fisv-20220930

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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, 2022


☐			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 21, 2022, there were 635,028,076 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 (Loss)	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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	43

	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,
	2022		2021		2022		2021
Revenue:
Processing and services (1)	$	3,678	$	3,407	$	10,738	$	9,822
Product	840		756		2,368		2,147
Total revenue	4,518		4,163		13,106		11,969
Expenses:
Cost of processing and services	1,443		1,530		4,381		4,425
Cost of product	553		521		1,631		1,500
Selling, general and administrative	1,547		1,476		4,560		4,289
Net (gain) loss on sale of business and other assets	120		—		(27)		—
Total expenses	3,663		3,527		10,545		10,214
Operating income	855		636		2,561		1,755
Interest expense, net	(190)		(172)		(534)		(523)

Other (expense) income	(13)		14		(83)		36
Income before income taxes and income (loss) from investments in unconsolidated affiliates	652		478		1,944		1,268
Income tax provision	(147)		(54)		(382)		(300)
Income (loss) from investments in unconsolidated affiliates	(12)		22		222		80
Net income	493		446		1,784		1,048
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	12		18		36		47
Net income attributable to Fiserv, Inc.	$	481	$	428	$	1,748	$	1,001

Net income attributable to Fiserv, Inc. per share – basic	$	0.75	$	0.65	$	2.71	$	1.51
Net income attributable to Fiserv, Inc. per share – diluted	$	0.75	$	0.64	$	2.68	$	1.49

Shares used in computing net income attributable to Fiserv, Inc. per share:
Basic	639.6		661.4		645.2		664.6
Diluted	645.0		669.7		651.0		674.1

(1)Includes processing and other fees charged to related party investments accounted for under the equity method of $51 million and $46 million for the three months ended September 30, 2022 and 2021, respectively, and $151 million and $160 million for the nine months ended September 30, 2022 and 2021, respectively (see Note 18).

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	493	$	446	$	1,784	$	1,048
Other comprehensive loss:
Fair market value adjustment on cash flow hedges, net of income tax benefit (provision) of $2 million, ($1 million), $4 million and ($1 million)	(4)		3		(11)		4
Reclassification adjustment for net realized losses (gains) on cash flow hedges included in cost of processing and services, net of income tax (benefit) provision of ($0 million), $1 million, $0 million and $2 million	1		(2)		—		(6)
Reclassification adjustment for net realized losses on cash flow hedges included in net interest expense, net of income tax benefit of $1 million, $2 million, $4 million and $4 million	3		4		11		12
Unrealized (loss) gain on defined benefit pension plans, net of income tax benefit (provision) of ($0 million), $0 million, $1 million and ($0 million)	1		—		(2)		1
Foreign currency translation, net of income tax (see Note 12)	(639)		(349)		(937)		(298)
Reclassification adjustment for accumulated foreign currency translation impacts from the sale of a foreign entity included in loss on sale of business, net of income tax benefit of $0 million (see Note 4)	56		—		56		—
Total other comprehensive loss	(582)		(344)		(883)		(287)
Comprehensive income (loss)	$	(89)	$	102	$	901	$	761
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests	12		18		36		47
Less: other comprehensive loss attributable to noncontrolling interests	(48)		(18)		(89)		(25)
Comprehensive income (loss) attributable to Fiserv, Inc.	$	(53)	$	102	$	954	$	739

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Balance Sheets

(In millions)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	893	$	835
Trade accounts receivable, less allowance for doubtful accounts	3,303		2,860
Prepaid expenses and other current assets	1,484		1,523
Settlement assets	14,195		13,652

Total current assets	19,875		18,870
Property and equipment, net	1,924		1,742
Customer relationships, net	8,464		9,991
Other intangible assets, net	3,992		4,018
Goodwill	36,241		36,433
Contract costs, net	886		811
Investments in unconsolidated affiliates	2,390		2,561
Other long-term assets	1,868		1,823
Total assets	$	75,640	$	76,249
Liabilities and Equity
Accounts payable and accrued expenses	$	3,456	$	3,550
Short-term and current maturities of long-term debt	528		508
Contract liabilities	545		585
Settlement obligations	14,195		13,652
Total current liabilities	18,724		18,295
Long-term debt	20,847		20,729
Deferred income taxes	3,766		4,172
Long-term contract liabilities	216		225
Other long-term liabilities	944		878
Total liabilities	44,497		44,299
Commitments and Contingencies (see Note 17)
Redeemable Noncontrolling Interests	161		278
Fiserv, Inc. Shareholders’ Equity:
Preferred stock, no par value: 25 million shares authorized; none issued	—		—
Common stock, $0.01 par value: 1,800 million shares authorized; 784 million shares issued	8		8
Additional paid-in capital	22,959		22,983
Accumulated other comprehensive loss	(1,539)		(745)
Retained earnings	16,594		14,846
Treasury stock, at cost, 148 million and 134 million shares	(7,696)		(6,140)
Total Fiserv, Inc. shareholders’ equity	30,326		30,952
Noncontrolling interests	656		720
Total equity	30,982		31,672
Total liabilities and equity	$	75,640	$	76,249

See accompanying notes to consolidated financial statements.

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Fiserv, Inc.

Consolidated Statements of Cash Flows (1)

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	1,784	$	1,048
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	982		861
Amortization of acquisition-related intangible assets	1,416		1,554
Amortization of financing costs and debt discounts	33		41

Share-based compensation	244		190

Deferred income taxes	(402)		(266)
Net gain on sale of business and other assets	(27)		—
Income from investments in unconsolidated affiliates	(222)		(80)
Distributions from unconsolidated affiliates	58		17

Non-cash impairment charges	—		6
Other operating activities	(2)		(26)
Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Trade accounts receivable	(521)		(298)
Prepaid expenses and other assets	(203)		(242)
Contract costs	(230)		(210)
Accounts payable and other liabilities	105		97
Contract liabilities	(30)		(1)
Net cash provided by operating activities	2,985		2,691
Cash flows from investing activities:
Capital expenditures, including capitalized software and other intangibles	(1,148)		(814)
Net proceeds from sale of business and other assets	218		—
Payments for acquisition of businesses, net of cash acquired	(682)		(495)
Distributions from unconsolidated affiliates	110		91
Purchases of investments	(45)		(250)
Proceeds from sale of investments	13		503
Net cash used in investing activities	(1,534)		(965)
Cash flows from financing activities:
Debt proceeds	1,450		5,177
Debt repayments, including debt financing costs	(2,945)		(6,515)
Net proceeds from commercial paper and short-term borrowings	2,020		1,388

Proceeds from issuance of treasury stock	96		105
Purchases of treasury stock, including employee shares withheld for tax obligations	(1,909)		(1,768)

Settlement activity, net	114		386
Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(30)		(41)
Payments of acquisition-related contingent consideration	—		(36)
Other financing activities	7		(2)
Net cash used in financing activities	(1,197)		(1,306)
Effect of exchange rate changes on cash and cash equivalents	(84)		(11)
Net change in cash and cash equivalents	170		409

Cash and cash equivalents, beginning balance	3,205		2,569
Cash and cash equivalents, ending balance	$	3,375	$	2,978

(1) The company revised, for comparable purposes with the current period’s presentation, the consolidated statement of cash flows presentation for the nine months ended September 30, 2021 to include cash and cash equivalents within settlement assets as a component of total cash and cash equivalents. Additional information is included in Note 1.

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, 2022 and 2021 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, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of Fiserv, Inc. and its subsidiaries in which the Company holds a majority controlling financial interest. All intercompany transactions and balances between the Company and its subsidiaries have been eliminated in consolidation. Control is typically 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 (loss) 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 of between 20% and 50%; however, for partnerships and limited liability companies, an ownership interest of between 3% and 50% or board of director representation may also constitute significant influence.

The Company maintains a majority controlling financial interest in certain entities, mostly related to consolidated merchant alliances (see Note 18). 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. 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 10).

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. The Company has determined that there have been no material changes to its estimates and assumptions within its consolidated financial statements to date as a result of the continuing impact of the COVID-19 pandemic. The Company will continue to monitor developments related to the COVID-19 pandemic; however, the extent to which the COVID-19 pandemic may impact the Company’s future operational and financial performance remains uncertain and difficult to predict.

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. Cash and cash equivalents held on behalf of merchants and other payees are included in settlement assets in the consolidated balance sheets.

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The following table provides a reconciliation between cash and cash equivalents on the consolidated balance sheets and the consolidated statements of cash flows at:



(In millions)	September 30, 2022		December 31, 2021		September 30, 2021
Cash and cash equivalents on the consolidated balance sheets	$	893	$	835	$	933
Cash and cash equivalents included in settlement assets	2,475		2,361		2,036
Other restricted cash	7		9		9
Total cash and cash equivalents on the consolidated statements of cash flows	$	3,375	$	3,205	$	2,978

The Company revised the consolidated statement of cash flows for the nine months ended September 30, 2021 to reflect settlement cash and cash equivalents within settlement assets as a component of total cash and cash equivalents on the consolidated statement of cash flows. The changes in settlement cash and cash equivalents for the nine months ended September 30, 2022 and 2021 of $114 million and $386 million, respectively, have been included in settlement activity, net within cash flows from financing activities.

Allowance for Doubtful Accounts

The Company analyzes the collectability of trade accounts receivable by considering historical bad debts, client creditworthiness, current economic trends, changes in client payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. 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 $55 million at September 30, 2022 and December 31, 2021, respectively.

Settlement Assets and Obligations

Settlement assets and obligations result from timing differences between collection and fulfillment of payment transactions and collateral amounts held to manage merchant credit risk, primarily associated with the Company’s merchant acquiring services. Settlement assets represent cash received or amounts receivable from agents, payment networks, bank partners, merchants or directly from consumers. Settlement obligations represent amounts payable to merchants and payees. Certain merchant settlement asset receivables that relate to settlement obligations are held by partner banks to which the Company does not have legal ownership but has the right to use the assets to satisfy the related settlement obligations. The Company records settlement obligations for amounts payable to merchants and for outstanding payment instruments issued to payees that have not yet been presented for settlement.

Allowance 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 risk. Collateral held by the Company, or funds held by partner banks for the Company’s benefit, is classified within settlement assets and the obligation to repay the collateral is classified within settlement obligations in the consolidated balance sheets. The Company also utilizes a number of systems and procedures to manage merchant credit risk. Despite these efforts, the Company experiences some level of losses due to merchant defaults.

The aggregate merchant credit loss expense, recognized by the Company within cost of processing and services in the consolidated statements of income, was $18 million for the three months ended September 30, 2022. The aggregate merchant credit loss expense recognized by the Company was not significant for the three months ended September 30, 2021. The Company recognized aggregate merchant credit loss expense of $46 million and $31 million for the nine months ended September 30, 2022 and 2021, respectively. The amount of collateral available to the Company was $1.9 billion and $2.2 billion at September 30, 2022 and December 31, 2021, respectively. The Company maintains an allowance for merchant credit losses that are expected to exceed the amount of merchant collateral. The allowance includes estimated losses from anticipated chargebacks and fraud events that have been incurred on merchants’ payment transactions that have been processed but not yet reported to the Company, which is recorded within accounts payable and accrued expenses in the consolidated balance sheets, as well as estimated losses on refunded amounts to cardholders that have not yet been collected from the merchants, which is recorded within prepaid expenses and other current assets in the consolidated balance sheets. The allowance is based primarily

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on the Company’s historical experience of credit losses and other relevant factors such as changes in economic conditions or increases in merchant fraud. The aggregate merchant credit loss allowance was $32 million and $42 million at September 30, 2022 and December 31, 2021, 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, which is one level below the Company’s reportable segments. The Company’s most recent annual impairment assessment of its reporting units in the fourth quarter of 2021 determined that its goodwill was not impaired as the estimated fair values exceeded the carrying values. However, it is reasonably possible that future developments related to the interest rate environment, the economic impact of the COVID-19 pandemic, or significant changes in the composition of, or assumptions used in, the quantitative test on certain of the Company’s reporting units (such as an increase in risk-adjusted discount rates) could have a future material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment. There is no accumulated goodwill impairment for the Company through September 30, 2022.

Other Investments

The Company maintains investments, of which it does not have significant influence, in various equity securities without a readily determinable fair value. Such investments totaled $141 million and $113 million at September 30, 2022 and December 31, 2021, respectively, and are included within other long-term assets in the 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. To the extent such events or changes occur, the Company evaluates the fair value compared to its cost basis in the investment. Gains or losses from a sale of these investments or a change in fair value are included within other (expense) income in the consolidated statement of income for the period. During the nine months ended September 30, 2021, the Company remeasured its equity interest in Ondot Systems, Inc. (“Ondot”) to fair value upon acquiring a remaining ownership interest, resulting in the recognition of a pre-tax gain of $12 million (see Note 4). Other adjustments made to the values recorded for certain equity securities and gains and losses from sales of equity securities during the three and nine months ended September 30, 2022 and 2021, were not significant.

Derivatives

Derivatives are entered into for periods consistent with related underlying exposures and are recorded in the consolidated balance sheets as either an asset or liability measured at fair value. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive loss and recognized in the consolidated statements of income when the hedged item affects earnings. If the derivative is designated as a net investment hedge, changes in the fair value of the derivative are recorded in the foreign currency translation component of other comprehensive loss until the net investment is sold, diluted, or liquidated. If the derivative is designated as a fair value hedge, changes in the fair value of the derivative are recorded in the same line item as the changes in the fair value of the hedged item and recognized in the consolidated statements of income. To the extent a derivative is not designated as a hedge, changes in fair value are recognized in the consolidated statements of income. The Company’s policy is to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes.

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. Interest expense, net consisted of the following:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
Interest expense	$	(193)	$	(173)	$	(542)	$	(526)
Interest income	3		1		8		3
Interest expense, net	$	(190)	$	(172)	$	(534)	$	(523)

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2. Recent Accounting Pronouncements

In 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. For public entities, ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The provisions within ASU 2022-03 are to be applied prospectively with any adjustments from the adoption recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact the adoption of ASU 2022-03 will have on its consolidated financial statements and disclosures.

In 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which among other items, requires that entities disclose current period gross write-offs by year of origination for financing receivables and net investments in leases. For public entities, the provisions within ASU 2022-02 are to be applied prospectively and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt the additional disclosures, as applicable, for any write-offs reflected in its consolidated financial statements effective for the year ending December 31, 2023.

In 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832) (“ASU 2021-10”), which requires that an entity provide certain disclosures in its annual financial statements about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. ASU 2021-10 is effective for all business entities for annual periods beginning after December 15, 2021 and may be applied either prospectively or retrospectively to the transactions reflected in the financial statements at the date of initial application. The Company will adopt the additional disclosures prospectively, as applicable, to the transactions reflected in its consolidated financial statements for the year ending December 31, 2022.

In 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Generally, this should result in recognition and measurement of contract assets and contract liabilities at carryover value consistent with how they were recognized and measured in the acquiree’s financial statements, providing consistent recognition and enhanced comparability with revenue contracts with customers not acquired in a business combination. Prior to adoption of ASU 2021-08, an acquirer generally recognized contract assets and contract liabilities acquired in a business combination at fair value on the acquisition date. For public entities, ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Entities are required to apply a prospective transition approach upon adoption, unless early adoption occurs in an interim period. The Company adopted ASU 2021-08 effective January 1, 2022, with prospective application to business combinations occurring after adoption.

In 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments (“ASU 2021-05”), which amends the lease classification requirements for lessors with certain leases containing variable payments. A lessor is to classify and account for a lease with variable lease payments that do not depend on an index or a rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss. For public entities, ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted. Entities that have adopted ASC Topic 842 prior to the issuance of ASU 2021-05 may apply this update either retrospectively to leases that commenced or were modified on or after the adoption of ASC Topic 842 or prospectively to leases that commence or are modified on or after the date the entity first applies ASU 2021-05. The Company adopted ASU 2021-05 effective January 1, 2022, with prospective application to leases commencing or modified thereafter, and the adoption did not have a material impact on its consolidated financial statements.

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.

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Disaggregation of Revenue

The Company’s operations are comprised of the Merchant Acceptance (“Acceptance”) segment, the Financial Technology (“Fintech”) segment and the Payments and Network (“Payments”) segment. Additional information regarding the Company’s business segments is included in Note 19. The tables below present the Company’s revenue disaggregated by type of revenue, including a reconciliation with its reportable segments. The majority of the Company’s revenue is earned domestically, with revenue generated outside the U.S. comprising approximately 14% of total revenue for each of the three months ended September 30, 2022 and 2021, and the nine months ended September 30, 2022 and 2021.


(In millions)	Reportable Segments
Three Months Ended September 30, 2022	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	1,586	$	407	$	1,218	$	6	$	3,217
Hardware, print and card production	254		9		271		—		534
Professional services	5		119		74		—		198
Software maintenance	—		138		7		—		145
License and termination fees	15		36		19		—		70
Output Solutions postage	—		—		—		251		251
Other	18		57		28		—		103
Total revenue	$	1,878	$	766	$	1,617	$	257	$	4,518


(In millions)	Reportable Segments
Three Months Ended September 30, 2021	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	1,446	$	389	$	1,132	$	4	$	2,971
Hardware, print and card production	232		10		236		—		478
Professional services	12		124		66		—		202
Software maintenance	—		139		2		—		141
License and termination fees	12		45		16		—		73
Output Solutions postage	—		—		—		209		209
Other	14		54		19		2		89
Total revenue	$	1,716	$	761	$	1,471	$	215	$	4,163


(In millions)	Reportable Segments
Nine Months Ended September 30, 2022	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	4,649	$	1,210	$	3,486	$	18	$	9,363
Hardware, print and card production	694		28		744		—		1,466
Professional services	15		366		203		—		584
Software maintenance	—		415		18		—		433
License and termination fees	43		152		79		—		274
Output Solutions postage	—		—		—		712		712
Other	31		176		67		—		274
Total Revenue	$	5,432	$	2,347	$	4,597	$	730	$	13,106

Table of Contents


(In millions)	Reportable Segments
Nine Months Ended September 30, 2021	Acceptance		Fintech		Payments		Corporate and Other		Total

Type of Revenue
Processing	$	4,044	$	1,152	$	3,331	$	26	$	8,553
Hardware, print and card production	636		33		667		—		1,336
Professional services	30		350		195		—		575
Software maintenance	—		417		6		—		423
License and termination fees	33		133		43		—		209
Output Solutions postage	—		—		—		616		616
Other	36		166		55		—		257
Total Revenue	$	4,779	$	2,251	$	4,297	$	642	$	11,969

Contract Balances

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


(In millions)	September 30, 2022		December 31, 2021
Contract assets	$	546	$	541
Contract liabilities	761		810

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 $499 million of revenue during the nine months ended September 30, 2022 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 were unsatisfied (or partially unsatisfied) at September 30, 2022:



(In millions)
Year Ending December 31,
Remainder of 2022			$