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Fiserv Reports Second Quarter 2022 Results

·14 min read

GAAP revenue growth of 10% both in the quarter and year to date; GAAP EPS increased 130% in the quarter and 128% year to date; Organic revenue growth of 12% in the quarter and 11% year to date; Adjusted EPS increased 14% in the quarter and 17% year to date; Company raises 2022 organic revenue growth outlook to 9% to 11% and adjusted EPS outlook to $6.45 to $6.55, or growth of 16% to 17%

BROOKFIELD, Wis., July 26, 2022--(BUSINESS WIRE)--Fiserv, Inc. (NASDAQ: FISV), a leading global provider of payments and financial services technology solutions, today reported financial results for the second quarter of 2022.

Second Quarter 2022 GAAP Results

GAAP revenue for the company increased 10% to $4.45 billion in the second quarter of 2022 compared to the prior year period, with 14% growth in the Acceptance segment, 6% growth in the Fintech segment and 7% growth in the Payments segment. GAAP revenue for the company increased 10% to $8.59 billion in the first six months of 2022 compared to the prior year period, with 16% growth in the Acceptance segment, 6% growth in the Fintech segment and 5% growth in the Payments segment.

GAAP earnings per share was $0.92 in the second quarter and $1.94 in the first six months of 2022, an increase of 130% and 128%, respectively, compared to the prior year periods. The second quarter and first six months of 2022 includes a $110 million pre-tax gain from the fair value remeasurement of an equity investment, whereas the second quarter and first six months of 2021 includes certain discrete tax expenses. GAAP operating margin was 19.3% and 19.9% in the second quarter and first six months of 2022, respectively, compared to 15.9% and 14.3% in the second quarter and first six months of 2021, respectively. Net cash provided by operating activities was $1.81 billion in the first six months of 2022 compared to $2.01 billion in the prior year period.

"Our second quarter results were strong, with double digit organic revenue and adjusted earnings per share growth. These results put us above the high end of our full year guidance range for organic revenue growth and at the high end of our adjusted earnings per share range on a year to date basis," said Frank Bisignano, Chairman, President and Chief Executive Officer of Fiserv. "We achieved these results while continuing to invest for sustainable growth."

Second Quarter 2022 Non-GAAP Results and Additional Information

  • Adjusted revenue increased 10% to $4.23 billion in the second quarter and 10% to $8.14 billion in the first six months of 2022 compared to the prior year periods.

  • Organic revenue growth was 12% in the second quarter of 2022, led by 17% growth in the Acceptance segment, 7% growth in the Fintech segment and 8% growth in the Payments segment.

  • Organic revenue growth was 11% in the first six months of 2022, led by 18% growth in the Acceptance segment and 6% growth in both the Fintech and Payments segments.

  • Adjusted earnings per share increased 14% to $1.56 in the second quarter and 17% to $2.96 in the first six months of 2022 compared to the prior year periods.

  • Adjusted operating margin decreased 40 basis points to 33.5% in the second quarter and was flat at 32.7% in the first six months of 2022 compared to the prior year periods.

  • Free cash flow was $1.26 billion in the first six months of 2022 compared to $1.72 billion in the prior year period.

  • The company repurchased 5.1 million shares of common stock for $500 million in the second quarter and 10.2 million shares of common stock for $1.0 billion in the first six months of 2022.

  • In June 2022, the company entered into a new revolving credit facility, increasing available borrowing capacity to $6.0 billion through June 2027.

Outlook for 2022

Fiserv raises full year 2022 outlook and now expects organic revenue growth of 9% to 11% and adjusted earnings per share of $6.45 to $6.55, representing growth of 16% to 17%.

"An unprecedented confluence of macro factors is likely to impact the global economy," said Bisignano. "The demonstrated resilience of our business model, driven by the strength of our assets, balance sheet and pipeline of innovation, should position us well to withstand potential challenges and deliver value for our clients."

Earnings Conference Call

The company will discuss its second quarter 2022 results in a live webcast at 7 a.m. CT on Tuesday, July 26, 2022. 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 and business management platform. Fiserv is a member of the S&P 500® Index, the FORTUNE® 500, and has been recognized as one of FORTUNE World's Most Admired Companies® for 11 of the past 14 years and named among the World's Most Innovative Companies by Fast Company for two consecutive years. 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," "adjusted revenue growth," "organic revenue," "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 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, certain assets or investments; certain discrete tax benefits and expenses; and non-cash deferred revenue adjustments arising from acquisitions. 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 organic revenue growth is useful because it presents adjusted revenue growth excluding the impact of foreign currency fluctuations, acquisitions, dispositions and the company's Output Solutions postage reimbursements 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 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 organic 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 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 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 success of the company's merchant alliances, some of which are not controlled by the company; 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, including those resulting from heightened inflation, a recession, or intensified international hostilities, 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, 2021, 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
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Revenue

Processing and services

$

3,696

$

3,361

$

7,060

$

6,415

Product

754

690

1,528

1,391

Total revenue

4,450

4,051

8,588

7,806

Expenses

Cost of processing and services

1,502

1,498

2,938

2,895

Cost of product

542

469

1,078

979

Selling, general and administrative

1,546

1,440

3,013

2,813

Gain on sale of assets

(147

)

Total expenses

3,590

3,407

6,882

6,687

Operating income

860

644

1,706

1,119

Interest expense, net

(176

)

(175

)

(344

)

(351

)

Other (expense) income

(66

)

1

(70

)

22

Income before income taxes and income from investments in unconsolidated affiliates

618

470

1,292

790

Income tax provision

(137

)

(228

)

(235

)

(246

)

Income from investments in unconsolidated affiliates

128

42

234

58

Net income

609

284

1,291

602

Less: net income attributable to noncontrolling interests

11

15

24

29

Net income attributable to Fiserv

$

598

$

269

$

1,267

$

573

GAAP earnings per share attributable to Fiserv - diluted

$

0.92

$

0.40

$

1.94

$

0.85

Diluted shares used in computing earnings per share attributable to Fiserv

650.8

672.7

654.0

676.3

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
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

GAAP net income attributable to Fiserv

$

598

$

269

$

1,267

$

573

Adjustments:

Merger and integration costs 1

39

148

61

273

Severance costs 2

47

4

99

14

Amortization of acquisition-related intangible assets 3

471

513

946

1,019

Non wholly-owned entity activities 4

(14

)

7

(70

)

7

Gain on sale of assets 5

(147

)

Tax impact of adjustments 6

(128

)

(154

)

(222

)

(302

)

Discrete tax items 7

134

134

Adjusted net income

$

1,013

$

921

$

1,934

$

1,718

GAAP earnings per share attributable to Fiserv

$

0.92

$

0.40

$

1.94

$

0.85

Adjustments - net of income taxes:

Merger and integration costs 1

0.05

0.17

0.07

0.31

Severance costs 2

0.06

0.12

0.02

Amortization of acquisition-related intangible assets 3

0.57

0.59

1.14

1.16

Non wholly-owned entity activities 4

(0.04

)

0.01

(0.11

)

0.01

Gain on sale of assets 5

(0.21

)

Discrete tax items 7

0.20

0.20

Adjusted earnings per share

$

1.56

$

1.37

$

2.96

$

2.54

GAAP earnings per share attributable to Fiserv growth

130

%

128

%

Adjusted earnings per share growth

14

%

17

%

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, including those in 2021 related to the First Data acquisition. Merger and integration costs in the second quarter and first six months of 2022 primarily include share-based compensation attributable to various acquisitions. First Data integration costs in the second quarter and first six months of 2021 primarily include $63 million and $115 million, respectively, of third-party professional service fees associated with integration activities; $10 million and $28 million, respectively, of incremental share-based compensation, including the fair value of stock awards assumed by Fiserv; and $48 million and $93 million, respectively, of other integration-related compensation costs.

2

Represents severance costs associated with the achievement of expense management initiatives.

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 second quarter and first six months of 2022 also includes gains totaling $110 million and $201 million, respectively, related to certain equity investment transactions. In addition, the second quarter and first six months of 2022 includes other expense of $59 million associated with joint venture debt guarantees. This adjustment during the second quarter and first six months of 2021 also includes gains totaling $33 million and $73 million, respectively, related to the fair value remeasurement and sale of certain equity investments.

5

Represents a gain associated with the sale of certain merchant contracts in conjunction with the mutual termination of one of the company's merchant alliance joint ventures.

6

The tax impact of adjustments is calculated using a tax rate of 21% and 23% in the first six months of 2022 and 2021, respectively, which approximates the company's anticipated annual effective tax rates, exclusive of the $16 million actual tax impacts associated with the gain on sale of assets and certain equity investment transactions in the first six months of 2022.

7

Represents discrete tax items related to 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
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Total Company

Revenue

$

4,450

$

4,051

$

8,588

$

7,806

Adjustments:

Output Solutions postage reimbursements

(222

)

(202

)

(461

)

(407

)

Deferred revenue purchase accounting adjustments

6

6

13

13

Adjusted revenue

$

4,234

$

3,855

$

8,140

$

7,412

Operating income

$

860

$

644

$

1,706

$

1,119

Adjustments:

Merger and integration costs

39

148

61

273

Severance costs

47

4

99

14

Amortization of acquisition-related intangible assets

471

513

946

1,019

Gain on sale of assets

(147

)

Adjusted operating income

$

1,417

$

1,309

$

2,665

$

2,425

Operating margin

19.3

%

15.9

%

19.9

%

14.3

%

Adjusted operating margin

33.5

%

33.9

%

32.7

%

32.7

%

Merchant Acceptance ("Acceptance") 1

Revenue

$

1,901

$

1,666

$

3,554

$

3,063

Operating income

$

593

$

524

$

1,063

$

911

Operating margin

31.2

%

31.4

%

29.9

%

29.7

%

Financial Technology ("Fintech") 1

Revenue

$

803

$

754

$

1,581

$

1,490

Operating income

$

281

$

273

$

556

$

519

Operating margin

35.0

%

36.2

%

35.2

%

34.9

%

Payments and Network ("Payments")

Revenue

$

1,518

$

1,421

$

2,980

$

2,826

Adjustments:

Deferred revenue purchase accounting adjustments

6

6

13

13

Adjusted revenue

$

1,524

$

1,427

$

2,993

$

2,839

Operating income

$

662

$

629

$

1,280

$

1,207

Adjustments:

Merger and integration costs

6

7

13

14

Adjusted operating income

$

668

$

636

$

1,293

$

1,221

Operating margin

43.6

%

44.3

%

42.9

%

42.7

%

Adjusted operating margin

43.8

%

44.6

%

43.2

%

43.0

%

Fiserv, Inc.

Financial Results by Segment (cont.)

(In millions, unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Corporate and Other

Revenue

$

228

$

210

$

473

$

427

Adjustments:

Output Solutions postage reimbursements

(222

)

(202

)

(461

)

(407

)

Adjusted revenue

$

6

$

8

$

12

$

20

Operating loss

$

(676

)

$

(782

)

$

(1,193

)

$

(1,518

)

Adjustments:

Merger and integration costs

33

141

48

259

Severance costs

47

4

99

14...