Wisconsin | 0-14948 | 39-1506125 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. The exhibit set forth in the following Exhibit Index is being furnished herewith: |
Exhibit Number | Description | |
99.1 |
FISERV, INC. | ||||
Date: | October 31, 2017 | By: | /s/ Robert W. Hau | |
Robert W. Hau | ||||
Chief Financial Officer and Treasurer |
Exhibit 99.1 | ||
Press Release |
For more information contact: | |
Media Relations: Britt Zarling Vice President, Corporate Communications Fiserv, Inc. 678-375-1595 britt.zarling@fiserv.com | Investor Relations: Paul Seamon Vice President, Investor Relations Fiserv, Inc. 262-879-5727 paul.seamon@fiserv.com |
For Immediate Release |
Press Release |
• | Adjusted revenue increased 2 percent to $1.34 billion in the third quarter and 3 percent to $3.98 billion in the first nine months of 2017 compared to the prior year periods. |
• | Internal revenue growth for the company was 2 percent in the third quarter, driven by 3 percent growth in the Payments segment. Financial segment internal revenue growth in the quarter was flat compared to the prior year period. |
• | Internal revenue growth for the company was 3 percent in the first nine months of 2017, with 4 percent growth in the Payments segment and 2 percent growth in the Financial segment. |
• | Adjusted earnings per share increased 11 percent to $1.27 in the third quarter and 13 percent to $3.71 in the first nine months of 2017 compared to the prior year periods. |
• | Adjusted operating margin decreased 20 basis points to 32.6 percent in the third quarter and increased 20 basis points to 32.4 percent in the first nine months of 2017 compared to the prior year periods. |
• | Free cash flow increased 10 percent to $819 million in the first nine months of 2017 compared to the prior year period. Cash distributions from StoneRiver of $44 million were not included in the company's free cash flow results for the first nine months of 2017. |
• | The company repurchased 2.4 million shares of common stock for $298 million in the third quarter and 8.3 million shares of common stock for $983 million in the first nine months of 2017. As of September 30, 2017, the company had 12.2 million remaining shares authorized for repurchase. |
• | The company completed three acquisitions during the quarter: |
◦ | In July, the company acquired the assets of PCLender, LLC, a leader in next-generation internet-based mortgage software and mortgage lending technology solutions, to enhance the company's suite of mortgage origination services. |
◦ | In August, the company acquired Dovetail Group Limited, a leading provider of bank payments and liquidity management solutions, to further enable the company to help financial institutions around the world transform their payments infrastructure. |
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◦ | In September, to expand its digital leadership, the company completed its acquisition of Monitise plc, a provider of digital solutions that enable innovative digital banking experiences for leading financial institutions worldwide. |
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Fiserv, Inc. | |||||||||||||||
Condensed Consolidated Statements of Income | |||||||||||||||
(In millions, except per share amounts, unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | |||||||||||||||
Processing and services | $ | 1,199 | $ | 1,160 | $ | 3,563 | $ | 3,441 | |||||||
Product | 201 | 220 | 617 | 633 | |||||||||||
Total revenue | 1,400 | 1,380 | 4,180 | 4,074 | |||||||||||
Expenses | |||||||||||||||
Cost of processing and services | 572 | 551 | 1,715 | 1,651 | |||||||||||
Cost of product | 174 | 186 | 531 | 547 | |||||||||||
Selling, general and administrative | 284 | 274 | 837 | 806 | |||||||||||
Gain on sale of business | — | — | (10 | ) | — | ||||||||||
Total expenses | 1,030 | 1,011 | 3,073 | 3,004 | |||||||||||
Operating income | 370 | 369 | 1,107 | 1,070 | |||||||||||
Interest expense | (45 | ) | (41 | ) | (131 | ) | (121 | ) | |||||||
Interest and investment income (loss) - net | — | — | 2 | (7 | ) | ||||||||||
Income before income taxes and income from investment in unconsolidated affiliate | 325 | 328 | 978 | 942 | |||||||||||
Income tax provision | (98 | ) | (114 | ) | (309 | ) | (373 | ) | |||||||
Income from investment in unconsolidated affiliate | 5 | — | 31 | 146 | |||||||||||
Net income | $ | 232 | $ | 214 | $ | 700 | $ | 715 | |||||||
GAAP earnings per share - diluted | $ | 1.08 | $ | 0.96 | $ | 3.23 | $ | 3.18 | |||||||
Diluted shares used in computing earnings per share | 214.5 | 222.7 | 216.7 | 225.2 | |||||||||||
Earnings per share is calculated using actual, unrounded amounts. |
Press Release |
Fiserv, Inc. | |||||||||||||||
Reconciliation of GAAP to | |||||||||||||||
Adjusted Net Income and Adjusted Earnings Per Share | |||||||||||||||
(In millions, except per share amounts, unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
GAAP net income | $ | 232 | $ | 214 | $ | 700 | $ | 715 | |||||||
Adjustments: | |||||||||||||||
Merger, integration and other costs 1 | 23 | 18 | 52 | 41 | |||||||||||
Severance costs | 3 | 3 | 22 | 11 | |||||||||||
Amortization of acquisition-related intangible assets | 39 | 39 | 117 | 119 | |||||||||||
Tax impact of adjustments 2 | (21 | ) | (21 | ) | (63 | ) | (60 | ) | |||||||
StoneRiver and other investment activity 3 | (5 | ) | — | (31 | ) | (139 | ) | ||||||||
Tax impact of StoneRiver and other investment activity 2 | 2 | — | 11 | 52 | |||||||||||
Gain on sale of business 4 | — | — | (10 | ) | — | ||||||||||
Tax impact of gain on sale of business 2 | — | — | 5 | — | |||||||||||
Adjusted net income | $ | 273 | $ | 253 | $ | 803 | $ | 739 | |||||||
GAAP earnings per share | $ | 1.08 | $ | 0.96 | $ | 3.23 | $ | 3.18 | |||||||
Adjustments - net of income taxes: | |||||||||||||||
Merger, integration and other costs 1 | 0.07 | 0.05 | 0.16 | 0.12 | |||||||||||
Severance costs | 0.01 | 0.01 | 0.07 | 0.03 | |||||||||||
Amortization of acquisition-related intangible assets | 0.12 | 0.11 | 0.36 | 0.34 | |||||||||||
StoneRiver and other investment activity 3 | (0.01 | ) | — | (0.09 | ) | (0.39 | ) | ||||||||
Gain on sale of business 4 | — | — | (0.02 | ) | — | ||||||||||
Adjusted earnings per share | $ | 1.27 | $ | 1.14 | $ | 3.71 | $ | 3.28 |
1 | Merger, integration and other costs include acquisition and related integration costs of $30 million in 2017 and $29 million in 2016, and certain costs associated with the achievement of the company's operational effectiveness objectives of $22 million in 2017 and $12 million in 2016, including expenses related to data center consolidation activities. |
2 | The tax impact of adjustments is calculated using tax rates of 33 percent and 35 percent in 2017 and 2016, respectively, which approximates the company's annual effective tax rate for the respective years, exclusive of the actual tax impacts associated with StoneRiver transactions and the gain on sale of business. |
3 | Represents the company's share of net gains on the disposition of a business and a business interest at StoneRiver, as well as a non-cash write-off of a $7 million investment in 2016. |
4 | Represents the gain on the sale of the company's Australian item processing business. |
Press Release |
Fiserv, Inc. | |||||||||||||||
Financial Results by Segment | |||||||||||||||
(In millions, unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total Company | |||||||||||||||
Revenue | $ | 1,400 | $ | 1,380 | $ | 4,180 | $ | 4,074 | |||||||
Output Solutions postage reimbursements | (65 | ) | (72 | ) | (204 | ) | (221 | ) | |||||||
Deferred revenue purchase accounting adjustments | 2 | 2 | 4 | 4 | |||||||||||
Adjusted revenue | $ | 1,337 | $ | 1,310 | $ | 3,980 | $ | 3,857 | |||||||
Operating income | $ | 370 | $ | 369 | $ | 1,107 | $ | 1,070 | |||||||
Merger, integration and other costs | 23 | 18 | 52 | 41 | |||||||||||
Severance costs | 3 | 3 | 22 | 11 | |||||||||||
Amortization of acquisition-related intangible assets | 39 | 39 | 117 | 119 | |||||||||||
Gain on sale of business | — | — | (10 | ) | — | ||||||||||
Adjusted operating income | $ | 435 | $ | 429 | $ | 1,288 | $ | 1,241 | |||||||
Operating margin | 26.5 | % | 26.8 | % | 26.5 | % | 26.3 | % | |||||||
Adjusted operating margin | 32.6 | % | 32.8 | % | 32.4 | % | 32.2 | % | |||||||
Payments and Industry Products ("Payments") | |||||||||||||||
Revenue | $ | 796 | $ | 772 | $ | 2,369 | $ | 2,284 | |||||||
Output Solutions postage reimbursements | (65 | ) | (72 | ) | (204 | ) | (221 | ) | |||||||
Deferred revenue purchase accounting adjustments | 2 | 1 | 4 | 2 | |||||||||||
Adjusted revenue | $ | 733 | $ | 701 | $ | 2,169 | $ | 2,065 | |||||||
Operating income | $ | 253 | $ | 241 | $ | 750 | $ | 703 | |||||||
Merger, integration and other costs | 1 | 1 | 3 | 2 | |||||||||||
Adjusted operating income | $ | 254 | $ | 242 | $ | 753 | $ | 705 | |||||||
Operating margin | 31.7 | % | 31.2 | % | 31.6 | % | 30.8 | % | |||||||
Adjusted operating margin | 34.6 | % | 34.4 | % | 34.7 | % | 34.1 | % | |||||||
Financial Institution Services ("Financial") | |||||||||||||||
Revenue | $ | 619 | $ | 623 | $ | 1,862 | $ | 1,834 | |||||||
Deferred revenue purchase accounting adjustments | — | 1 | — | 2 | |||||||||||
Adjusted revenue | $ | 619 | $ | 624 | $ | 1,862 | $ | 1,836 | |||||||
Operating income | $ | 204 | $ | 209 | $ | 614 | $ | 606 | |||||||
Operating margin | 33.1 | % | 33.5 | % | 33.0 | % | 33.1 | % | |||||||
Adjusted operating margin | 33.1 | % | 33.5 | % | 33.0 | % | 33.0 | % | |||||||
Corporate and Other | |||||||||||||||
Revenue | $ | (15 | ) | $ | (15 | ) | $ | (51 | ) | $ | (44 | ) | |||
Operating loss | $ | (87 | ) | $ | (81 | ) | $ | (257 | ) | $ | (239 | ) | |||
Merger, integration and other costs | 22 | 17 | 49 | 39 | |||||||||||
Severance costs | 3 | 3 | 22 | 11 | |||||||||||
Amortization of acquisition-related intangible assets | 39 | 39 | 117 | 119 | |||||||||||
Gain on sale of business | — | — | (10 | ) | — | ||||||||||
Adjusted operating loss | $ | (23 | ) | $ | (22 | ) | $ | (79 | ) | $ | (70 | ) | |||
See page 3 for disclosures related to the use of non-GAAP financial measures. | |||||||||||||||
Operating margin percentages are calculated using actual, unrounded amounts. |
Press Release |
Fiserv, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(In millions, unaudited) | |||||||
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 700 | $ | 715 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 205 | 187 | |||||
Amortization of acquisition-related intangible assets | 117 | 119 | |||||
Share-based compensation | 48 | 54 | |||||
Excess tax benefits from share-based awards | — | (46 | ) | ||||
Deferred income taxes | 20 | 7 | |||||
Income from investment in unconsolidated affiliate | (31 | ) | (146 | ) | |||
Dividends from unconsolidated affiliate | 44 | 140 | |||||
Non-cash impairment charges | 17 | 17 | |||||
Gain on sale of business | (10 | ) | — | ||||
Other operating activities | (4 | ) | (2 | ) | |||
Changes in assets and liabilities, net of effects from acquisitions: | |||||||
Trade accounts receivable | 23 | (15 | ) | ||||
Prepaid expenses and other assets | (60 | ) | (40 | ) | |||
Accounts payable and other liabilities | (11 | ) | 111 | ||||
Deferred revenue | (43 | ) | (59 | ) | |||
Net cash provided by operating activities | 1,015 | 1,042 | |||||
Cash flows from investing activities | |||||||
Capital expenditures, including capitalization of software costs | (208 | ) | (223 | ) | |||
Payments for acquisitions of businesses, net of cash acquired | (383 | ) | (265 | ) | |||
Proceeds from sale of business | 19 | — | |||||
Purchases of investments | (10 | ) | (1 | ) | |||
Other investing activities | 7 | 3 | |||||
Net cash used in investing activities | (575 | ) | (486 | ) | |||
Cash flows from financing activities | |||||||
Debt proceeds | 1,946 | 1,711 | |||||
Debt repayments | (1,410 | ) | (1,380 | ) | |||
Proceeds from issuance of treasury stock | 65 | 65 | |||||
Purchases of treasury stock, including employee shares withheld for tax obligations | (1,016 | ) | (970 | ) | |||
Excess tax benefits from share-based awards | — | 46 | |||||
Net cash used in financing activities | (415 | ) | (528 | ) | |||
Net change in cash and cash equivalents | 25 | 28 | |||||
Cash and cash equivalents, beginning balance | 300 | 275 | |||||
Cash and cash equivalents, ending balance | $ | 325 | $ | 303 |
Press Release |
Fiserv, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(In millions, unaudited) | |||||||
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 325 | $ | 300 | |||
Trade accounts receivable – net | 898 | 902 | |||||
Prepaid expenses and other current assets | 647 | 526 | |||||
Total current assets | 1,870 | 1,728 | |||||
Property and equipment – net | 385 | 405 | |||||
Intangible assets – net | 1,888 | 1,833 | |||||
Goodwill | 5,612 | 5,373 | |||||
Other long-term assets | 444 | 404 | |||||
Total assets | $ | 10,199 | $ | 9,743 | |||
Liabilities and Shareholders' Equity | |||||||
Accounts payable and accrued expenses | $ | 1,306 | $ | 1,242 | |||
Current maturities of long-term debt | 93 | 95 | |||||
Deferred revenue | 451 | 483 | |||||
Total current liabilities | 1,850 | 1,820 | |||||
Long-term debt | 5,018 | 4,467 | |||||
Deferred income taxes | 815 | 762 | |||||
Other long-term liabilities | 166 | 153 | |||||
Total liabilities | 7,849 | 7,202 | |||||
Shareholders' equity | 2,350 | 2,541 | |||||
Total liabilities and shareholders' equity | $ | 10,199 | $ | 9,743 |
Press Release |
Internal Revenue Growth 1 | Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||
Payments Segment | 3% | 4% | ||
Financial Segment | 0% | 2% | ||
Total Company | 2% | 3% |
1 | Internal revenue growth is measured as the increase in adjusted revenue (see page 8) for the current period excluding acquired revenue and revenue attributable to dispositions, divided by adjusted revenue from the prior year period excluding revenue attributable to dispositions. In the third quarter of 2017, acquired revenue was $12 million ($9 million in the Payments segment and $3 million in the Financial segment), and revenue in the comparable prior year period attributable to dispositions was $8 million (all in the Financial segment). During the first nine months of 2017, acquired revenue was $30 million ($23 million in the Payments segment and $7 million in the Financial segment), and revenue in the comparable prior year period attributable to dispositions was $20 million (all in the Financial segment). |
Free Cash Flow | Nine Months Ended September 30, | |||||||
2017 | 2016 | |||||||
Net cash provided by operating activities | $ | 1,015 | $ | 1,042 | ||||
Capital expenditures | (208 | ) | (223 | ) | ||||
Adjustments: | ||||||||
Severance, merger and integration payments | 65 | 39 | ||||||
StoneRiver cash distributions | (44 | ) | (140 | ) | ||||
Other | (3 | ) | 4 | |||||
Tax payments on adjustments | (6 | ) | 25 | |||||
Free cash flow | $ | 819 | $ | 747 |
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