(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)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit Number | Description | |
99.1 | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
FISERV, INC. | ||||
Date: | November 6, 2019 | By: | /s/ Robert W. Hau | |
Robert W. Hau | ||||
Chief Financial Officer and Treasurer |
Exhibit 99.1 | ||
News Release |
For more information contact: | |
Media Relations: Britt Zarling Corporate Communications Fiserv, Inc. 414-378-4040 britt.zarling@fiserv.com | Investor Relations: Peter Poillon Investor Relations Fiserv, Inc. 212-266-3565 peter.poillon@fiserv.com |
For Immediate Release |
News Release |
• | Adjusted revenue increased 5% to $3.62 billion in the third quarter and 4% to $10.73 billion in the first nine months of 2019 compared to the prior year periods. |
• | Internal revenue growth, on a constant currency basis, was 6% in the third quarter, with 7% growth in the First Data segment, 6% growth in the Payments segment and 4% growth in the Financial segment. |
• | Internal revenue growth, on a constant currency basis, was 6% in the first nine months of 2019, with 7% growth in the First Data segment, 5% growth in the Payments segment and 4% growth in the Financial segment. |
• | Adjusted earnings per share increased 17% to $1.02 in the third quarter and 16% to $2.87 in the first nine months of 2019 compared to the prior year periods. |
• | Adjusted operating margin increased 130 basis points to 29.8% in the third quarter and increased 100 basis points to 29.1% in the first nine months of 2019 compared to the prior year periods. |
• | Free cash flow increased 13% to $2.3 billion in the first nine months of 2019 compared to $2 billion in the prior year period. |
• | Actual sales results were up 15% in the quarter and up 8% in the first nine months of 2019 compared to the prior year periods. |
News Release |
• | The company reinstated its share repurchase program late in the third quarter and repurchased 341 thousand shares in the quarter, and 2 million shares in the first nine months of 2019, for $35 million and $156 million, respectively. |
News Release |
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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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | |||||||||||||||
Processing and services | $ | 2,608 | $ | 1,223 | $ | 5,229 | $ | 3,668 | |||||||
Product | 520 | 189 | 913 | 604 | |||||||||||
Total revenue | 3,128 | 1,412 | 6,142 | 4,272 | |||||||||||
Expenses | |||||||||||||||
Cost of processing and services | 1,204 | 568 | 2,445 | 1,696 | |||||||||||
Cost of product | 413 | 181 | 755 | 551 | |||||||||||
Selling, general and administrative | 1,137 | 305 | 1,821 | 930 | |||||||||||
(Gain) loss on sale of businesses | — | 2 | (10 | ) | (227 | ) | |||||||||
Total expenses | 2,754 | 1,056 | 5,011 | 2,950 | |||||||||||
Operating income | 374 | 356 | 1,131 | 1,322 | |||||||||||
Interest expense, net | (164 | ) | (45 | ) | (279 | ) | (134 | ) | |||||||
Debt financing activities | 49 | (8 | ) | (47 | ) | (8 | ) | ||||||||
Other (expense) income | (3 | ) | 1 | — | 3 | ||||||||||
Income before income taxes and income from investments in unconsolidated affiliates | 256 | 304 | 805 | 1,183 | |||||||||||
Income tax provision | (53 | ) | (78 | ) | (144 | ) | (290 | ) | |||||||
Income from investments in unconsolidated affiliates | 22 | 1 | 12 | 8 | |||||||||||
Net income | 225 | 227 | 673 | 901 | |||||||||||
Less: net income attributable to noncontrolling interests | 27 | — | 27 | — | |||||||||||
Net income attributable to Fiserv | $ | 198 | $ | 227 | $ | 646 | $ | 901 | |||||||
GAAP earnings per share attributable to Fiserv - diluted | $ | 0.33 | $ | 0.55 | $ | 1.39 | $ | 2.16 | |||||||
Diluted shares used in computing earnings per share attributable to Fiserv | 596.9 | 412.0 | 465.2 | 416.6 | |||||||||||
Earnings per share is calculated using actual, unrounded amounts. | |||||||||||||||
News 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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
GAAP net income | $ | 198 | $ | 227 | $ | 646 | $ | 901 | |||||||
GAAP net income attributable to First Data 1 | (141 | ) | 401 | 303 | 843 | ||||||||||
Combined net income attributable to Fiserv | 57 | 628 | 949 | 1,744 | |||||||||||
Combined adjustments: | |||||||||||||||
Merger and integration costs 2 | 217 | 16 | 319 | 50 | |||||||||||
Severance and restructuring costs 3 | 37 | 40 | 75 | 124 | |||||||||||
Amortization of acquisition-related intangible assets 4 | 400 | 147 | 689 | 445 | |||||||||||
Debt financing activities 5 | 186 | 10 | 287 | 11 | |||||||||||
Impact of divestitures 6 | — | (9 | ) | — | (28 | ) | |||||||||
Non wholly-owned entity activities 7 | (2 | ) | (6 | ) | (20 | ) | (26 | ) | |||||||
Tax impact of adjustments 8 | (193 | ) | (46 | ) | (311 | ) | (133 | ) | |||||||
Gain on sale of businesses 6 | — | (202 | ) | (7 | ) | (429 | ) | ||||||||
Tax impact of gain on sale of businesses 8 | — | 14 | 2 | 91 | |||||||||||
Discrete tax items 9 | 8 | 19 | 8 | (88 | ) | ||||||||||
Adjusted net income | $ | 710 | $ | 611 | $ | 1,991 | $ | 1,761 | |||||||
Weighted average common shares outstanding - diluted | 596.9 | 412.0 | 465.2 | 416.6 | |||||||||||
Issuance of shares for combination | 95.4 | 286.3 | 222.7 | 286.3 | |||||||||||
Dilutive impact of exchanged equity awards | 2.6 | 7.8 | 6.0 | 7.8 | |||||||||||
Combined weighted average common shares outstanding - diluted 10 | 694.9 | 706.1 | 693.9 | 710.7 | |||||||||||
GAAP earnings per share 10 | $ | 0.33 | $ | 0.55 | $ | 1.39 | $ | 2.16 | |||||||
Combined earnings per share 10 | $ | 0.08 | $ | 0.89 | $ | 1.37 | $ | 2.45 | |||||||
Combined adjustments - net of income taxes: | |||||||||||||||
Merger and integration costs 2 | 0.24 | 0.02 | 0.35 | 0.06 | |||||||||||
Severance and restructuring costs 3 | 0.04 | 0.04 | 0.08 | 0.13 | |||||||||||
Amortization of acquisition-related intangible assets 4 | 0.44 | 0.16 | 0.76 | 0.48 | |||||||||||
Debt financing activities 5 | 0.21 | 0.01 | 0.32 | 0.01 | |||||||||||
Impact of divestitures 6 | — | (0.01 | ) | — | (0.03 | ) | |||||||||
Non wholly-owned entity activities 7 | — | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||
Gain on sale of businesses 6 | — | (0.27 | ) | (0.01 | ) | (0.48 | ) | ||||||||
Discrete tax items 9 | 0.01 | 0.03 | 0.01 | (0.12 | ) | ||||||||||
Adjusted earnings per share | $ | 1.02 | $ | 0.87 | $ | 2.87 | $ | 2.48 |
1 | Represents the financial results of First Data prior to the date of acquisition. For the three and nine months ended September 30, 2019, this includes the results of First Data from July 1, 2019 through July 28, 2019 and from January 1, 2019 through July 28, 2019, respectively. For the three and nine months ended September 30, 2018, this includes the results of First Data from July 1, 2018 through September 30, 2018 and from January 1, 2018 through September 30, 2018, respectively. |
News Release |
2 | Represents acquisition and related integration costs incurred as a result of the company's various acquisitions. Merger and integration costs include $200 million and $280 million in the third quarter and first nine months of 2019, respectively, related to the acquisition of First Data and primarily consist of legal and other professional service fees and incremental share-based compensation associated with the fair value of stock awards assumed by Fiserv in connection with the First Data acquisition. |
3 | Represents severance and other costs associated with the achievement of ongoing expense management initiatives, including real estate and data center consolidation activities. |
4 | Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology, and tradenames. This adjustment does not exclude the amortization of other intangible assets such as contract assets (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts. See additional information on page 17 for an analysis of the company's amortization expense. |
5 | Represents losses on early debt extinguishments and other costs associated with the refinancing of certain indebtedness of First Data. Debt financing activities in the first nine months of 2019 include $220 million of early debt extinguishment costs and $98 million of bridge term loan facility expenses, partially offset by $50 million of net currency transaction gains related to foreign currency denominated debt. |
6 | Represents the earnings attributable to divested businesses and the gain on the associated divestiture transactions. The divested businesses include First Data’s card processing business in Central and Southeastern Europe, First Data’s remittance processing business, and a 55% interest in Fiserv's Lending Solutions business in September 2018, August 2018 and March 2018, respectively. |
7 | Represents the company’s share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which it holds a controlling financial interest. This adjustment also includes a $14 million net gain on the merger of a joint venture in the third quarter and first nine months of 2019. |
8 | The tax impact of adjustments is calculated using a tax rate of 23%, which is expected to approximate the combined company's annual effective tax rate, exclusive of the actual tax impacts associated with the net gain on sale of businesses. |
9 | Represents certain discrete tax items, such as tax effects associated with U.S. federal tax reform and tax impacts from valuation allowance releases, tax reserves and non-deductible transaction costs associated with the acquisition of First Data. |
10 | GAAP earnings per share is computed by dividing GAAP net income by the weighted-average number of common shares outstanding - diluted during the period. Combined earnings per share is computed by dividing combined net income attributable to Fiserv by the combined weighted average common shares outstanding - diluted during the period. The combined weighted average common shares outstanding - diluted is computed based on the historical Fiserv weighted average shares outstanding - diluted determined in accordance with GAAP, adjusted to include the Fiserv shares issued as merger consideration and shares subject to First Data equity awards assumed by Fiserv in connection with the First Data acquisition for all periods presented. |
News Release |
Fiserv, Inc. | |||||||||||||||
Financial Results by Segment | |||||||||||||||
(In millions, unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Total Company | |||||||||||||||
Revenue | $ | 3,128 | $ | 1,412 | $ | 6,142 | $ | 4,272 | |||||||
First Data revenue 1 | 808 | 2,369 | 5,609 | 7,099 | |||||||||||
Combined revenue | 3,936 | 3,781 | 11,751 | 11,371 | |||||||||||
Combined adjustments: | |||||||||||||||
Intercompany eliminations 2 | — | (2 | ) | (4 | ) | (6 | ) | ||||||||
Output Solutions postage reimbursements 3 | (237 | ) | (249 | ) | (730 | ) | (755 | ) | |||||||
Deferred revenue purchase accounting adjustments | 6 | — | 6 | 3 | |||||||||||
Merchant Services adjustment 4 | (88 | ) | (94 | ) | (290 | ) | (297 | ) | |||||||
Adjusted revenue | $ | 3,617 | $ | 3,436 | $ | 10,733 | $ | 10,316 | |||||||
Operating income | $ | 374 | $ | 356 | $ | 1,131 | $ | 1,322 | |||||||
First Data operating income 1 | 99 | 679 | 1,088 | 1,563 | |||||||||||
Combined operating income | 473 | 1,035 | 2,219 | 2,885 | |||||||||||
Combined adjustments: | |||||||||||||||
Merger and integration costs | 217 | 16 | 319 | 50 | |||||||||||
Severance and restructuring costs | 37 | 40 | 75 | 124 | |||||||||||
Amortization of acquisition-related intangible assets | 400 | 147 | 689 | 445 | |||||||||||
Merchant Services adjustment 4 | (48 | ) | (57 | ) | (169 | ) | (172 | ) | |||||||
Gain on sale of businesses | — | (202 | ) | (7 | ) | (429 | ) | ||||||||
Adjusted operating income | $ | 1,079 | $ | 979 | $ | 3,126 | $ | 2,903 | |||||||
Operating margin | 12.0 | % | 25.2 | % | 18.4 | % | 31.0 | % | |||||||
Adjusted operating margin | 29.8 | % | 28.5 | % | 29.1 | % | 28.1 | % | |||||||
First Data 5 | |||||||||||||||
First Data revenue | $ | 2,422 | $ | 2,369 | $ | 7,223 | $ | 7,099 | |||||||
Adjustments: | |||||||||||||||
Intercompany eliminations 2 | — | (1 | ) | (2 | ) | (4 | ) | ||||||||
Output Solutions postage reimbursements | (172 | ) | (179 | ) | (521 | ) | (531 | ) | |||||||
Deferred revenue purchase accounting adjustments | 6 | — | 6 | — | |||||||||||
Merchant Services adjustment 4 | (88 | ) | (94 | ) | (290 | ) | (297 | ) | |||||||
First Data adjusted revenue | $ | 2,168 | $ | 2,095 | $ | 6,416 | $ | 6,267 | |||||||
First Data operating income | $ | 589 | $ | 653 | $ | 1,775 | $ | 1,746 | |||||||
Adjustments: | |||||||||||||||
Merger and integration costs | 23 | 1 | 30 | 3 | |||||||||||
Severance and restructuring costs | 3 | 22 | 7 | 54 | |||||||||||
Amortization of acquisition-related intangible assets | 100 | 107 | 300 | 325 | |||||||||||
Merchant Services adjustment 4 | (48 | ) | (57 | ) | (169 | ) | (172 | ) | |||||||
Gain on sale of businesses | — | (88 | ) | — | (88 | ) | |||||||||
First Data adjusted operating income | $ | 667 | $ | 638 | $ | 1,943 | $ | 1,868 | |||||||
First Data operating margin | 24.4 | % | 27.6 | % | 24.6 | % | 24.5 | % | |||||||
First Data adjusted operating margin | 30.7 | % | 30.5 | % | 30.3 | % | 29.8 | % |
News Release |
Fiserv, Inc. | |||||||||||||||
Financial Results by Segment (cont.) | |||||||||||||||
(In millions, unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Payments and Industry Products ("Payments") | |||||||||||||||
Revenue | $ | 926 | $ | 844 | $ | 2,757 | $ | 2,523 | |||||||
Adjustments: | |||||||||||||||
Intercompany eliminations 2 | — | (1 | ) | (2 | ) | (2 | ) | ||||||||
Output Solutions postage reimbursements 3 | (65 | ) | (70 | ) | (209 | ) | (224 | ) | |||||||
Deferred revenue purchase accounting adjustments | — | — | — | 3 | |||||||||||
Adjusted revenue | $ | 861 | $ | 773 | $ | 2,546 | $ | 2,300 | |||||||
Operating income | $ | 309 | $ | 267 | $ | 899 | $ | 807 | |||||||
Adjustments: | |||||||||||||||
Merger and integration costs | — | — | — | 2 | |||||||||||
Adjusted operating income | $ | 309 | $ | 267 | $ | 899 | $ | 809 | |||||||
Operating margin | 33.3 | % | 31.5 | % | 32.6 | % | 32.0 | % | |||||||
Adjusted operating margin | 35.9 | % | 34.4 | % | 35.3 | % | 35.2 | % | |||||||
Financial Institution Services ("Financial") | |||||||||||||||
Revenue | $ | 596 | $ | 574 | $ | 1,798 | $ | 1,780 | |||||||
Operating income | $ | 196 | $ | 187 | $ | 598 | $ | 590 | |||||||
Operating margin | 32.9 | % | 32.7 | % | 33.3 | % | 33.2 | % | |||||||
Corporate and Other | |||||||||||||||
Revenue | $ | (8 | ) | $ | (6 | ) | $ | (27 | ) | $ | (31 | ) | |||
Operating loss | $ | (527 | ) | $ | (98 | ) | $ | (762 | ) | $ | (75 | ) | |||
First Data operating (loss) income | (94 | ) | 26 | (291 | ) | (183 | ) | ||||||||
Combined adjustments: | |||||||||||||||
Merger and integration costs | 194 | 15 | 289 | 45 | |||||||||||
Severance and restructuring costs | 34 | 18 | 68 | 70 | |||||||||||
Amortization of acquisition-related intangible assets | 300 | 40 | 389 | 120 | |||||||||||
Gain on sale of businesses | — | (114 | ) | (7 | ) | (341 | ) | ||||||||
Adjusted operating loss | $ | (93 | ) | $ | (113 | ) | $ | (314 | ) | $ | (364 | ) | |||
See page 3 for disclosures related to the use of non-GAAP financial measures. | |||||||||||||||
Operating margin percentages are calculated using actual, unrounded amounts. |
1 | Represents the financial results of First Data prior to the date of acquisition. For the three and nine months ended September 30, 2019, this includes the results of First Data from July 1, 2019 through July 28, 2019 and from January 1, 2019 through July 28, 2019, respectively. For the three and nine months ended September 30, 2018, this includes the results of First Data from July 1, 2018 through September 30, 2018 and from January 1, 2018 through September 30, 2018, respectively. |
2 | Represents the elimination of intercompany revenue and expense between First Data and the company. |
3 | Adjustment reflects the conformity of historical amounts to be consistent with the combined company's Output Solutions postage reimbursements. |
News Release |
4 | Represents an adjustment primarily related to the company's joint venture with Bank of America. The company and Bank of America jointly announced the dissolution of the Banc of America Merchant Services joint venture ("BAMS"), to be effective June 2020. The company owns 51% of BAMS and BAMS' financial results are 100% consolidated into the company's financial statements for GAAP reporting purposes. Upon dissolution of the joint venture, the company is entitled to receive a 51% share of the joint venture's value via an agreed upon contractual process. In addition, Bank of America has the right to require the company to continue providing merchant processing and related services to the joint venture clients allocated to Bank of America in the dissolution of the joint venture through June 2023 at current pricing. The company anticipates an ongoing relationship with Bank of America to provide processing and other support services to other Bank of America merchant clients following the joint venture's dissolution. The non-GAAP adjustment reduces adjusted revenue and adjusted operating income by the joint venture revenue and expense that is not expected to be retained by the company upon dissolution and is partially offset by an increase to processing and services revenue. |
5 | Represents the results of First Data less amounts included in Corporate and Other consisting of intercompany eliminations, unallocated corporate expenses and other activities that are not considered when management evaluates First Data segment performance. |
News Release |
Fiserv, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(In millions, unaudited) | |||||||
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 673 | $ | 901 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 386 | 278 | |||||
Amortization of acquisition-related intangible assets | 476 | 120 | |||||
Amortization of financing costs, debt discounts and other | 116 | 8 | |||||
Net foreign currency gain on financing activities | (50 | ) | — | ||||
Share-based compensation | 121 | 54 | |||||
Deferred income taxes | 26 | 105 | |||||
Gain on sale of business | (10 | ) | (227 | ) | |||
Income from investments in unconsolidated affiliates | (12 | ) | (8 | ) | |||
Distributions from unconsolidated affiliates | 6 | 1 | |||||
Settlement of interest rate hedge contracts | (183 | ) | — | ||||
Other operating activities | (3 | ) | 11 | ||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | |||||||
Trade accounts receivable | 151 | (29 | ) | ||||
Prepaid expenses and other assets | (41 | ) | (63 | ) | |||
Contract costs | (141 | ) | (107 | ) | |||
Accounts payable and other liabilities | 117 | 48 | |||||
Contract liabilities | (15 | ) | (111 | ) | |||
Net cash provided by operating activities | 1,617 | 981 | |||||
Cash flows from investing activities | |||||||
Capital expenditures, including capitalization of software costs | (431 | ) | (263 | ) | |||
Proceeds from sale of businesses | 39 | 419 | |||||
Payments for acquisition of business, net of cash acquired | (16,004 | ) | — | ||||
Distributions from unconsolidated affiliates | 85 | — | |||||
Purchases of investments | (4 | ) | — | ||||
Other investing activities | 6 | (13 | ) | ||||
Net cash (used in) provided by investing activities | (16,309 | ) | 143 | ||||
Cash flows from financing activities | |||||||
Debt proceeds | 18,855 | 3,627 | |||||
Debt repayments | (3,051 | ) | (3,256 | ) | |||
Payments of debt financing, redemption and other costs | (247 | ) | — | ||||
Proceeds from issuance of treasury stock | 116 | 60 | |||||
Purchases of treasury stock, including employee shares withheld for tax obligations | (271 | ) | (1,254 | ) | |||
Distributions paid to noncontrolling interests and redeemable noncontrolling interest | (46 | ) | — | ||||
Other financing activities | (5 | ) | 4 | ||||
Net cash provided by (used in) financing activities | 15,351 | (819 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (4 | ) | — | ||||
Net change in cash, cash equivalents, and restricted cash | 655 | 305 | |||||
Net cash flows from discontinued operations | — | 43 | |||||
Cash, cash equivalents, and restricted cash beginning balance | 415 | 325 | |||||
Cash, cash equivalents, and restricted cash ending balance | $ | 1,070 | $ | 673 | |||
News Release |
Fiserv, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(In millions, unaudited) | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 1,028 | $ | 415 | |||
Trade accounts receivable – net | 2,653 | 1,049 | |||||
Prepaid expenses and other current assets | 1,330 | 274 | |||||
Settlement assets | 12,980 | 486 | |||||
Total current assets | 17,991 | 2,224 | |||||
Property and equipment – net | 1,639 | 398 | |||||
Customer relationships – net | 14,540 | 1,348 | |||||
Other intangible assets – net | 3,197 | 795 | |||||
Goodwill | 35,517 | 5,702 | |||||
Contract costs – net | 481 | 419 | |||||
Investments in unconsolidated affiliates | 2,618 | 65 | |||||
Other long-term assets | 1,881 | 311 | |||||
Total assets | $ | 77,864 | $ | 11,262 | |||
Liabilities and Shareholders' Equity | |||||||
Accounts payable and accrued expenses | $ | 2,901 | $ | 1,146 | |||
Short-term and current maturities of long-term debt | 368 | 4 | |||||
Contract liabilities | 412 | 380 | |||||
Settlement obligations | 12,980 | 480 | |||||
Total current liabilities | 16,661 | 2,010 | |||||
Long-term debt | 22,123 | 5,955 | |||||
Deferred income taxes | 4,110 | 745 | |||||
Long-term contract liabilities | 129 | 89 | |||||
Other long-term liabilities | 989 | 170 | |||||
Total liabilities | 44,012 | 8,969 | |||||
Redeemable noncontrolling interest | 92 | — | |||||
Fiserv shareholders' equity | 32,669 | 2,293 | |||||
Noncontrolling interests | 1,091 | — | |||||
Total equity | 33,760 | 2,293 | |||||
Total liabilities and equity | $ | 77,864 | $ | 11,262 | |||
News Release |
Internal Revenue Growth | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2019 | 2018 | Growth | 2019 | 2018 | Growth | |||||||||||||||
Total Company | ||||||||||||||||||||
Adjusted revenue | $ | 3,617 | $ | 3,436 | $ | 10,733 | $ | 10,316 | ||||||||||||
Currency impact 1 | 43 | — | 193 | — | ||||||||||||||||
Acquisition adjustments | (50 | ) | — | (152 | ) | — | ||||||||||||||
Divestiture adjustments | (9 | ) | (48 | ) | (27 | ) | (208 | ) | ||||||||||||
Internal revenue | $ | 3,601 | $ | 3,388 | 6% | $ | 10,747 | $ | 10,108 | 6% | ||||||||||
First Data | ||||||||||||||||||||
Adjusted revenue | $ | 2,168 | $ | 2,095 | $ | 6,416 | $ | 6,267 | ||||||||||||
Currency impact 1 | 41 | — | 186 | — | ||||||||||||||||
Acquisition adjustments | (9 | ) | — | (20 | ) | — | ||||||||||||||
Divestiture adjustments | — | (38 | ) | — | (134 | ) | ||||||||||||||
Internal revenue | $ | 2,200 | $ | 2,057 | 7% | $ | 6,582 | $ | 6,133 | 7% | ||||||||||
Payments | ||||||||||||||||||||
Adjusted revenue | $ | 861 | $ | 773 | $ | 2,546 | $ | 2,300 | ||||||||||||
Currency impact 1 | 1 | — | 4 | — | ||||||||||||||||
Acquisition adjustments | (40 | ) | — | (131 | ) | — | ||||||||||||||
Internal revenue | $ | 822 | $ | 773 | 6% | $ | 2,419 | $ | 2,300 | 5% | ||||||||||
Financial | ||||||||||||||||||||
Adjusted revenue | $ | 596 | $ | 574 | $ | 1,798 | $ | 1,780 | ||||||||||||
Currency impact 1 | 1 | — | 3 | — | ||||||||||||||||
Acquisition adjustments | (1 | ) | — | (1 | ) | — | ||||||||||||||
Divestiture adjustments | — | — | — | (54 | ) | |||||||||||||||
Internal revenue | $ | 596 | $ | 574 | 4% | $ | 1,800 | $ | 1,726 | 4% | ||||||||||
Corporate and Other | ||||||||||||||||||||
Adjusted revenue | $ | (8 | ) | $ | (6 | ) | $ | (27 | ) | $ | (31 | ) | ||||||||
Divestiture adjustments | (9 | ) | (10 | ) | (27 | ) | (20 | ) | ||||||||||||
Internal revenue | $ | (17 | ) | $ | (16 | ) | n/m | $ | (54 | ) | $ | (51 | ) | n/m |
1 | Currency impact is measured as the increase or decrease in adjusted revenue for the current period by applying prior period foreign currency exchange rates to present a constant currency comparison to prior periods. |
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Free Cash Flow | Nine Months Ended September 30, | |||||||
2019 | 2018 | |||||||
Net cash provided by operating activities | $ | 1,617 | $ | 981 | ||||
First Data net cash provided by operating activities 1 | 1,370 | 1,809 | ||||||
First Data payments for contract assets 2 | (51 | ) | (62 | ) | ||||
Combined net cash provided by operating activities | 2,936 | 2,728 | ||||||
Combined capital expenditures | (828 | ) | (653 | ) | ||||
Combined adjustments: | ||||||||
Distributions paid to noncontrolling interests and redeemable noncontrolling interest | (199 | ) | (193 | ) | ||||
Distributions from unconsolidated affiliates 3 | 85 | — | ||||||
Severance, restructuring, merger and integration payments | 202 | 158 | ||||||
Settlement of interest rate hedge contracts | 183 | — | ||||||
Tax reform payments | — | 23 | ||||||
Tax payments on adjustments and debt financing | (72 | ) | (25 | ) | ||||
Other | (4 | ) | (1 | ) | ||||
Free cash flow | $ | 2,303 | $ | 2,037 | ||||
1 | Represents the financial results of First Data prior to the date of acquisition. For the nine months ended September 30, 2019, this includes the results of First Data from January 1, 2019 through July 28, 2019. For the nine months ended September 30, 2018, this includes the results of First Data from January 1, 2018 through September 30, 2018. |
2 | Represents the conformity of First Data's historical classification of payments for contract assets to be consistent with the company's classification and treatment. |
3 | Distributions from unconsolidated affiliates totaled $190 million and $191 million for the nine months ended September 30, 2019 and 2018, respectively, of which $105 million and $191 million of the distributions are recorded within First Data net cash provided by operating activities. |
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Total Amortization1 | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Acquisition-related intangible assets | $ | 387 | $ | 40 | $ | 476 | $ | 120 | ||||||||
Capitalized software | 40 | 35 | 117 | 101 | ||||||||||||
Purchased software | 32 | 12 | 57 | 35 | ||||||||||||
Financing costs, debt discounts and other | 11 | 3 | 116 | 9 | ||||||||||||
Sales commissions | 20 | 18 | 61 | 58 | ||||||||||||
Deferred conversion costs | 6 | 5 | 16 | 15 | ||||||||||||
Total amortization | $ | 496 | $ | 113 | $ | 843 | $ | 338 | ||||||||
First Data acquisition-related intangible assets | $ | 33 | $ | 107 | $ | 233 | $ | 325 | ||||||||
First Data capitalized software | 10 | 23 | 62 | 68 | ||||||||||||
First Data purchased software | 11 | 30 | 72 | 89 | ||||||||||||
First Data financing costs, debt discounts and other | — | 4 | 7 | 13 | ||||||||||||
First Data sales commissions | — | — | — | — | ||||||||||||
First Data deferred conversion costs | 4 | 10 | 22 | 30 | ||||||||||||
Total First Data amortization 2 | $ | 58 | $ | 174 | $ | 396 | $ | 525 | ||||||||
Combined acquisition-related intangible assets | $ | 420 | $ | 147 | $ | 709 | $ | 445 | ||||||||
Combined capitalized software | 50 | 58 | 179 | 169 | ||||||||||||
Combined purchased software | 43 | 42 | 129 | 124 | ||||||||||||
Combined financing costs, debt discounts and other | 11 | 7 | 123 | 22 | ||||||||||||
Combined sales commissions | 20 | 18 | 61 | 58 | ||||||||||||
Combined deferred conversion costs | 10 | 15 | 38 | 45 | ||||||||||||
Total combined amortization | $ | 554 | $ | 287 | $ | 1,239 | $ | 863 |
1 | The company adjusts its non-GAAP results to exclude amortization of acquisition-related intangible assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions (see corresponding adjustment on page 8). The adjustment for acquired First Data software/technology excludes only the incremental amortization related to the fair value purchase accounting allocation. Management believes that the adjustment of acquisition-related intangible asset amortization supplements the GAAP information with a measure that can be used to assess the comparability of operating performance. Although the company excludes amortization from acquisition-related intangible assets from its non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. |
2 | Represents the financial results of First Data prior to the date of acquisition. For the three and nine months ended September 30, 2019, this includes the results of First Data from July 1, 2019 through July 28, 2019 and from January 1, 2019 through July 28, 2019, respectively. For the three and nine months ended September 30, 2018, this includes the results of First Data from July 1, 2018 through September 30, 2018 and from January 1, 2018 through September 30, 2018, respectively. |
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2018 GAAP net income | $ | 1,187 | |
2018 GAAP net income attributable to First Data | 1,005 | ||
2018 combined net income attributable to Fiserv | 2,192 | ||
Combined adjustments: | |||
Merger and integration costs 1 | 55 | ||
Severance and restructuring costs 2 | 155 | ||
Amortization of acquisition-related intangible assets 3 | 594 | ||
Debt financing activities 4 | 167 | ||
Impact of divestitures 5 | (28 | ) | |
Non wholly-owned entity activities 6 | (33 | ) | |
Tax impact of adjustments 7 | (209 | ) | |
Gain on sale of businesses 5 | (424 | ) | |
Tax impact of gain on sale of businesses 7 | 90 | ||
Discrete tax items 8 | (127 | ) | |
2018 adjusted net income | $ | 2,432 | |
Weighted average common shares outstanding - diluted | 413.7 | ||
Issuance of shares for combination | 286.3 | ||
Dilutive impact of exchanged equity awards | 7.8 | ||
Combined weighted average common shares outstanding - diluted 9 | 707.8 | ||
2018 GAAP earnings per share 9 | $ | 2.87 | |
2018 combined earnings per share 9 | $ | 3.10 | |
Combined adjustments - net of income taxes | |||
Merger and integration costs 1 | 0.06 | ||
Severance and restructuring costs 2 | 0.17 | ||
Amortization of acquisition-related intangible assets 3 | 0.65 | ||
Debt financing activities 4 | 0.18 | ||
Impact of divestitures 5 | (0.03 | ) | |
Non wholly-owned entity activities 6 | (0.04 | ) | |
Gain on sale of businesses 5 | (0.48 | ) | |
Discrete tax items 8 | (0.18 | ) | |
2018 adjusted earnings per share | $ | 3.44 | |
2019 adjusted earnings per share outlook | $3.98 - $4.02 | ||
2019 adjusted earnings per share growth outlook | 16% - 17% | ||
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1 | Represents acquisition and related integration costs incurred as a result of the company's various acquisitions. |
2 | Represents severance and other costs associated with the achievement of ongoing expense management initiatives, including real estate and data center consolidation activities. |
3 | Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology, and tradenames. This adjustment does not exclude the amortization of other intangible assets such as contract assets (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts. See additional information on page 17 for an analysis of the company's amortization expense. |
4 | Represents losses on early debt extinguishment primarily associated with the redemption of First Data's 7.0% senior notes and the company's 4.625% senior notes with aggregate principal amounts of $3.4 billion and $450 million, respectively. |
5 | Represents the earnings attributable to divested businesses and the gain on the associated divestiture transactions. The divested businesses include First Data's card processing business in Central and Southeastern Europe, First Data's remittance processing business, and a 55% interest in Fiserv's Lending Solutions business in September 2018, August 2018 and March 2018, respectively. |
6 | Represents the company's share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which it holds a controlling financial interest. |
7 | The tax impact of adjustments is calculated using a tax rate of 23%, which is expected to approximate the combined company's annual effective tax rate, exclusive of the actual tax impacts associated with the gain on sale of businesses. |
8 | Represents certain discrete tax items, such as tax effects associated with U.S. federal tax reform and tax impacts from valuation allowance releases and tax reserves. |
9 | GAAP earnings per share is computed by dividing GAAP net income by the weighted-average number of common shares outstanding - diluted during the period. Combined earnings per share is computed by dividing combined net income attributable to Fiserv by the combined weighted average common shares outstanding - diluted during the period. The combined weighted average common shares outstanding - diluted is computed based on the historical Fiserv weighted average shares outstanding - diluted determined in accordance with GAAP, adjusted to include the Fiserv shares issued as merger consideration and shares subject to First Data equity awards assumed by Fiserv in connection with the First Data acquisition for the period. |