Fiserv Inc. (
reported first quarter earnings of $1.33 per share, which were in
line with the Zacks Consensus Estimate. Earnings per share
increased 11.8% from the year-ago quarter but decreased 4.4%
sequentially in the quarter.
Revenues (excluding output solutions, postage reimbursements and
Open Solutions deferred revenue adjustment) remained almost flat
on a sequential basis but climbed 6.0% from the year-ago quarter
to $1.08 billion. This, however, missed the Zacks Consensus
Estimate of $1.18 billion.
Revenues from products decreased 6.5% year over year and 9.7%
sequentially to $186.0 million. However, processing and services
revenues increased 7.6% year over year and 1.7% quarter over
quarter to $966.0 million. Acquisitions contributed $65.0 million
of revenues in the quarter.
Internal revenue growth was flat in the quarter due to lower
license revenues and termination fees. Payments and Industry
Products revenues (all internal) increased 1.7% from the year-ago
quarter but decreased 5.1% sequentially to $543.0 million.
The moderate year-over-year growth was driven by strong
performance from the Debit (volume up 13.0%), Biller Solutions
(transaction volume up 3.0%) and Mobiliti businesses, partially
offset by lower pricing related to the renewed contract with
Bank of America (
and lower license fee revenues in risk business.
Fiserv signed 90 new clients, which helped it to expand its total
number of clients for the Mobiliti solution to 1,500 at the end
of the first quarter. Client demand for Popmoney solution
continues to remain strong as Fiserv signed 89 new institutions
in the quarter, bringing the total customer base to 1,900. During
the quarter, Fiserv signed 78 electronic bill payment clients and
36 debit processing clients.
Transactions grew 68% from the year-ago quarter. The SpotPay
solution continues to attract significant clients. Fiserv
continues to proceed rapidly with Open Solutions integration
(acquired Jan 14, 2013). Open Solutions' primary product DNA has
gained significant momentum as Fiserv won 5 new contracts in the
Financial Institution Services segment revenues increased 10.8%
from the year-ago quarter and 5.9% sequentially to $555.0
million. Internal revenues declined 2.0% from the year-ago
quarter due to lower termination fees, reduction in license
revenues and loss of revenues from the migration of a large
account processing client.
Operating margin (excluding mergers, severance costs and
amortization of acquisition-related intangible assets) contracted
30 basis points ("bps") on a year-over-year basis in the quarter.
The year-over-year contraction was due to 100 bps negative impact
of the Open Solutions acquisition and higher corporate losses. On
a sequential basis, operating margin plunged 240 bps.
Payments and Industry Products' operating margin improved 100 bps
from the year-ago quarter but decreased 70 bps from the previous
quarter to 30.6%. The Financial Institution Services segment's
operating margin declined 40 bps from the year-ago quarter and
330 bps sequentially to 29.7%.
The Corporate and Other segment witnessed an operating loss of
$23 million, which deteriorated from $15.0 million loss incurred
in the year-ago quarter but improved from $63.0 million in the
As of Mar 31, 2013, Fiserv had cash and cash equivalents of
$356.0 million, slightly declined from $358.0 million at the end
of the previous quarter. Long-term debt came to $4.04 billion
compared with $3.23 billion in the previous quarter.
Free cash flow surged 28.0% year over year to $232.0 million.
Fiserv repurchased 0.8 million shares in the first quarter.
For full year 2013, Fiserv expects revenue growth to be more than
10.0% and adjusted internal revenue growth to be 3.0% - 4.5%.
Earnings per share are likely to be in the range of $5.84 to
$6.03 (down from $5.88-$6.07 due to Club solutions divestiture),
representing yearly growth of 15%- 19%.
Fiserv forecast free cash flow per share to be more than $6.55
per share. The company expects operating margin to expand in a
range of 10 to 50 bps.
Fiserv expects revenues and earnings growth to be sequentially
stronger each quarter in 2013 attributable to large recurring
revenue client conversions in the second and third quarter and
positive synergies from the Open Solutions acquisition.
Fiserv continues to expect internal revenue growth in the
Payments segment within its long-term outlook of 4% to 8% for the
remainder of 2013.
Fiserv has expanded its foothold in the financial and payment
solutions business supported by its broad customer base and
various contracts wins from the likes of Bank of America, TD bank
and power generation company
American Electric Power (
and healthcare provider
Moreover, Fiserv's diversified product portfolio and continued
technology upgrades are expected to boost its top-line growth
However, volatile macroeconomic environment, banking and
financial service consolidation, poor cash flow, tough
competition and increasing industry regulations are the primary
concerns in the near term.
Currently, Fiserv has a Zacks Rank #3 (Hold).
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