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Fiserv Reports Third Quarter 2021 Results

Fiserv, Inc. (NASDAQ: FISV), a leading global provider of payments and financial services technology solutions, today reported financial results for the third quarter of 2021.

Third Quarter 2021 GAAP Results

GAAP revenue for the company increased 10% to $4.16 billion in the third quarter of 2021 compared to the prior year period, with 18% growth in the Acceptance segment, 5% growth in the Fintech segment and 6% growth in the Payments segment. GAAP revenue for the company increased 9% to $11.97 billion in the first nine months of 2021 compared to the prior year period, with 17% growth in the Acceptance segment, 4% growth in the Fintech segment and 5% growth in the Payments segment.

GAAP earnings per share was $0.64 in the third quarter and $1.49 in the first nine months of 2021, an increase of 64% and 55%, respectively, compared to the prior year periods. GAAP operating margin was 15.3% and 14.7% in the third quarter and first nine months of 2021, respectively, compared to 14.3% and 12.1% in the third quarter and first nine months of 2020, respectively. Net cash provided by operating activities was $2.69 billion in the first nine months of 2021 compared to $2.96 billion in the prior year period.

"We posted another strong quarter of double-digit adjusted revenue and adjusted EPS growth as we continue to invest in organic and inorganic growth and demonstrate unmatched execution," said Frank Bisignano, President and Chief Executive Officer of Fiserv.

Third Quarter 2021 Non-GAAP Results and Additional Information

  • Adjusted revenue increased 10% to $3.96 billion in the third quarter and 11% to $11.37 billion in the first nine months of 2021 compared to the prior year periods.
  • Internal revenue growth (organic, constant currency) was 10% in the third quarter of 2021, led by 18% growth in the Acceptance segment, 4% growth in the Fintech segment and 6% growth in the Payments segment.
  • Internal revenue growth was 11% in the first nine months of 2021, led by 21% growth in the Acceptance segment, 4% growth in the Fintech segment and 5% growth in the Payments segment.
  • Adjusted earnings per share increased 23% to $1.47 in the third quarter and 29% to $4.01 in the first nine months of 2021 compared to the prior year periods.
  • Adjusted operating margin increased 130 basis points to 34.2% in the third quarter and 330 basis points to 33.2% in the first nine months of 2021 compared to the prior year periods.
  • Free cash flow was $2.29 billion in the first nine months of 2021 compared to $2.59 billion in the prior year period.
  • The company repurchased 3.2 million shares of common stock for $365 million in the third quarter and 13.4 million shares of common stock for $1.57 billion in the first nine months of 2021.
  • In October 2021, the company entered into a definitive merger agreement to acquire BentoBox, a digital marketing and commerce platform for restaurants, to accelerate the omni-commerce capabilities of Clover. The company expects the transaction to close during the fourth quarter of 2021, subject to customary approvals and closing conditions.

     

Outlook for 2021

Fiserv tightens its full year outlook for internal revenue growth to 11% and improves its adjusted earnings per share outlook to a range of $5.55 to $5.60, representing growth of 26% to 27%, for 2021.

"Given our strong financial results year to date and increased visibility into the fourth quarter, we are tightening our internal revenue growth and adjusted EPS outlook," said Bisignano. "The strength of our assets, our agility and our new product launches continue to accelerate our growth."

Earnings Conference Call

The company will discuss its third quarter 2021 results in a live webcast at 7 a.m. CT on Wednesday, October 27, 2021. The webcast, along with supplemental financial information, can be accessed on the investor relations section of the Fiserv website at investors.fiserv.com. A replay will be available approximately one hour after the conclusion of the live webcast.

About Fiserv

Fiserv, Inc. (NASDAQ: FISV) 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 solution. Fiserv is a member of the S&P 500 Index and the FORTUNE 500, and is among FORTUNE World's Most Admired Companies. Visit fiserv.com and follow on social media for more information and the latest company news.

Use of Non-GAAP Financial Measures

In this news release, the company supplements its reporting of information determined in accordance with generally accepted accounting principles ("GAAP"), such as revenue, operating income, operating margin, net income attributable to Fiserv, earnings per share and net cash provided by operating activities, with "adjusted revenue," "internal revenue," "internal revenue growth," "organic revenue" (which is calculated in the same manner as internal revenue; see page 4 of this release), "organic revenue growth," "adjusted operating income," "adjusted operating margin," "adjusted net income," "adjusted earnings per share," "adjusted earnings per share growth," 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 its GAAP financial measures to calculate these unaudited non-GAAP measures. The corresponding reconciliations of these unaudited non-GAAP financial measures to the most comparable GAAP measures are included in this news 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; restructuring costs; severance costs; net charges associated with debt financing activities; merger and integration costs; gains or losses from the sale of businesses or investments; and certain discrete tax benefits and expenses. The company excludes these items to more clearly focus on the factors management believes are pertinent to the company's 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 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 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.

Management believes internal revenue growth, also referred to as organic revenue growth, is useful because it presents adjusted revenue growth including deferred revenue purchase accounting adjustments and excluding the impact of foreign currency fluctuations, acquisitions, dispositions and the company's Output Solutions postage reimbursements. 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 unaudited 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 attributable to Fiserv, earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated internal revenue growth, adjusted earnings per share, adjusted earnings per share growth and other statements regarding our future financial performance. Statements can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “could,” “should,” or words of similar meaning. Statements that describe the company's future plans, objectives or goals are also forward-looking statements.

Forward-looking statements are subject to assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that could cause the company’s actual results to differ materially include, among others, the following, many of which are, and may continue to be, amplified by the COVID-19 pandemic: the duration and intensity of the COVID-19 pandemic, including how quickly the global economy recovers from the impact of the pandemic; governmental and private sector responses to the COVID-19 pandemic and the impact of such responses on the company; the impact of the COVID-19 pandemic on the company's employees, clients, vendors, supply chain, operations and sales; the possibility that the company may be unable to achieve expected synergies and operating efficiencies from the acquisition of First Data within the expected time frames or that the integration of First Data may be more difficult, time-consuming or costly than expected; the company's ability to compete effectively against new and existing competitors and to continue to introduce competitive new products and services on a timely, cost-effective basis; changes in customer demand for the company's products and services; the ability of the company's technology to keep pace with a rapidly evolving marketplace; the successful management of the company's merchant alliance program which involves several alliances not under its sole control; the impact of a security breach or operational failure on the company's business including disruptions caused by other participants in the global financial system; the failure of the company's vendors and merchants to satisfy their obligations; the successful management of credit and fraud risks in the company's business and merchant alliances; changes in local, regional, national and international economic or political conditions and the impact they may have on the company and its customers; the effect of proposed and enacted legislative and regulatory actions affecting the company or the financial services industry as a whole; the company's ability to comply with government regulations and applicable card association and network rules; the protection and validity of intellectual property rights; the outcome of pending and future litigation and governmental proceedings; the company's ability to successfully identify, complete and integrate acquisitions, and to realize the anticipated benefits associated with the same; the impact of the company's strategic initiatives; the company's ability to attract and retain key personnel; volatility and disruptions in financial markets that may impact the company's ability to access preferred sources of financing and the terms on which the company is able to obtain financing or increase its costs of borrowing; adverse impacts from currency exchange rates or currency controls; changes in corporate tax and interest rates; and other factors included in “Risk Factors” in the company's Annual Report on Form 10-K for the year ended December 31, 2020, and in other documents that the company files with the Securities and Exchange Commission, which are available at http://www.sec.gov. You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements. The company assumes no obligation to update any forward-looking statements, which speak only as of the date of this news release.

Fiserv, Inc.

Condensed Consolidated Statements of Income

(In millions, except per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Revenue

 

 

 

 

 

 

 

Processing and services

$

3,407

 

 

 

$

3,153

 

 

 

$

9,822

 

 

 

$

9,118

 

 

Product

756

 

 

 

633

 

 

 

2,147

 

 

 

1,902

 

 

Total revenue

4,163

 

 

 

3,786

 

 

 

11,969

 

 

 

11,020

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Cost of processing and services

1,530

 

 

 

1,387

 

 

 

4,425

 

 

 

4,488

 

 

Cost of product

521

 

 

 

481

 

 

 

1,500

 

 

 

1,467

 

 

Selling, general and administrative

1,476

 

 

 

1,412

 

 

 

4,289

 

 

 

4,193

 

 

Gain on sale of businesses

 

 

 

(36

)

 

 

 

 

 

(464

)

 

Total expenses

3,527

 

 

 

3,244

 

 

 

10,214

 

 

 

9,684

 

 

 

 

 

 

 

 

 

 

Operating income

636

 

 

 

542

 

 

 

1,755

 

 

 

1,336

 

 

Interest expense, net

(172

)

 

 

(174

)

 

 

(523

)

 

 

(535

)

 

Other income

14

 

 

 

13

 

 

 

36

 

 

 

34

 

 

 

 

 

 

 

 

 

 

Income before income taxes and income from investments in unconsolidated affiliates

478

 

 

 

381

 

 

 

1,268

 

 

 

835

 

 

Income tax provision

(54

)

 

 

(124

)

 

 

(300

)

 

 

(176

)

 

Income from investments in unconsolidated affiliates

22

 

 

 

19

 

 

 

80

 

 

 

3

 

 

 

 

 

 

 

 

 

 

Net income

446

 

 

 

276

 

 

 

1,048

 

 

 

662

 

 

Less: net income attributable to noncontrolling interests

18

 

 

 

12

 

 

 

47

 

 

 

4

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fiserv

$

428

 

 

 

$

264

 

 

 

$

1,001

 

 

 

$

658

 

 

 

 

 

 

 

 

 

 

GAAP earnings per share attributable to Fiserv - diluted

$

0.64

 

 

 

$

0.39

 

 

 

$

1.49

 

 

 

$

0.96

 

 

 

 

 

 

 

 

 

 

Diluted shares used in computing earnings per share attributable to Fiserv

669.7

 

 

 

680.3

 

 

 

674.1

 

 

 

684.1

 

 

 

 

 

 

 

 

 

 

Earnings per share is calculated using actual, unrounded amounts.

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,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

GAAP net income attributable to Fiserv

$

428

 

 

 

$

264

 

 

 

$

1,001

 

 

 

$

658

 

 

Adjustments:

 

 

 

 

 

 

 

Merger and integration costs 1

210

 

 

 

185

 

 

 

483

 

 

 

648

 

 

Severance costs 2

24

 

 

 

13

 

 

 

38

 

 

 

92

 

 

Amortization of acquisition-related intangible assets 3

490

 

 

 

477

 

 

 

1,509

 

 

 

1,523

 

 

Non wholly-owned entity activities 4

33

 

 

 

34

 

 

 

40

 

 

 

53

 

 

Tax impact of adjustments 5

(174

)

 

 

(162

)

 

 

(476

)

 

 

(532

)

 

Gain on sale of businesses 6

 

 

 

(36

)

 

 

 

 

 

(464

)

 

Tax impact of gain on sale of businesses 5

 

 

 

12

 

 

 

 

 

 

124

 

 

Discrete tax items 7

(24

)

 

 

32

 

 

 

110

 

 

 

32

 

 

Adjusted net income

$

987

 

 

 

$

819

 

 

 

$

2,705

 

 

 

$

2,134

 

 

 

 

 

 

 

 

 

 

GAAP earnings per share attributable to Fiserv

$

0.64

 

 

 

$

0.39

 

 

 

$

1.49

 

 

 

$

0.96

 

 

Adjustments - net of income taxes:

 

 

 

 

 

 

 

Merger and integration costs 1

0.24

 

 

 

0.21

 

 

 

0.55

 

 

 

0.73

 

 

Severance costs 2

0.03

 

 

 

0.02

 

 

 

0.04

 

 

 

0.10

 

 

Amortization of acquisition-related intangible assets 3

0.56

 

 

 

0.54

 

 

 

1.72

 

 

 

1.71

 

 

Non wholly-owned entity activities 4

0.04

 

 

 

0.04

 

 

 

0.05

 

 

 

0.06

 

 

Gain on sale of businesses 6

 

 

 

(0.04

)

 

 

 

 

 

(0.50

)

 

Discrete tax items 7

(0.04

)

 

 

0.05

 

 

 

0.16

 

 

 

0.05

 

 

Adjusted earnings per share

$

1.47

 

 

 

$

1.20

 

 

 

$

4.01

 

 

 

$

3.12

 

 

 

 

 

 

 

 

 

 

See pages 3-4 for disclosures related to the use of non-GAAP financial measures.
Earnings per share is calculated using actual, unrounded amounts.

1

Represents acquisition and related integration costs incurred in connection with various acquisitions, primarily related to the First Data acquisition. First Data integration costs in the third quarter and first nine months of 2021 primarily include $95 million and $210 million, respectively, of third party professional service fees associated with integration activities; $13 million and $41 million, respectively, of incremental share-based compensation, including the fair value of stock awards assumed by Fiserv; and $60 million and $153 million, respectively, of other integration-related compensation costs. First Data integration costs in the third quarter and first nine months of 2020 primarily include $51 million and $154 million, respectively, of third party professional services fees associated with integration activities; $34 million and $126 million, respectively, of incremental share-based compensation, including the fair value of stock awards assumed by Fiserv; $27 million and $105 million, respectively, of other integration-related compensation costs; $35 million and $115 million, respectively, of accelerated depreciation and amortization associated with the termination of certain vendor contracts; and $4 million and $44 million, respectively, of non-cash impairment charges associated with the early exit of certain leased facilities. The company expects to complete the integration activities associated with the achievement of cost synergies related to the First Data acquisition by the end of 2021.

 

2

Represents severance costs associated with the achievement of expense management initiatives, primarily related to the First Data acquisition.

 

3

Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract costs (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts. See additional information on page 14 for an analysis of the company's amortization expense.

 

4

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 the company holds a controlling financial interest. This adjustment during the third quarter and first nine months of 2021 also includes net gains totaling $2 million and $75 million, respectively, related to the fair value remeasurement and sale of certain equity investments.

 

5

The tax impact of adjustments is calculated using a tax rate of 23%, which approximates the company's anticipated annual effective tax rate, exclusive of the actual tax impacts associated with the gain on the sale of businesses.

 

6

Represents the gain associated with the sale of a 60% interest in the Investment Services business in February 2020 and the dissolution of the Banc of America Merchant Services joint venture in July 2020.

 

7

Represents certain discrete tax items, such as foreign derived intangible income tax benefits from a subsidiary restructuring and the revaluation of deferred taxes due to a change in the respective statutory tax rates in the United Kingdom and Argentina.

Fiserv, Inc.

Financial Results by Segment

(In millions, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Total Company

 

 

 

 

 

 

 

Revenue

$

4,163

 

 

$

3,786

 

 

$

11,969

 

 

$

11,020

 

Adjustments:

 

 

 

 

 

 

 

Output Solutions postage reimbursements

(209

)

 

(207

)

 

(616

)

 

(640

)

Deferred revenue purchase accounting adjustments

8

 

 

11

 

 

21

 

 

34

 

Merchant Services adjustment 1

 

 

 

 

 

 

(126

)

Adjusted revenue

$

3,962

 

 

$

3,590

 

 

$

11,374

 

 

$

10,288

 

 

 

 

 

 

 

 

 

Operating income

$

636

 

 

$

542

 

 

$

1,755

 

 

$

1,336

 

Adjustments:

 

 

 

 

 

 

 

Merger and integration costs

206

 

 

185

 

 

479

 

 

648

 

Severance costs

24

 

 

13

 

 

38

 

 

92

 

Amortization of acquisition-related intangible assets

490

 

 

477

 

 

1,509

 

 

1,523

 

Merchant Services adjustment 1

 

 

 

 

 

 

(59

)

Gain on sale of businesses

 

 

(36

)

 

 

 

(464

)

Adjusted operating income

$

1,356

 

 

$

1,181

 

 

$

3,781

 

 

$

3,076

 

 

 

 

 

 

 

 

 

Operating margin

15.3

%

 

14.3

%

 

14.7

%

 

12.1

%

Adjusted operating margin

34.2

%

 

32.9

%

 

33.2

%

 

29.9

%

 

 

 

 

 

 

 

 

Merchant Acceptance ("Acceptance")

 

 

 

 

 

 

 

Revenue

$

1,716

 

 

$

1,454

 

 

$

4,779

 

 

$

4,078

 

Adjustments:

 

 

 

 

 

 

 

Deferred revenue purchase accounting adjustments

 

 

2

 

 

 

 

6

 

Merchant Services adjustment 1

 

 

 

 

 

 

(126

)

Adjusted revenue

$

1,716

 

 

$

1,456

 

 

$

4,779

 

 

$

3,958

 

 

 

 

 

 

 

 

 

Operating income

$

552

 

 

$

423

 

 

$

1,463

 

 

$

985

 

Adjustments:

 

 

 

 

 

 

 

Merger and integration costs

 

 

2

 

 

 

 

5

 

Merchant Services adjustment 1

 

 

 

 

 

 

(59

)

Adjusted operating income

$

552

 

 

$

425

 

 

$

1,463

 

 

$

931

 

 

 

 

 

 

 

 

 

Operating margin

32.2

%

 

29.1

%

 

30.6

%

 

24.1

%

Adjusted operating margin

32.2

%

 

29.2

%

 

30.6

%

 

23.5

%

 

 

 

 

 

 

 

 

Financial Technology ("Fintech") 2

 

 

 

 

 

 

 

Revenue

$

761

 

 

$

727

 

 

$

2,251

 

 

$

2,159

 

 

 

 

 

 

 

 

 

Operating income

$

275

 

 

$

265

 

 

$

794

 

 

$

721

 

 

 

 

 

 

 

 

 

Operating margin

36.0

%

 

36.4

%

 

35.3

%

 

33.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiserv, Inc.

Financial Results by Segment (cont.)

(In millions, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Payments and Network ("Payments")

 

 

 

 

 

 

 

Revenue

$

1,471

 

 

$

1,387

 

 

$

4,297

 

 

$

4,093

 

Adjustments:

 

 

 

 

 

 

 

Deferred revenue purchase accounting adjustments

8

 

 

9

 

 

21

 

 

28

 

Adjusted revenue

$

1,479

 

 

$

1,396

 

 

$

4,318

 

 

$

4,121

 

 

 

 

 

 

 

 

 

Operating income

$

643

 

 

$

599

 

 

$

1,850

 

 

$

1,712

 

Adjustments:

 

 

 

 

 

 

 

Merger and integration costs

7

 

 

9

 

 

21

 

 

29

 

Adjusted operating income

$

650

 

 

$

608

 

 

$

1,871

 

 

$

1,741

 

 

 

 

 

 

 

 

 

Operating margin

43.7

%

 

43.2

%

 

43.1

%

 

41.8

%

Adjusted operating margin

44.0

%

 

43.5

%

 

43.4

%

 

42.3

%

 

 

 

 

 

 

 

 

Corporate and Other

 

 

 

 

 

 

 

Revenue

$

215

 

 

$

218

 

 

$

642

 

 

$

690

 

Adjustments:

 

 

 

 

 

 

 

Output Solutions postage reimbursements

(209

)

 

(207

)

 

(616

)

 

(640

)

Adjusted revenue

$

6

 

 

$

11

 

 

$

26

 

 

$

50

 

 

 

 

 

 

 

 

 

Operating loss

$

(834

)

 

$

(745

)

 

$

(2,352

)

 

$

(2,082

)

Adjustments:

 

 

 

 

 

 

 

Merger and integration costs

199

 

 

174

 

 

458

 

 

614

 

Severance costs

24

 

 

13

 

 

38

 

 

92

 

Amortization of acquisition-related intangible assets

490

 

 

477

 

 

1,509

 

 

1,523

 

Gain on sale of businesses

 

 

(36

)

 

 

 

(464

)

Adjusted operating loss

$

(121

)

 

$

(117

)

 

$

(347

)

 

$

(317

)

 

 

 

 

 

 

 

 

See pages 3-4 for disclosures related to the use of non-GAAP financial measures.

Operating margin percentages are calculated using actual, unrounded amounts.

1

Represents an adjustment primarily related to the company's joint venture with Bank of America. The Banc of America Merchant Services joint venture (BAMS) was dissolved effective July 1, 2020. The company owned 51% of BAMS and, through June 30, 2020, BAMS' financial results were 100% consolidated into the company's financial statements for GAAP reporting purposes. In connection with the dissolution of the joint venture, the company received a 51% share of the joint venture's value via an agreed upon contractual separation. In addition, the company will continue providing merchant processing and related services to Bank of America for its merchant clients. This non-GAAP adjustment reduces adjusted revenue and adjusted operating income by the joint venture revenue and expense that was not expected to be retained by the company upon dissolution and is partially offset by an increase to processing and services revenue.

 

2

For all periods presented in the Fintech segment, there were no adjustments to GAAP measures presented and thus the adjusted measures are equal to the GAAP measures presented.

Fiserv, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions, unaudited)

 

Nine Months Ended

September 30,

 

2021

 

2020

Cash flows from operating activities

 

 

 

Net income

$

1,048

 

 

 

$

662

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and other amortization

861

 

 

 

833

 

 

Amortization of acquisition-related intangible assets

1,554

 

 

 

1,603

 

 

Amortization of financing costs and debt discounts

41

 

 

 

36

 

 

Share-based compensation

190

 

 

 

286

 

 

Deferred income taxes

(266

)

 

 

(125

)

 

Gain on sale of businesses

 

 

 

(464

)

 

Income from investments in unconsolidated affiliates

(80

)

 

 

(3

)

 

Distributions from unconsolidated affiliates

17

 

 

 

12

 

 

Non-cash impairment charges

6

 

 

 

44

 

 

Other operating activities

(26

)

 

 

(4

)

 

Changes in assets and liabilities, net of effects from acquisitions and dispositions:

 

 

 

Trade accounts receivable

(298

)

 

 

460

 

 

Prepaid expenses and other assets

(242

)

 

 

(150

)

 

Contract costs

(210

)

 

 

(229

)

 

Accounts payable and other liabilities

97

 

 

 

34

 

 

Contract liabilities

(1

)

 

 

(34

)

 

Net cash provided by operating activities

2,691

 

 

 

2,961

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

Capital expenditures, including capitalized software and other intangibles

(814

)

 

 

(689

)

 

Proceeds from sale of business

 

 

 

578

 

 

Payments for acquisition of businesses, net of cash acquired

(495

)

 

 

(137

)

 

Distributions from unconsolidated affiliates

91

 

 

 

94

 

 

Purchases of investments

(250

)

 

 

 

 

Proceeds from sale of investments

503

 

 

 

 

 

Net cash used in investing activities

(965

)

 

 

(154

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

Debt proceeds

5,177

 

 

 

8,125

 

 

Debt repayments

(6,515

)

 

 

(9,307

)

 

Net proceeds from (repayments of) commercial paper and short-term borrowings

1,388

 

 

 

(28

)

 

Payments of debt financing costs

 

 

 

(16

)

 

Proceeds from issuance of treasury stock

105

 

 

 

108

 

 

Purchases of treasury stock, including employee shares withheld for tax obligations

(1,768

)

 

 

(1,612

)

 

Distributions paid to noncontrolling interests and redeemable noncontrolling interests

(41

)

 

 

(61

)

 

Payments of acquisition-related contingent consideration

(36

)

 

 

 

 

Other financing activities

(2

)

 

 

6

 

 

Net cash used in financing activities

(1,692

)

 

 

(2,785

)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(11

)

 

 

(4

)

 

Net change in cash, cash equivalents and restricted cash

23

 

 

 

18

 

 

Cash, cash equivalents and restricted cash, beginning balance

919

 

 

 

933

 

 

Cash, cash equivalents and restricted cash, ending balance

$

942

 

 

 

$

951

 

 

 

 

 

 

Fiserv, Inc.

Condensed Consolidated Balance Sheets

(In millions, unaudited)

 

 

 

 

 

September 30,

 

December 31,

 

2021

 

2020

Assets

 

 

 

Cash and cash equivalents

$

933

 

 

$

906

 

Trade accounts receivable – net

2,793

 

 

2,482

 

Prepaid expenses and other current assets

1,455

 

 

1,310

 

Settlement assets

13,244

 

 

11,521

 

Total current assets

18,425

 

 

16,219

 

 

 

 

 

Property and equipment – net

1,717

 

 

1,628

 

Customer relationships – net

10,347

 

 

11,603

 

Other intangible assets – net

3,921

 

 

3,755

 

Goodwill

36,303

 

 

36,322

 

Contract costs – net

782

 

 

692

 

Investments in unconsolidated affiliates

2,602

 

 

2,756

 

Other long-term assets

1,670

 

 

1,644

 

Total assets

$

75,767

 

 

$

74,619

 

 

 

 

 

Liabilities and Equity

 

 

 

Accounts payable and accrued expenses

$

3,340

 

 

$

3,186

 

Short-term and current maturities of long-term debt

449

 

 

384

 

Contract liabilities

529

 

 

546

 

Settlement obligations

13,244

 

 

11,521

 

Total current liabilities

17,562

 

 

15,637

 

 

 

 

 

Long-term debt

20,540

 

 

20,300

 

Deferred income taxes

4,113

 

 

4,389

 

Long-term contract liabilities

204

 

 

187

 

Other long-term liabilities

764

 

 

777

 

Total liabilities

43,183

 

 

41,290

 

 

 

 

 

Redeemable noncontrolling interests

260

 

 

259

 

 

 

 

 

Fiserv shareholders' equity

31,596

 

 

32,330

 

Noncontrolling interests

728

 

 

740

 

Total equity

32,324

 

 

33,070

 

Total liabilities and equity

$

75,767

 

 

$

74,619

 

 

 

 

 

 

Fiserv, Inc.

Selected Non-GAAP Financial Measures and Additional Information

(In millions, unaudited)

 

Internal Revenue Growth 1

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

Growth

 

2021

 

2020

 

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

3,962

 

 

 

$

3,590

 

 

 

 

 

$

11,374

 

 

 

$

10,288

 

 

 

 

Currency impact 2

 

3

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

 

Acquisition adjustments

 

(12

)

 

 

 

 

 

 

 

(26

)

 

 

 

 

 

 

Divestiture adjustments

 

(6

)

 

 

(12

)

 

 

 

 

(272

)

 

 

(287

)

 

 

 

Internal revenue

 

$

3,947

 

 

 

$

3,578

 

 

 

10

%

 

$

11,058

 

 

 

$

10,001

 

 

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Acceptance

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

1,716

 

 

 

$

1,456

 

 

 

 

 

$

4,779

 

 

 

$

3,958

 

 

 

 

Currency impact 2

 

5

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

Acquisition adjustments

 

(6

)

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

Divestiture adjustments

 

 

 

 

 

 

 

 

 

(246

)

 

 

(217

)

 

 

 

Internal revenue

 

$

1,715

 

 

 

$

1,456

 

 

 

18

%

 

$

4,526

 

 

 

$

3,741

 

 

 

21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Fintech

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

761

 

 

 

$

727

 

 

 

 

 

$

2,251

 

 

 

$

2,159

 

 

 

 

Currency impact 2

 

(1

)

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

Internal revenue

 

$

760

 

 

 

$

727

 

 

 

4

%

 

$

2,242

 

 

 

$

2,159

 

 

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

1,479

 

 

 

$

1,396

 

 

 

 

 

$

4,318

 

 

 

$

4,121

 

 

 

 

Currency impact 2

 

(1

)

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

 

Acquisition adjustments

 

(6

)

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

 

Divestiture adjustments

 

 

 

 

(1

)

 

 

 

 

 

 

 

(20

)

 

 

 

Internal revenue

 

$

1,472

 

 

 

$

1,395

 

 

 

6

%

 

$

4,290

 

 

 

$

4,101

 

 

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Other

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

6

 

 

 

$

11

 

 

 

 

 

$

26

 

 

 

$

50

 

 

 

 

Divestiture adjustments

 

(6

)

 

 

(11

)

 

 

 

 

(26

)

 

 

(50

)

 

 

 

Internal revenue

 

$

 

 

 

$

 

 

 

 

 

$

 

 

 

$

 

 

 

 

 

See pages 3-4 for disclosures related to the use of non-GAAP financial measures.

Internal revenue growth is calculated using actual, unrounded amounts.

1

Internal revenue growth is measured as the change in adjusted revenue (see pages 9-10) for the current period excluding the impact of foreign currency fluctuations and revenue attributable to acquisitions and dispositions, divided by adjusted revenue from the prior period excluding revenue attributable to dispositions. Revenue attributable to dispositions also includes current and prior period revenue associated with merchants retained by the company from the Banc of America Merchant Services joint venture through the one year period following the joint venture's July 1, 2020 dissolution date, and transition services revenue within Corporate and Other.

 

2

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.

Fiserv, Inc.

Selected Non-GAAP Financial Measures and Additional Information (cont.)

(In millions, unaudited)

 

Free Cash Flow

 

Nine Months Ended

September 30,

 

2021

 

2020

 

 

 

 

 

Net cash provided by operating activities

 

$

2,691

 

 

 

$

2,961

 

 

Capital expenditures

 

(814

)

 

 

(689

)

 

Adjustments:

 

 

 

 

Distributions paid to noncontrolling interests and redeemable noncontrolling interests

 

(41

)

 

 

(61

)

 

Distributions from unconsolidated affiliates included in cash flows from investing activities

 

91

 

 

 

94

 

 

Severance, merger and integration payments

 

414

 

 

 

368

 

 

Tax payments on adjustments

 

(95

)

 

 

(79

)

 

Tax payments on gain on sale of investments in unconsolidated affiliates

 

44

 

 

 

 

 

Free cash flow

 

$

2,290

 

 

 

$

2,594

 

 

 

 

 

 

 

Total Amortization 1

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Acquisition-related intangible assets

 

$

509

 

 

$

504

 

 

$

1,554

 

 

$

1,603

 

Capitalized software and other intangibles

 

76

 

 

41

 

 

202

 

 

119

 

Purchased software

 

57

 

 

78

 

 

181

 

 

212

 

Financing costs and debt discounts

 

16

 

 

13

 

 

41

 

 

36

 

Sales commissions

 

24

 

 

23

 

 

72

 

 

67

 

Deferred conversion costs

 

13

 

 

8

 

 

37

 

 

22

 

Total amortization

 

$

695

 

 

$

667

 

 

$

2,087

 

 

$

2,059

 

 

 

 

 

 

 

 

 

 

See pages 3-4 for disclosures related to the use of non-GAAP financial measures.
 

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 7). 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.

Fiserv, Inc.
Full Year Forward-Looking Non-GAAP Financial Measures

Reconciliations of unaudited non-GAAP financial measures to the most comparable GAAP measures are included in this news 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 these items that are excluded from the non-GAAP outlook measures. The company’s forward-looking non-GAAP financial measures for 2021, including internal revenue growth, adjusted earnings per share and adjusted earnings per share growth, are designed to enhance shareholders’ ability to evaluate the company’s performance by excluding certain items to focus on factors and trends affecting its business.

Internal Revenue Growth - The company's internal revenue growth outlook for 2021 includes deferred revenue purchase accounting adjustments and excludes the impact of foreign currency fluctuations, acquisitions, dispositions and the impact of the company's Output Solutions postage reimbursements. These adjustments are subject to variability and are anticipated to negatively impact 2021 GAAP revenue growth by approximately 1% as compared to internal revenue growth, primarily due to the BAMS dissolution in the prior year.

Adjusted Earnings Per Share - The company's adjusted earnings per share outlook for 2021 excludes certain non-cash or other items such as non-cash intangible asset amortization expense associated with acquisitions; non-cash impairment charges; restructuring costs; merger and integration costs; severance costs; gains or losses from the sale of businesses and investments; and certain discrete tax benefits and expenses, and includes non-cash deferred revenue purchase accounting adjustments. The company estimates that amortization expense in 2021 with respect to acquired intangible assets will approximate the amount incurred in 2020. Other adjustments to the company’s financial measures that were incurred in 2020 and for the three and nine months ended September 30, 2021 are presented in this news release; however, they are not necessarily indicative of adjustments that may be incurred throughout 2021 or beyond. Estimates of these impacts and adjustments on a forward-looking basis are not available due to the variability, complexity and limited visibility of these items.

Fiserv, Inc.

Full Year Forward-Looking Non-GAAP Financial Measures (cont.)

 

The company's adjusted earnings per share growth outlook for 2021 is based on 2020 adjusted earnings per share performance.

 

2020 GAAP net income attributable to Fiserv

$

958

 

 

Adjustments:

 

Merger and integration costs 1

902

 

 

Severance costs 2

108

 

 

Amortization of acquisition-related intangible assets 3

2,024

 

 

Non wholly-owned entity activities 4

94

 

 

Tax impact of adjustments 5

(719

)

 

Gain on sale of businesses 6

(464

)

 

Tax impact of gain on sale of businesses 5

124

 

 

Discrete tax items 7

(7

)

 

2020 adjusted net income

$

3,020

 

 

 

 

Weighted average common shares outstanding - diluted

683.4

 

 

 

 

2020 GAAP earnings per share attributable to Fiserv

$

1.40

 

 

Adjustments - net of income taxes:

 

Merger and integration costs 1

1.02

 

 

Severance costs 2

0.12

 

 

Amortization of acquisition-related intangible assets 3

2.28

 

 

Non wholly-owned entity activities 4

0.11

 

 

Gain on sale of businesses 6

(0.50

)

 

Discrete tax items 7

(0.01

)

 

2020 adjusted earnings per share

$

4.42

 

 

 

 

2021 adjusted earnings per share outlook

$5.55 - $5.60

 

2021 adjusted earnings per share growth outlook

26% - 27%

 

 

 

In millions, except per share amounts, unaudited. Earnings per share is calculated using actual, unrounded amounts.

See pages 3-4 for disclosures related to the use of non-GAAP financial measures.

Fiserv, Inc.

Full Year Forward-Looking Non-GAAP Financial Measures (cont.)

 

1

Represents acquisition and related integration costs incurred in connection with various acquisitions. Merger and integration costs include $865 million related to the First Data acquisition. First Data integration costs primarily include $224 million of third party professional service fees associated with integration activities; $165 million of incremental share-based compensation, including the fair value of stock awards assumed by Fiserv; $118 million of accelerated depreciation and amortization associated with the termination of vendor contracts; $137 million of other integration-related compensation costs; and $124 million of non-cash impairment charges associated with the early exit of certain leased facilities.

2

Represents severance costs associated with the achievement of expense management initiatives, primarily related to the First Data acquisition.

3

Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology, and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract costs (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts.

4

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 the company holds a controlling financial interest.

5

The tax impact of adjustments is calculated using a tax rate of 23%, which approximates the company's anticipated annual effective tax rate, exclusive of the actual tax impacts associated with the gain on sale of businesses.

6

Represents the earnings attributable to divested businesses and the gain on the associated divestiture transactions, including the sale of a 60% interest in the Investment Services business in February 2020 and the dissolution of the Banc of America Merchant Services joint venture in July 2020.

7

Represents certain discrete tax items, primarily related to foreign income tax benefits from a subsidiary restructuring and the revaluation of deferred taxes due to a change in the statutory tax rate in the United Kingdom.

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Disclaimer

Fiserv Reports Third Quarter 2021 Results Fiserv, Inc. (NASDAQ: FISV), a leading global provider of payments and financial services technology solutions, today reported financial results for the third quarter of 2021. Third Quarter 2021 GAAP Results GAAP revenue for the company increased …

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