliates and the related tax expense or benefit is reported within the income tax provision in the consolidated statements of income. Significant influence over an affiliate’s operations generally coincides with an ownership interest in an entity of between 20% and 50%. All intercompany transactions and balances have been eliminated in consolidation.

The Company maintains majority controlling interests in certain entities, mostly related to consolidated merchant alliances (see Notes 4 and 21). Noncontrolling interests represent the minority shareholders’ share of the net income or loss and equity in consolidated subsidiaries. The Company’s noncontrolling interests presented in the consolidated statements of income include net income attributable to noncontrolling interests and redeemable noncontrolling interests. Noncontrolling interests are presented as a component of equity in the consolidated balance sheets and reflect the minority shareholders’ share of acquired fair value in the consolidated subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries, net of dividends or distributions. Noncontrolling interests that are redeemable upon the occurrence of an event that is not solely within the Company’s control are presented outside of equity and are carried at their estimated redemption value if it exceeds the initial carrying value of the redeemable interest (see Note 12).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

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Risks and Uncertainties

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and has since continued to spread and negatively impact the economy of the United States and other countries around the world. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic. In response to the COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions have taken actions to prevent the spread of COVID-19, such as imposing travel restrictions and bans, quarantines, social distancing guidelines, shelter-in-place or lock-down orders and other similar limitations. Accordingly, the COVID-19 pandemic has adversely impacted global economic activity and has contributed to significant volatility in financial markets during 2020.

Global economic and market conditions impact levels of consumer spending. Consequently, the Company’s operating performance, primarily within its merchant acquiring and payment-related businesses, which earn transaction-based fees, has been adversely affected, and may continue to be adversely affected, by the economic impact of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s future operational and financial performance will depend on, among other matters, the duration and intensity of the pandemic; governmental and private sector responses to the pandemic and the impact of such responses on the Company; and the impact of the pandemic on the Company’s employees, clients, vendors, operations and sales, all of which are uncertain and cannot be predicted. These changing conditions may also affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the valuations of the Company’s long-lived assets, definite-lived intangible assets and equity method investments; the Company’s deferred tax assets and related valuation allowances; the estimate of current expected credit losses; and certain pension plan assumptions. To the extent economic and market conditions do not continue to improve or deteriorate, the COVID-19 pandemic and the related economic and market decline may also impact the assumptions used in the Company’s annual impairment assessment of goodwill during the fourth quarter of 2020. Changes in any assumptions used may result in a goodwill impairment charge that, if incurred, could have a material adverse impact on the Company’s results of operations, total assets and total equity in the period recognized. Events and changes in circumstances arising subsequent to September 30, 2020, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and investments with original maturities of 90 days or less. Cash and cash equivalents are stated at cost in the consolidated balance sheets, which approximates market value. Cash and cash equivalents that were restricted from use due to regulatory or other requirements are included in other long-term assets in the consolidated balance sheets and totaled $14 million and $40 million at September 30, 2020 and December 31, 2019, respectively.

Allowance for Doubtful Accounts

The Company analyzes the collectability of trade accounts receivable by considering historical bad debts, client creditworthiness, current economic conditions, expectations of near term economic trends, changes in client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts for expected credit losses. Any change in the assumptions used in analyzing a specific account receivable may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. The allowance for doubtful accounts was $47 million and $39 million at September 30, 2020 and December 31, 2019, respectively.

Reserve for Merchant Credit Losses

With respect to the Company’s merchant acquiring business, the Company’s merchant customers have the legal obligation to refund any charges properly reversed by the cardholder. However, in the event the Company is not able to collect the refunded amounts from the merchants, the Company may be liable for the reversed charges. The Company’s risk in this area primarily relates to situations where the cardholder has purchased goods or services to be delivered in the future. The Company requires cash deposits, guarantees, letters of credit or other types of collateral from certain merchants to minimize this obligation. Collateral held by the Company is classified within settlement assets and the obligation to repay the collateral is classified within settlement obligations in the Company’s consolidated balance sheets. The Company also utilizes a number of systems and procedures to manage merchant risk. Despite these efforts, the Company experiences some level of losses due to merchant defaults. The aggregate merchant credit losses, included within cost of processing and services in the consolidated statements of income, incurred by the Company was $35 million and $89 million for the three and nine months ended September 30, 2020, respectively, and $17 million for both the three and nine months ended September 30, 2019. The amount of collateral held by the Company was $982 million and $510 million at September 30, 2020 and December 31, 2019, respectively. The Company maintains reserves for merchant credit losses that are expected to exceed the amount of collateral held. The reserves include an estimated amount for anticipated chargebacks and fraud events that have been incurred on merchants’ payment transactions that have been processed but not yet reported to the Company (“IBNR Reserve”), as well as an allowance on refunded amounts to cardholders that have not yet been collected from the merchants. The IBNR Reserve, which is recorded within accounts payable

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and accrued expenses in the consolidated balance sheets, is based primarily on the Company’s historical experience of credit losses and other relevant factors such as economic downturns or increases in merchant fraud. The aggregate merchant credit loss reserves were $63 million and $34 million at September 30, 2020 and December 31, 2019, respectively.

Goodwill

Goodwill represents the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment on an annual basis, or more frequently if circumstances indicate possible impairment. Goodwill is tested for impairment at a reporting unit level, determined to be at an operating segment level or one level below. When assessing goodwill for impairment, the Company considers (i) the amount of excess fair value over the carrying value of each reporting unit, (ii) the period of time since a reporting unit’s last quantitative test, (iii) the extent a reorganization or disposition changes the composition of one or more of the reporting units and (iv) other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of its reporting units are less than their respective carrying values. Examples of qualitative factors that the Company assesses include its share price, its financial performance, market and competitive factors in its industry and other events specific to its reporting units. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative impairment test by comparing reporting unit carrying values to estimated fair values.

The Company performed its annual assessment of its reporting units’ goodwill in the fourth quarter of 2019 and no impairment was identified. In connection with the Segment Realignment described above, certain of the Company’s reporting units have changed in composition in which goodwill was allocated to such reporting units using a relative fair value approach. Accordingly, the Company performed an interim goodwill impairment assessment in the first quarter of 2020 for those reporting units impacted by the Segment Realignment, and determined that its goodwill was not impaired based on an assessment of various qualitative factors as described above. There is no accumulated goodwill impairment for the Company through September 30, 2020. See Note 7 for additional information.

Other Investments

The Company maintains investments in various equity securities without a readily determinable fair value. Such investments totaled $165 million and $167 million at September 30, 2020 and December 31, 2019, respectively, and are included within other long-term assets in the Company’s consolidated balance sheets. The Company reviews these investments each reporting period to determine whether an impairment or observable price change for the investment has occurred. When such events or changes occur, the Company evaluates the fair value compared to its cost basis in the investment. Gains or losses from a change in fair value are included within other income (expense) in the consolidated statements of income for the period. Adjustments made to the values recorded for these equity securities during the three and nine months ended September 30, 2020 and 2019 were not significant.

Interest Expense, Net

Interest expense, net consists of interest expense primarily associated with the Company’s outstanding borrowings and finance lease obligations, as well as interest income primarily associated with the Company’s investment securities. The Company recognized $176 million and $187 million of interest expense and $2 million and $23 million of interest income during the three months ended September 30, 2020 and 2019, respectively. The Company recognized $541 million and $309 million of interest expense and $6 million and $30 million of interest income for the nine months ended September 30, 2020 and 2019, respectively.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement that is a service contract within the requirements under Accounting Standards Codification (“ASC”) 350 for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Entities are permitted to apply either a retrospective or prospective transition approach to adopt the guidance. The Company adopted ASU 2018-15 effective January 1, 2020 using a prospective approach, and the adoption did not have a material impact on its consolidated financial statements.

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In 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which removes, modifies, and adds certain disclosure requirements of ASC Topic 820, Fair Value Measurement. ASU 2018-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019 with the additional disclosures required to be applied prospectively and the modified and removed disclosures required to be applied retrospectively to all periods presented. The Company adopted ASU 2018-13 effective January 1, 2020, and the adoption did not have a material impact on its disclosures.

In 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13” or “CECL”), which prescribes an impairment model for most financial instruments based on expected losses rather than incurred losses. Under this model, an estimate of expected credit losses over the contractual life of the instrument is to be recorded as of the end of a reporting period as an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be collected on the financial instrument. For public entities, ASU 2016-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019. For most instruments, entities must apply the standard using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted ASU 2016-13 effective January 1, 2020 using the required modified retrospective approach, which resulted in a cumulative-effect decrease to beginning retained earnings of $45 million. Financial assets and liabilities held by the Company subject to the “expected credit loss” model prescribed by CECL include trade and other receivables, net investments in leases, settlement assets and other credit exposures such as financial guarantees not accounted for as insurance.

Recently Issued Accounting Pronouncements

In 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”), which clarifies certain interactions between the guidance to account for certain equity securities, investments under the equity method of accounting, and forward contracts or purchased options to purchase securities under Topic 321, Topic 323 and Topic 815. For public entities, ASU 2020-01 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. The Company does not currently expect the adoption to have a material impact on its consolidated financial statements or disclosures.

In 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which introduces a number of amendments that are designed to simplify the application of accounting for income taxes. Such amendments include removing certain exceptions for intraperiod tax allocation, interim reporting when a year-to-date loss exceeds the anticipated loss, reflecting the effect of an enacted change in tax laws or rates in the annual effective tax rate and recognition of deferred taxes related to outside basis differences for ownership changes in investments. ASU 2019-12 also provides clarification related to when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. In addition, ASU 2019-12 provides guidance on the recognition of a franchise tax (or similar tax) that is partially based on income as an income-based tax and accounting for any incremental amount incurred as a non-income-based tax. For public entities, ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company plans to adopt ASU 2019-12 effective January 1, 2021, and does not expect the adoption to have a material impact on its consolidated financial statements.

In 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which removes, clarifies and adds certain disclosure requirements of ASC Topic 715, Compensation - Retirement Benefits. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. Entities must apply the disclosure updates retrospectively. The Company does not currently expect the adoption to have a material impact on its disclosures.

3. Revenue Recognition

The Company generates revenue from the delivery of processing, service and product solutions. Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer which may be at a point in time or over time.

Disaggregation of Revenue

The Company’s operations are comprised of the Acceptance segment, the Fintech segment and the Payments segment. Additional information regarding the Company’s business segments is included in Note 22. The tables below present the

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Company’s revenue disaggregated by type of revenue, including a reconciliation with its reportable segments. The Company’s disaggregation of revenue for the three and nine months ended September 30, 2019 have been restated to reflect the Segment Realignment. The majority of the Company’s revenue is earned domestically, with revenue generated outside the United States comprising approximately 14% of total revenue for both the three months ended September 30, 2020 and 2019, and 13% and 10% of total revenue for the nine months ended September 30, 2020 and 2019, respectively.


(In millions)	Reportable Segments
Three Months Ended September 30, 2020	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	1,245	$	364	$	1,112	$	9	$	2,730
Hardware, print and card production	179		12		176		—		367
Professional services	9		120		59		—		188
Software maintenance	—		141		1		—		142
License and termination fees	7		41		21		—		69
Output solutions postage	—		—		—		207		207
Other	14		49		18		2		83
Total Revenue	$	1,454	$	727	$	1,387	$	218	$	3,786


(In millions)	Reportable Segments
Three Months Ended September 30, 2019	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	861	$	346	$	911	$	40	$	2,158
Hardware, print and card production	133		10		142		—		285
Professional services	3		126		56		3		188
Software maintenance	—		144		1		3		148
License and termination fees	4		61		16		1		82
Output solutions postage	—		—		—		180		180
Other	11		48		27		1		87
Total Revenue	$	1,012	$	735	$	1,153	$	228	$	3,128


(In millions)	Reportable Segments
Nine Months Ended September 30, 2020	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	3,466	$	1,064	$	3,265	$	47	$	7,842
Hardware, print and card production	531		33		528		—		1,092
Professional services	20		347		174		1		542
Software maintenance	—		423		2		2		427
License and termination fees	19		139		61		—		219
Output solutions postage	—		—		—		640		640
Other	42		153		63		—		258
Total Revenue	$	4,078	$	2,159	$	4,093	$	690	$	11,020

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(In millions)	Reportable Segments
Nine Months Ended September 30, 2019	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	861	$	1,030	$	1,938	$	129	$	3,958
Hardware, print and card production	133		33		292		—		458
Professional services	3		364		105		7		479
Software maintenance	—		430		2		11		443
License and termination fees	4		181		47		1		233
Output solutions postage	—		—		—		324		324
Other	11		153		82		1		247
Total Revenue	$	1,012	$	2,191	$	2,466	$	473	$	6,142

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers:


(In millions)	September 30, 2020		December 31, 2019
Contract assets	$	383	$	382
Contract liabilities	621		647

Contract assets, reported within other long-term assets in the consolidated balance sheets, primarily result from revenue being recognized where payment is contingent upon the transfer of services to a customer over the contractual period. Contract liabilities primarily relate to advance consideration received from customers (deferred revenue) for which transfer of control occurs, and therefore revenue is recognized, as services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period. The Company recognized $424 million of revenue during the nine months ended September 30, 2020 that was included in the contract liability balance at the beginning of the period.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes estimated processing, services and product revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at September 30, 2020:



(In millions)
Year ending December 31,
Remainder of 2020	$	544
2021	1,839
2022	1,442
2023	1,129
Thereafter	2,093

The Company applies the optional exemption under ASC Topic 606 (“ASC 606”) and does not disclose information about remaining performance obligations for account- and transaction-based processing fees that qualify for recognition under the as-invoiced practical expedient. These multi-year contracts contain variable consideration for stand-ready performance obligations for which the exact quantity and mix of transactions to be processed are contingent upon the customer’s request. The Company also applies the optional exemptions under ASC 606 and does not disclose information for variable consideration that is a sales-based or usage-based royalty promised in exchange for a license of intellectual property or that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service in a series. The amounts disclosed above as remaining performance obligations consist primarily of fixed or monthly minimum processing fees and maintenance fees under contracts with an original expected duration of greater than one year.

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4. Acquisitions and Dispositions

Acquisition of First Data

On July 29, 2019, the Company completed the acquisition of First Data, a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. The acquisition increases the Company’s footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients, and consumers.

As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. The Company also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $16.4 billion to repay existing First Data debt. The Company funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand and proceeds from debt issuances.

The total purchase price paid for First Data is as follows:



(In millions)
Fair value of stock exchanged for shares of Fiserv, Inc. (1)	$	29,293
Repayment of First Data debt	16,414
Fair value of vested portion of First Data stock awards exchanged for Fiserv, Inc. awards (2)	768
Total purchase price	$	46,475

(1)The fair value of the 286 million shares of the Company’s common stock issued as of the acquisition date was determined based on a per share price of $102.30, which was the closing price of the Company’s common stock on July 26, 2019, the last trading day before the acquisition closed the morning of July 29, 2019. This includes a nominal amount of cash paid in lieu of fractional shares.

(2)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period.

The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency.

The assets and liabilities of First Data have been measured at estimated fair value as of the acquisition date. During the current year through the measurement period ended July 29, 2020, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. These measurement period adjustments resulted in an increase to goodwill of $304 million. The offsetting amounts to the change in goodwill were primarily related to customer relationship intangible assets, noncontrolling interests, property and equipment, payables and accrued expenses including legal contingency reserves, and deferred income taxes. The Company recorded a measurement period adjustment of $155 million to reduce the fair value of customer relationship intangible assets as a result of refinements to attrition rates. A measurement period adjustment of $126 million was recorded to reduce the fair value of noncontrolling interests based on changes to the fair value of the underlying customer relationship intangible assets and the incorporation of additional facts and circumstances that existed as of the acquisition date. A measurement period adjustment of $25 million was recorded to reduce the fair value of property and equipment to the estimated fair value of certain real property acquired. Measurement period adjustments were recorded to increase payables and accrued expenses by $37 million, reduce investments in unconsolidated affiliates by $23 million, and increase other long-term liabilities by $21 million. In addition, the Company recorded $178 million to increase recognized deferred tax liabilities related to measurement period adjustments. Such measurement period adjustments did not have a material impact on the consolidated statements of income. The allocation of purchase price recorded for First Data was finalized in the third quarter of 2020 as follows:

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(In millions)
Assets acquired (1)
Cash and cash equivalents	$	310
Trade accounts receivable	1,747
Prepaid expenses and other current assets	1,047
Settlement assets	10,398
Property and equipment	1,156
Customer relationships	13,458
Other intangible assets	2,814
Goodwill	30,811
Investments in unconsolidated affiliates	2,676
Other long-term assets	1,191
Total assets acquired	$	65,608

Liabilities assumed (1)
Accounts payable and accrued expenses	$	1,613
Short-term and current maturities of long-term debt (2)	243
Contract liabilities	71
Settlement obligations	10,398
Deferred income taxes	3,671
Long-term contract liabilities	16
Long-term debt and other long-term liabilities (3)	1,261
Total liabilities assumed	$	17,273

Net assets acquired	$	48,335
Redeemable noncontrolling interests	252
Noncontrolling interests	1,608
Total purchase price	$	46,475

(1)In connection with the acquisition of First Data, the Company acquired two businesses which it intended to sell and subsequently sold in October 2019. Therefore, such businesses were classified as held for sale and were included within prepaid expenses and other current assets and accounts payable and accrued expenses in the above allocation of purchase price.

(2)Includes foreign lines of credit, current portion of finance lease obligations and other financing obligations.

(3)Includes the receivable securitized loan and the long-term portion of finance lease obligations.

The fair values of the assets acquired and liabilities assumed were determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, technology and trade names were valued using the multi-period excess earnings method (“MEEM”), or the relief from royalty (“RFR”) method, both are forms of the income approach. A cost and market approach was applied, as appropriate, for property and equipment, including land.

•Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.

•Technology and trade name intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate, royalty rate, and other factors such as technology related obsolescence rates), the discount rate, reflecting the risks inherent in the future cash flow stream, and the tax amortization benefit, among other factors.

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•The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

•The market approach, which estimates value by leveraging comparable land sale data/listings and qualitatively comparing them to the in-scope properties, was used to value the land.

•An income approach was applied to derive fair value for both consolidated investments with a noncontrolling interest and equity method investments accounted for under the equity method of accounting. The significant assumptions used include the estimated annual cash flows, the discount rate, the long-term growth rate and operating margin, among other factors.

The Company believes that the information provided a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities.

The amounts allocated to intangible assets are as follows:


(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	13,458	15 years
Acquired software and technology	2,324		7 years
Trade names	490		9 years
Total	$	16,272	14 years

The Company incurred transaction expenses of approximately $47 million and $172 million for the three and nine months ended September 30, 2019, respectively. Approximately $45 million and $74 million of these expenses were included in selling, general and administrative expenses and $2 million and $98 million in debt financing activities within the Company’s consolidated statements of income for the three and nine months ended September 30, 2019, respectively.

The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the nine months ended September 30, 2019 as if the acquisition of First Data had occurred on January 1, 2019. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company’s operating results that may have actually occurred had the acquisition of First Data been completed on January 1, 2019. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of First Data.


(In millions, except for per share data)	Nine Months Ended September 30, 2019
Total revenue	$	11,730
Net income	463
Net income attributable to Fiserv, Inc.	400
Net income per share attributable to Fiserv, Inc.:
Basic	$