Fiserv Reports Record Earnings for First Quarter of 2004
Fiserv Reports Record Earnings for First Quarter of 2004
April 21, 2004
For the three-month period ended March 31, 2004, Fiserv processing and services revenues were $840.0 million, a 39% increase over the $604.3 million for the first quarter of 2003. Net income per share-diluted for the first quarter of 2004 was $0.47 per share, compared to $0.38 per share for the first quarter of 2003.
"Fiserv had an exceptional first quarter, posting solid growth in revenue, earnings and cash flow," said Leslie M. Muma, President and CEO of Fiserv, Inc. "Earnings per share for the quarter were $0.47, exceeding our expectations. Free cash flow increased 57% over the prior year period to $126.3 million, reflecting our strong financial position. We're on track for a record 2004, with a strong sales pipeline to fuel organic growth and a promising outlook for acquisitions. Our target for full-year diluted earnings is $1.87 to $1.93 per share."
Significant client renewals and new relationships signed in the first quarter include the following: Underscoring the technology implications of the federal Check 21 legislation, three clients broadened their relationships with Fiserv to include image-based check processing services. Fiserv significantly expanded its relationship with Hanmi Bank, a $1.7 billion bank in Los Angeles, with an agreement to deliver image-based check processing that will support the bank's acquisition of Pacific Union Bank. Community Credit Union, a $1.6 billion credit union headquartered in Plano, Texas, also added image-based check processing to its services, and Fiserv will provide image-based check processing to First Federal Bank of California, a $4.8 billion bank based in Santa Monica that already relies on Fiserv for many of its technology needs. In addition, Fiserv's RemitStream Solutions unit will supply lockbox services to First Federal.
Additionally, Navy Federal Credit Union, the nation's largest credit union, and Amsouth Bank, a $47 billion bank holding company based in Birmingham, Alabama, both significantly increased their relationships with Fiserv's Integrated Loan Services unit for loan settlement services. The National Bank of Canada signed a $368 million (Canadian) agreement with Fiserv's INTRIA Items joint venture to outsource its check, lockbox and currency processing. Fiserv's partner in INTRIA Items is the Canadian Imperial Bank of Commerce. Mexico's Banco Nacional del Ejercito, which provides banking services to the Mexican military services, selected the Fiserv ICBS core banking system to process its 48 branches throughout the country.
During the first quarter of 2004, Fiserv completed the acquisition of RegEd, Inc., headquartered in Morrisville, North Carolina, a provider of Internet-based compliance management systems and distance learning programs for the insurance and securities industries. RegEd's line of intelligent on-line products complements the distance learning capabilities that Fiserv offers through its existing Emerald Learning Solutions business.
Fiserv, Inc. (Nasdaq: FISV) provides information management systems and services to the financial industry including transaction processing, business process outsourcing and software and systems solutions. The company serves more than 15,000 clients, including banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies and agents, self-funded employers, lenders and savings institutions. Headquartered in Brookfield, Wisconsin, Fiserv reported $2.7 billion in processing and services revenues for 2003. Fiserv can be found on the Internet at www.fiserv.com.
The disclosure set forth above contains forward-looking statements, specifically Mr. Muma's statements regarding earnings targets, sales pipelines and acquisition prospects. These statements are covered by the safe harbor included in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to inherent assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, changes in customers' demand for the Corporation's products, pricing and other actions by competitors, and general changes in economic conditions or U.S. financial markets. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-0-
Three Months Ended
March 31,
2004 2003
------------- ------------
Revenues:
Processing and services $839,986 $604,262
Customer reimbursements 97,494 82,731
------------- ------------
Total revenues 937,480 686,993
------------- ------------
Cost of revenues:
Salaries, commissions and payroll
related costs 340,800 294,829
Customer reimbursement expenses 97,494 82,731
Data processing costs and
equipment rentals 55,268 52,381
Other operating expenses 240,100 95,056
Depreciation and amortization 46,958 37,399
------------- ------------
Total cost of revenues 780,620 562,396
------------- ------------
Operating income 156,860 124,597
Interest expense - net (4,732) (2,977)
------------- ------------
Income before income taxes 152,128 121,620
Income tax provision 59,330 47,432
------------- ------------
Net income $92,798 $74,188
============= ============
Net income per share:
Basic $0.48 $0.39
Diluted $0.47 $0.38
Shares used in computing net income
per share:
Basic 194,555 192,137
Diluted 197,063 194,746
FISERV, INC. AND SUBSIDIARIES
SELECTED SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2004 2003
------------ -----------
Processing and services revenues:
Financial outsourcing, systems
and services (1) $544,983 $457,021
Health plan management services 206,591 69,140
Investment support and securities processing
services 58,939 55,050
All other and corporate 29,473 23,051
------------ -----------
Total $839,986 $604,262
============ ===========
Operating income (loss):
Financial outsourcing, systems and
services (1) $136,970 $107,456
Health plan management services 19,378 12,101
Investment support and securities processing
services (2) (126) 7,240
All other and corporate 638 (2,200)
------------ -----------
Total $156,860 $124,597
============ ===========
(1) 2004 includes a one-time fee of $8.0 million received from a
customer due to the early termination of the customer's
contract. The existing customer had approximately 40 months
remaining on its contract when the customer was acquired by a
financial institution utilizing another data processing
system.
(2) 2004 includes a one-time charge of $6.0 million due to
additional costs and reserves associated with the Company's
broker-dealer subsidiary, Fiserv Securities Inc. ("FSI"). As
part of the Securities and Exchange Commission's (the "SEC")
ongoing industry-wide review of mutual fund trading practices,
including market timing and late trading, FSI has been
responding to inquiries from the SEC. The Company currently
estimates cumulative revenues associated with such practices
at approximately $4.0 to $5.0 million. The Company is
cooperating with the SEC and is conducting its own internal
investigation of these matters. Although the Company is unable
to predict the ultimate outcome of these matters, if the SEC
were to assert a violation of securities laws with respect to
these matters, then FSI may be subject to fines and penalties
and other administrative remedies.
FISERV, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Free Cash Flow
Three months ended
March 31,
------------------------
(In thousands) 2004 2003
------------------------
Net cash provided by operating activities $129,165 $142,052
Changes in securities processing receivables
and payables-net 28,792 (26,077)
------------------------
Net cash provided by operating activities
before changes in securities processing
receivables and payables-net 157,957 115,975
Capital expenditures, including capitalization
of software costs for external customers (31,700) (35,519)
------------------------
Free cash flow $126,257 $80,456
========================
Free cash flow is measured as net cash provided by operating
activities before changes in securities processing receivables and
payables less capital expenditures including capitalization of
software costs for external customers, as reported in the Company's
condensed consolidated statements of cash flows. As the changes in
securities processing receivables and payables are generally offset by
changes in short-term borrowings and investments, which are included
in financing and investing activities, management believes it is more
meaningful to analyze changes in operating cash flows before the
changes in securities processing receivables and payables. Free cash
flow is a non-GAAP financial measure that the Company believes is
useful to investors because it provides another measure of available
cash flow after the Company has satisfied the capital requirements of
its operations.
Internal Revenue Growth Percentages by Segment
Three months ended
March 31,
------------------
2004 2003
------------------
Financial outsourcing, systems and services ("Financial") 1% 1%
Health plan management services ("Health") 41% 18%
Investment support and securities processing
services ("Investment Services") 7% -9%
All other and corporate 28% -1%
------------------
TOTAL 10% 2%
==================
Internal revenue growth percentages are measured as the increase or
decrease in total processing and services revenue for the current
period less "acquired revenue from acquisitions" divided by total
processing and services revenues from the prior year period plus
"acquired revenue from acquisitions." "Acquired revenue from
acquisitions" was $159 million ($81 million in the Financial segment
and $78 million in the Health segment) for the first quarter and
represents pre-acquisition normalized revenue of acquired companies
for the comparable prior year period. Internal revenue growth
percentage is a non-GAAP financial measure that the Company believes
is useful to investors because it provides an alternative to measure
revenue growth excluding the impact of acquired revenues.
Contact:
Fiserv, Inc.
Leslie M. Muma, 262-879-5000
Source:
Fiserv, Inc.