Fiserv reports second quarter 2019 results
BROOKFIELD, WI (July 25, 2019) — Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions, today reported financial results for the second quarter of 2019.
Second Quarter 2019 GAAP Results
GAAP revenue for the company increased 6 percent to $1.51 billion in the second quarter of 2019 compared to the prior year period, with 10 percent growth in the Payments segment and 2 percent growth in the Financial segment. For the first six months of 2019, GAAP revenue increased 5 percent to $3.01 billioncompared to the prior year period, with 9 percent growth in the Payments segment and Financial segment revenue relatively consistent with the prior year period.
GAAP earnings per share was $0.56 in the second quarter and $1.12 in the first six months of 2019, decreasing 7 percent and 30 percent, respectively, compared to the prior year periods. GAAP earnings per share included costs of $0.10 and $0.26 per share in the second quarter and first six months of 2019, respectively, related to the previously announced pending acquisition of First Data Corporation. GAAP earnings per share in the first six months of 2018 included a gain of $0.36 per share on the sale of a 55 percent interest of the company’s Lending Solutions business (the “Lending Transaction”).
GAAP operating margin was 25.4 percent in the second quarter and 25.1 percent in the first six months of 2019 compared to 25.2 percent in the second quarter and 33.8 percent in the first six months of 2018. GAAP operating margin in the first six months of 2018 included a $229 million gain resulting from the Lending Transaction.
Net cash provided by operating activities was $579 million in the first six months of 2019 compared to $613 million in the first six months of 2018.
“We delivered stronger than expected second quarter results across all financial measures including double-digit sales growth,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “At the same time, we continue to advance our integration planning efforts for our pending First Data acquisition which we expect to close on July 29.”
Second Quarter 2019 Non-GAAP Results and Additional Information
- Adjusted revenue increased 7 percent to $1.45 billion in the second quarter and 6 percent to $2.88 billion in the first six months of 2019 compared to the prior year periods.
- Internal revenue growth for the company was 4 percent in the second quarter, with 5 percent growth in the Payments segment and 2 percent growth in the Financial segment.
- Internal revenue growth for the company was 4 percent in the first six months of 2019, with 4 percent growth in both the Payments and Financial segments.
- Adjusted earnings per share increased 9 percent to $0.82 in the second quarter and 11 percent to $1.66 in the first six months of 2019 compared to the prior year periods.
- Adjusted operating margin was 32.4 percent in both the second quarter of 2019 and 2018, and was 32.1 percent in the first six months of 2019 compared to 32.5 percent in the first six months of 2018.
- Free cash flow was $602 million in the first six months of 2019 compared to $491 million in the prior year period.
- Sales results were up 17 percent in the quarter and 14 percent in the first six months of 2019 compared to the prior year periods.
- The company repurchased 1.6 million shares of common stock for $120 million in 2019 prior to the announcement of the proposed First Data acquisition. The company has deferred additional share repurchases until the close of the acquisition. As of June 30, 2019, the company had 24.3 million remaining shares authorized for repurchase.
- In connection with the proposed acquisition, the company completed public offerings of $9.0 billion of senior notes in June 2019, and €1.5 billion and £1.1 billion of senior notes in July 2019.
Agreement to Merge with First Data Corporation
On January 16, 2019, Fiserv announced that it had entered into a definitive merger agreement to acquire First Data Corporation(“First Data“) in an all-stock transaction for an equity value of approximately $22 billion as of the announcement. Fiserv and First Data have received the final required regulatory approvals and non-objections needed to complete the proposed acquisition. Subject to the satisfaction or waiver of the remaining customary contractual conditions set forth in the merger agreement, the parties expect to close the transaction on or about July 29, 2019.
Outlook for 2019
Fiserv continues to expect internal revenue growth in a range of 4.5 to 5 percent for the year. The company also expects adjusted earnings per share in a range of $3.39 to $3.52, which represents growth of 10 to 14 percent, as adjusted for the Lending Transaction. The company’s outlook for the year does not include any impact related to its pending acquisition of First Data Corporation.
“Our stronger than expected first-half performance positions us well to meet our financial commitments for the year,” said Yabuki.
Earnings Conference Call
The company will discuss its second quarter 2019 results on a conference call and webcast at 4 p.m. CT on Thursday, July 25, 2019. To register for the event, go to fiserv.com and click on the Q2 Earnings webcast link. Supplemental materials will be available in the “Investor Relations” section of the website.
Use of Non-GAAP Financial Measures
In this earnings release, the company supplements its reporting of information determined in accordance with GAAP, such as revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities, with “adjusted revenue,” “internal revenue growth,” “adjusted operating income,” “adjusted operating margin,” “adjusted net income,” “adjusted earnings per share,” “adjusted earnings per share, as adjusted for the Lending Transaction impact,” and “free cash flow.” Management believes that adjustments for certain non-cash or other items and the exclusion of certain pass-through revenue and expenses should enhance shareholders’ ability to evaluate the company’s performance, as such measures provide additional insights into the factors and trends affecting its business. Therefore, the company excludes these items from GAAP revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities to calculate these non-GAAP measures. The corresponding reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are included in this earnings release, except for forward-looking measures where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and limited visibility of the non-cash and other items described below that are excluded from the non-GAAP outlook measures. See page 15 for additional information regarding the company’s forward-looking non-GAAP financial measures.
Examples of non-cash or other items may include, but are not limited to, non-cash deferred revenue adjustments arising from acquisitions, non-cash intangible asset amortization expense associated with acquisitions, non-cash impairment charges, severance costs, charges associated with debt financing activities including early debt extinguishment and bridge financing costs, merger and integration costs, certain costs associated with the achievement of the company’s operational effectiveness objectives, gains or losses from dispositions and unconsolidated affiliates, and certain discrete tax benefits and expenses. The company excludes these items to more clearly focus on the factors management believes are pertinent to its operations, and management uses this information to make operating decisions, including the allocation of resources to the company’s various businesses.
The company adjusts its non-GAAP results to exclude amortization of all 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. 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.
Internal revenue growth and free cash flow are non-GAAP financial measures and are described on page 13. Management believes internal revenue growth is useful because it presents revenue growth excluding acquisitions, dispositions and the impact of postage reimbursements in the company’s Output Solutions business, and including deferred revenue purchase accounting adjustments. Management believes free cash flow is useful to measure the funds generated in a given period that are available for debt service requirements and strategic capital decisions. Management believes this supplemental information enhances shareholders’ ability to evaluate and understand the company’s core business performance.
These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should be considered in addition to, and not as a substitute for, revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP.
Fiserv, Inc. (NYSE: FI), a Fortune 500 company, aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale and business management platform. Fiserv is a member of the S&P 500® Index and one of Fortune® World’s Most Admired Companies™. Visit fiserv.com and follow on social media for more information and the latest company news.