GAAP revenue growth of 161% in the quarter and
75% for the year; GAAP EPS decrease of 49% in the quarter and 40%
for the year; Internal revenue growth of 5% in the quarter and 6%
for the year; Adjusted EPS increase of 18% in the quarter and 16%
for the year; Company expects 2020 internal revenue growth of 6% to
8% and adjusted EPS growth of 23% to 27%
Fiserv, Inc. (NASDAQ: FISV), a leading global provider of
payments and financial services technology solutions, today
reported financial results for the fourth quarter and full year
2019.
Fourth Quarter and Full Year 2019 GAAP Results
On a GAAP basis, the financial results of First Data Corporation
("First Data") are included in the consolidated results of Fiserv,
Inc. from July 29, 2019, the date of acquisition. GAAP revenue for
the company increased 161% to $4.05 billion in the fourth quarter
of 2019 compared to the prior year period, with $2.46 billion from
the First Data segment, 5% growth in the Payments segment and 1%
decline in the Financial segment. Full year 2019 GAAP revenue for
the company increased 75% to $10.19 billion compared to the prior
year, with $4.08 billion from the First Data segment, 8% growth in
the Payments segment and 1% growth in the Financial segment.
GAAP earnings per share was $0.36 in the fourth quarter of 2019
and $1.71 for the full year, decreasing 49% and 40%, respectively,
compared to the prior year periods. GAAP earnings per share in 2019
included transaction and related integration costs and acquired
intangible asset amortization from the application of purchase
accounting associated with the First Data acquisition. GAAP
earnings per share in 2018 included a gain on the sale of a 55%
interest of the company's Lending Solutions business (the "Lending
Transaction").
GAAP operating margin was 11.8% and 15.8% in the fourth quarter
and full year 2019, respectively, compared to 27.8% and 30.1% in
the fourth quarter and full year 2018, respectively. GAAP operating
margin in 2019 included the operating margin impacts from
transaction and related integration costs and acquired intangible
asset amortization associated with the acquisition of First Data.
GAAP operating margin in 2018 included a $227 million gain
resulting from the Lending Transaction.
Net cash provided by operating activities was $2.80 billion in
2019 compared to $1.55 billion in 2018.
“2019 was a year of leadership and growth in which we took steps
to transform an industry to better enable long-term, differentiated
value for clients, associates and shareholders,” said Jeffery
Yabuki, Chairman and Chief Executive Officer of Fiserv. “We
delivered strong financial results including our 34th consecutive
year of double digit adjusted earnings per share growth.”
Fourth Quarter and Full Year 2019 Non-GAAP Results and
Additional Information
On an adjusted non-GAAP basis, the company's financial
performance measures in this release, including adjusted revenue,
internal revenue, adjusted operating margin, adjusted net income,
adjusted earnings per share and free cash flow, have been
recalculated to provide current and historical results on a
combined company basis to enhance investors' ability to evaluate
the company's operating performance on a combined basis with First
Data.
- Adjusted revenue increased 4% in both the fourth quarter and
full year to $3.71 billion and $14.45 billion, respectively,
compared to the prior year periods.
- Internal revenue growth, on a constant currency basis, was 5%
in the fourth quarter, with 6% growth in the First Data segment, 4%
growth in the Payments segment and relatively consistent
performance in the Financial segment compared to the prior year
period.
- Internal revenue growth, on a constant currency basis, was 6%
for the full year, with 7% growth in the First Data segment, 5%
growth in the Payments segment and 3% growth in the Financial
segment.
- Adjusted earnings per share increased 18% to $1.13 in the
fourth quarter and 16% to $4.00 for the full year compared to the
prior year periods.
- Adjusted operating margin increased 100 basis points in both
the fourth quarter and full year to 31.4% and 29.7%, respectively,
compared to the prior year periods.
- Free cash flow for 2019 increased 16% to $3.29 billion compared
to the prior year.
- Sales results were up 15% in the fourth quarter and up 10% for
the year compared to the prior year periods.
- The company repurchased 2.2 million shares of common stock for
$238 million in the fourth quarter and 4.2 million shares of common
stock for $394 million in 2019.
- As previously announced, in December 2019, the company entered
into a definitive agreement to sell 60% of its Investment Services
business ("Investment Services Transaction") for approximately $510
million in net after-tax proceeds. The company expects to complete
the transaction, which is subject to customary closing conditions,
in the first quarter of 2020. In addition, in October 2019, the
company sold for proceeds of $133 million two businesses which were
acquired as part of the First Data acquisition.
- In January 2020, Fiserv was named one of FORTUNE Magazine
World's Most Admired Companies® for the seventh consecutive year.
The company received high marks for its people management, use of
corporate assets, quality of management and long-term investment
value, and was also noted for its quality of products/services and
financial soundness.
Outlook for 2020
Fiserv expects internal revenue growth of 6% to 8% for 2020. The
company also expects adjusted earnings per share to grow in a range
of 23% to 27% ($4.86 to $5.02) over the adjusted earnings per share
for 2019 as revised for the net impact of divestitures including
the Investment Services transaction announced in December.
"We expect to deliver exceptional financial results in 2020
including accelerated internal revenue growth resulting from a
combination of our strong underlying business and meaningful
synergy opportunities,” said Yabuki.
Earnings Conference Call
The company will discuss its results on a conference call and
webcast at 4 p.m. CT on Tuesday, February 4, 2020. To register for
the event, go to fiserv.com and click on the Q4 Earnings webcast
link. Supplemental materials will be available in the "Investor
Relations" section of the website.
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
Due to the financial impact of the First Data acquisition, the
company's non-GAAP financial performance measures have been
recalculated in this news release on a combined company basis for
the fourth quarter of 2018 and the full years 2019 and 2018. The
combined financial information has been prepared by making certain
adjustments to the sum of historical First Data financial
information determined in accordance with generally accepted
accounting principles ("GAAP") and historical Fiserv financial
information determined in accordance with GAAP. The historical
combined financial information includes various estimates and is
not necessarily indicative of the operating results of the combined
companies had the transaction been completed at the assumed dates
or of the combined companies in the future. The historical combined
financial information does not reflect any cost savings or other
synergies anticipated as a result of the acquisition. In addition,
the historical combined financial information does not reflect the
impact of any purchase accounting adjustments that may arise from
the acquisition as those impacts would be excluded in the
preparation of the combined financial information. The combined
financial information is not pro forma information prepared in
accordance with Article 11 of Regulation S-X of the Securities and
Exchange Commission, and the preparation of information in
accordance with Article 11 would result in a significantly
different presentation.
The company supplements its and First Data's historical
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 "combined revenue," "adjusted revenue," "internal revenue,"
"internal revenue growth," "combined operating income," "adjusted
operating income," "adjusted operating margin," "combined net
income attributable to Fiserv," "adjusted net income," "combined
earnings per share," "adjusted earnings per share," "combined net
cash provided by operating activities," and "free cash flow."
Management believes that providing combined historical financial
information, making adjustments for certain non-cash or other items
and excluding certain pass-through revenue and expenses with
respect to such combined information should enhance shareholders'
ability to evaluate the combined company's performance, including
providing a reasonable basis of comparison with its results for
post-acquisition periods and providing additional insights into the
factors and trends affecting the combined company's business.
Therefore, the company excludes these items from its and First
Data's historical combined revenue, combined operating income,
combined net income attributable to Fiserv, combined earnings per
share and combined net cash provided by operating activities to
calculate these non-GAAP measures. The corresponding
reconciliations of adjusted 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 that are excluded from the non-GAAP outlook measures.
See page 18 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 and restructuring costs; net charges associated with debt
financing activities including foreign currency transaction gains,
early debt extinguishment and bridge financing costs; merger and
integration costs; gains or losses from the sale of businesses; 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 is useful because it
presents combined 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 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.
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 and adjusted earnings per share growth.
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 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 at all or to successfully integrate the operations
of First Data into the company's operations; such integration may
be more difficult, time-consuming or costly than expected;
profitability following the transaction may be lower than expected,
including due to unexpected costs, charges or expenses resulting
from the transaction; operating costs, customer loss and business
disruption (including, without limitation, difficulties in
maintaining relationships with employees, customers, clients or
suppliers) may be greater than expected following the transaction;
unforeseen risks relating to the company's liabilities or those of
First Data may exist; the company's ability to meet expectations
regarding the accounting and tax treatments of the transaction; 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; rapid technological
developments and changes, and 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 at other participants in the global
financial system; the failure of the company's third party vendors
and merchants to satisfy their obligations; the successful
management of credit and fraud risks in the company's business
units 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 financial services industry as a whole and/or the company; 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; changes
in the interest rate environment that increase interest on the
company's borrowings or the interest rate at which the company can
refinance its borrowings; adverse impacts from currency exchange
rates or currency controls imposed by any government or otherwise;
and other factors included in “Risk Factors” in the company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2019, and in other documents that the company files with the SEC,
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 December
31,
Year Ended December 31,
2019
2018
2019
2018
Revenue
Processing and services
$
3,344
$
1,307
$
8,573
$
4,975
Product
701
244
1,614
848
Total revenue
4,045
1,551
10,187
5,823
Expenses
Cost of processing and services
1,571
628
4,016
2,324
Cost of product
538
194
1,293
745
Selling, general and administrative
1,463
298
3,284
1,228
Gain on sale of businesses
(5
)
—
(15
)
(227
)
Total expenses
3,567
1,120
8,578
4,070
Operating income
478
431
1,609
1,753
Interest expense, net
(194
)
(55
)
(473
)
(189
)
Debt financing activities
—
(6
)
(47
)
(14
)
Other (expense) income
(6
)
2
(6
)
5
Income before income taxes and income
from investments in unconsolidated affiliates
278
372
1,083
1,555
Income tax provision
(54
)
(88
)
(198
)
(378
)
Income from investments in unconsolidated
affiliates
17
2
29
10
Net income
241
286
914
1,187
Less: net income (loss) attributable to
noncontrolling interests
(6
)
—
21
—
Net income attributable to
Fiserv
$
247
$
286
$
893
$
1,187
GAAP earnings per share attributable to
Fiserv - diluted
$
0.36
$
0.71
$
1.71
$
2.87
Diluted shares used in computing
earnings per share attributable to Fiserv
694.7
404.7
522.6
413.7
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 December
31,
Year Ended December 31,
2019
2018
2019
2018
GAAP net income
$
247
$
286
$
893
$
1,187
GAAP net income attributable to First Data
1
—
162
303
1,005
Combined net income attributable to
Fiserv
247
448
1,196
2,192
Combined adjustments:
Merger and integration costs 2
148
5
467
55
Severance and restructuring costs 3
75
31
150
155
Amortization of acquisition-related
intangible assets 4
533
149
1,222
594
Debt financing activities 5
—
156
287
167
Impact of divestitures 6
—
—
—
(28
)
Non wholly-owned entity activities 7
(33
)
(7
)
(53
)
(33
)
Tax impact of adjustments 8
(169
)
(76
)
(480
)
(209
)
(Gain) loss on sale of businesses 6
(5
)
5
(12
)
(424
)
Tax impact of (gain) loss on sale of
businesses 8
1
(1
)
3
90
Discrete tax items 9
(13
)
(39
)
(5
)
(127
)
Adjusted net income
$
784
$
671
$
2,775
$
2,432
Weighted average common shares
outstanding - diluted
694.7
404.7
522.6
413.7
Issuance of shares for combination
—
286.3
167.0
286.3
Dilutive impact of exchanged equity
awards
—
7.8
4.5
7.8
Combined weighted average common shares
outstanding - diluted 10
694.7
698.8
694.1
707.8
GAAP earnings per share 10
$
0.36
$
0.71
$
1.71
$
2.87
Combined earnings per share 10
$
0.36
$
0.64
$
1.72
$
3.10
Combined adjustments - net of income
taxes:
Merger and integration costs 2
0.16
0.01
0.52
0.06
Severance and restructuring costs 3
0.08
0.04
0.17
0.17
Amortization of acquisition-related
intangible assets 4
0.59
0.16
1.36
0.65
Debt financing activities 5
—
0.17
0.32
0.18
Impact of divestitures 6
—
—
—
(0.03
)
Non wholly-owned entity activities 7
(0.04
)
(0.01
)
(0.06
)
(0.04
)
(Gain) loss on sale of businesses 6
(0.01
)
—
(0.01
)
(0.48
)
Discrete tax items 9
(0.02
)
(0.06
)
(0.01
)
(0.18
)
Adjusted earnings per share
$
1.13
$
0.96
$
4.00
$
3.44
See pages 3-5 for disclosures related to
the use of non-GAAP financial measures.
Earnings per share is calculated using
actual, unrounded amounts.
1.
Represents the financial results of First
Data prior to the date of acquisition. For the year ended December
31, 2019, this includes the results of First Data from January 1,
2019 through July 28, 2019. For the three months and year ended
December 31, 2018, this includes the results of First Data from
October 1, 2018 through December 31, 2018 and from January 1, 2018
through December 31, 2018, respectively.
2.
Represents acquisition and related
integration costs incurred as a result of the company's various
acquisitions. Merger and integration costs include $128 million and
$408 million in the fourth quarter and full year 2019,
respectively, related to the acquisition of First Data and
primarily consist of legal and other professional service fees and
incremental share-based compensation including the fair value of
stock awards assumed by Fiserv in connection with the First Data
acquisition. Legal and other professional service fees were $37
million and $199 million in the fourth quarter and full year 2019,
respectively. Incremental share-based compensation including the
fair value of assumed stock awards was $51 million and $108 million
in the fourth quarter and full year 2019, respectively.
3.
Represents severance and other costs
associated with the achievement of ongoing expense management
initiatives, including real estate and data center consolidation
activities. Severance and restructuring costs includes a non-cash
impairment charge of $48 million in both the fourth quarter and
full year 2019 primarily related to an international core
processing platform.
4.
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 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, including that of First Data in 2019. Debt
financing activities in 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.
Debt financing activities in 2018 represent the loss on early debt
extinguishment associated with the company's cash tender offer for
and redemption of its $450 million aggregate principal amount of
4.625% senior notes.
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 that occurred in the third quarter of 2019.
8.
The tax impact of adjustments is
calculated using a tax rate of 23%, which approximates the combined
company's annual effective tax rate, exclusive of the actual tax
impacts associated with the net (gain) loss on sale of
businesses.
9.
Represents certain discrete tax items,
such as tax effects associated with U.S. federal tax reform,
deferred tax on basis difference related to the Investment Services
Transaction 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.
Fiserv, Inc.
Financial Results by
Segment
(In millions, unaudited)
Three Months Ended December
31,
Year Ended December 31,
2019
2018
2019
2018
Total Company
Revenue
$
4,045
$
1,551
$
10,187
$
5,823
First Data revenue 1
—
2,399
5,609
9,498
Combined revenue
4,045
3,950
15,796
15,321
Combined adjustments:
Intercompany eliminations 2
—
(3
)
(4
)
(9
)
Output Solutions postage reimbursements
3
(248
)
(261
)
(978
)
(1,016
)
Deferred revenue purchase accounting
adjustments
12
—
18
3
Merchant Services adjustment 4
(97
)
(100
)
(387
)
(397
)
Adjusted revenue
$
3,712
$
3,586
$
14,445
$
13,902
Operating income
$
478
$
431
$
1,609
$
1,753
First Data operating income 1
—
529
1,088
2,092
Combined operating income
478
960
2,697
3,845
Combined adjustments:
Merger and integration costs
148
5
467
55
Severance and restructuring costs
75
31
150
155
Amortization of acquisition-related
intangible assets
533
149
1,222
594
Merchant Services adjustment 4
(61
)
(60
)
(230
)
(232
)
(Gain) loss on sale of businesses
(5
)
5
(12
)
(424
)
Adjusted operating income
$
1,168
$
1,090
$
4,294
$
3,993
Operating margin
11.8
%
27.8
%
15.8
%
30.1
%
Adjusted operating margin
31.4
%
30.4
%
29.7
%
28.7
%
First Data 5
First Data revenue
$
2,464
$
2,399
$
9,687
$
9,498
Adjustments:
Intercompany eliminations 2
—
(2
)
(2
)
(6
)
Output Solutions postage
reimbursements
(163
)
(177
)
(684
)
(708
)
Deferred revenue purchase accounting
adjustments
12
—
18
—
Merchant Services adjustment 4
(97
)
(100
)
(387
)
(397
)
First Data adjusted revenue
$
2,216
$
2,120
$
8,632
$
8,387
First Data operating income
$
635
$
599
$
2,410
$
2,345
Adjustments:
Merger and integration costs
30
—
60
3
Severance and restructuring costs
7
16
14
70
Amortization of acquisition-related
intangible assets
97
106
397
431
Merchant Services adjustment 4
(61
)
(60
)
(230
)
(232
)
(Gain) loss on sale of businesses
—
5
—
(83
)
First Data adjusted operating income
$
708
$
666
$
2,651
$
2,534
First Data operating margin
25.8
%
25.0
%
24.9
%
24.7
%
First Data adjusted operating margin
31.9
%
31.4
%
30.7
%
30.2
%
Fiserv, Inc.
Financial Results by Segment
(cont.)
(In millions, unaudited)
Three Months Ended December
31,
Year Ended December 31,
2019
2018
2019
2018
Payments and Industry Products
("Payments")
Revenue
$
987
$
944
$
3,744
$
3,467
Adjustments:
Intercompany eliminations 2
—
(1
)
(2
)
(3
)
Output Solutions postage reimbursements
3
(85
)
(84
)
(294
)
(308
)
Deferred revenue purchase accounting
adjustments
—
—
—
3
Adjusted revenue
$
902
$
859
$
3,448
$
3,159
Operating income
$
353
$
315
$
1,252
$
1,122
Adjustments:
Merger and integration costs
—
—
—
2
Adjusted operating income
$
353
$
315
$
1,252
$
1,124
Operating margin
35.8
%
33.4
%
33.4
%
32.3
%
Adjusted operating margin
39.2
%
36.7
%
36.3
%
35.6
%
Financial Institution Services
("Financial") 6
Revenue
$
609
$
615
$
2,407
$
2,395
Operating income
$
207
$
208
$
805
$
798
Operating margin
34.1
%
33.7
%
33.5
%
33.3
%
Corporate and Other
Revenue
$
(15
)
$
(8
)
$
(42
)
$
(39
)
Operating loss
$
(717
)
$
(92
)
$
(1,479
)
$
(167
)
First Data operating loss
—
(70
)
(291
)
(253
)
Combined adjustments:
Merger and integration costs
118
5
407
50
Severance and restructuring costs
68
15
136
85
Amortization of acquisition-related
intangible assets
436
43
825
163
Gain on sale of businesses
(5
)
—
(12
)
(341
)
Adjusted operating loss
$
(100
)
$
(99
)
$
(414
)
$
(463
)
See pages 3-5 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 year ended December
31, 2019, this includes the results of First Data from January 1,
2019 through July 28, 2019. For the three months and year ended
December 31, 2018, this includes the results of First Data from
October 1, 2018 through December 31, 2018 and from January 1, 2018
through December 31, 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.
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
separation 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.
6
For all periods presented in the Financial
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)
Year Ended
December 31,
2019
2018
Cash flows from operating
activities
Net income
$
914
$
1,187
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and other amortization
615
382
Amortization of acquisition-related
intangible assets
1,036
163
Amortization of financing costs, debt
discounts and other
127
11
Net foreign currency gain on financing
activities
(50
)
—
Share-based compensation
229
73
Deferred income taxes
47
133
Gain on sale of businesses
(15
)
(227
)
Income from investments in unconsolidated
affiliates
(29
)
(10
)
Distributions from unconsolidated
affiliates
23
2
Settlement of interest rate hedge
contracts
(183
)
—
Non-cash impairment charges
48
3
Other operating activities
(3
)
4
Changes in assets and liabilities, net of
effects from acquisitions and dispositions:
Trade accounts receivable
(7
)
(108
)
Prepaid expenses and other assets
(82
)
(6
)
Contract costs
(212
)
(137
)
Accounts payable and other liabilities
238
116
Contract liabilities
99
(34
)
Net cash provided by operating
activities
2,795
1,552
Cash flows from investing
activities
Capital expenditures, including
capitalization of software costs
(721
)
(360
)
Proceeds from sale of businesses
51
419
Payments for acquisitions of businesses,
net of cash acquired
(16,005
)
(712
)
Distributions from unconsolidated
affiliates
113
—
Purchases of investments, net
(45
)
(3
)
Other investing activities
5
(7
)
Net cash used in investing
activities
(16,602
)
(663
)
Cash flows from financing
activities
Debt proceeds
20,260
5,039
Debt repayments
(5,273
)
(4,005
)
Payments of debt financing, redemption and
other costs
(247
)
—
Proceeds from issuance of treasury
stock
156
75
Purchases of treasury stock, including
employee shares withheld for tax obligations
(561
)
(1,946
)
Distributions paid to noncontrolling
interests and redeemable noncontrolling interests
(118
)
—
Other financing activities
(26
)
(5
)
Net cash provided by (used in)
financing activities
14,191
(842
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
1
—
Net change in cash, cash equivalents and
restricted cash
385
47
Net cash flows from discontinued
operations
133
43
Cash, cash equivalents and restricted
cash, beginning balance
415
325
Cash, cash equivalents and restricted
cash, ending balance
$
933
$
415
Fiserv, Inc.
Condensed Consolidated Balance
Sheets
(In millions, unaudited)
December 31,
2019
2018
Assets
Cash and cash equivalents
$
893
$
415
Trade accounts receivable – net
2,782
1,049
Prepaid expenses and other current
assets
1,503
274
Settlement assets
11,868
486
Total current assets
17,046
2,224
Property and equipment – net
1,606
398
Customer relationships - net
14,042
1,348
Other intangible assets – net
3,600
795
Goodwill
36,038
5,702
Contract costs - net
533
419
Investments in unconsolidated
affiliates
2,720
65
Other long-term assets
1,954
311
Total assets
$
77,539
$
11,262
Liabilities and Equity
Accounts payable and accrued expenses
$
3,080
$
1,146
Short-term and current maturities of
long-term debt
287
4
Contract liabilities
492
380
Settlement obligations
11,868
480
Total current liabilities
15,727
2,010
Long-term debt
21,612
5,955
Deferred income taxes
4,247
745
Long-term contract liabilities
155
89
Other long-term liabilities
941
170
Total liabilities
42,682
8,969
Redeemable noncontrolling interests
262
—
Fiserv shareholders' equity
32,979
2,293
Noncontrolling interests
1,616
—
Total equity
34,595
2,293
Total liabilities and equity
$
77,539
$
11,262
Fiserv, Inc.
Selected Non-GAAP Financial
Measures and Additional Information
($ in millions, unaudited)
Internal Revenue Growth 1
Three Months Ended December
31,
Year Ended December 31,
2019
2018
Growth
2019
2018
Growth
Total Company
Adjusted revenue
$
3,712
$
3,586
$
14,445
$
13,902
Currency impact 2
38
—
231
—
Acquisition adjustments
(27
)
—
(178
)
—
Divestiture adjustments
(53
)
(75
)
(81
)
(283
)
Internal revenue
$
3,670
$
3,511
5%
$
14,417
$
13,619
6%
First Data
Adjusted revenue
$
2,216
$
2,120
$
8,632
$
8,387
Currency impact 2
38
—
224
—
Acquisition adjustments
(11
)
—
(31
)
—
Divestiture adjustments
—
(8
)
—
(142
)
Internal revenue
$
2,243
$
2,112
6%
$
8,825
$
8,245
7%
Payments
Adjusted revenue
$
902
$
859
$
3,448
$
3,159
Currency impact 2
—
—
4
—
Acquisition adjustments
(16
)
—
(147
)
—
Divestiture adjustments
(42
)
(48
)
(42
)
(48
)
Internal revenue
$
844
$
811
4%
$
3,263
$
3,111
5%
Financial
Adjusted revenue
$
609
$
615
$
2,407
$
2,395
Currency impact 2
—
—
3
—
Divestiture adjustments
(6
)
(11
)
(7
)
(65
)
Internal revenue
$
603
$
604
—%
$
2,403
$
2,330
3%
Corporate and Other
Adjusted revenue
$
(15
)
$
(8
)
$
(42
)
$
(39
)
Divestiture adjustments
(5
)
(8
)
(32
)
(28
)
Internal revenue
$
(20
)
$
(16
)
n/m
$
(74
)
$
(67
)
n/m
See pages 3-5 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
increase in adjusted revenue (see pages 10-11) for the current
period excluding the impact of foreign currency fluctuations and
revenue attributable to acquisitions (except for revenue
attributable to First Data which is presented on a combined company
basis) and dispositions, divided by adjusted revenue from the prior
period excluding revenue attributable to dispositions. Revenue
attributable to dispositions includes 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
Year Ended
December 31,
2019
2018
Net cash provided by operating
activities
$
2,795
$
1,552
First Data net cash provided by operating
activities 1
1,370
2,307
First Data payments for contract assets
2
(51
)
(78
)
Combined net cash provided by operating
activities
4,114
3,781
Combined capital expenditures
(1,118
)
(886
)
Combined adjustments:
Distributions paid to noncontrolling
interests and redeemable noncontrolling interests
(271
)
(255
)
Distributions from unconsolidated
affiliates 3
113
—
Severance, restructuring, merger and
integration payments
375
209
Settlement of interest rate hedge
contracts
183
—
Tax reform payments
—
23
Tax payments on adjustments and debt
financing
(105
)
(35
)
Other
(4
)
(2
)
Free cash flow
$
3,287
$
2,835
See pages 3-5 for disclosures related to
the use of non-GAAP financial measures.
1
Represents the financial results of First
Data prior to the date of acquisition. For the year ended December
31, 2019, this includes the results of First Data from January 1,
2019 through July 28, 2019. For the year ended December 31, 2018,
this includes the results of First Data from January 1, 2018
through December 31, 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 $234 million and $255 million in 2019 and 2018,
respectively, of which $121 million and $255 million of the
distributions are recorded within First Data net cash provided by
operating activities.
Fiserv, Inc.
Selected Non-GAAP Financial
Measures and Additional Information (cont.)
(In millions, unaudited)
Total Amortization 1
Three Months Ended December
31,
Year Ended December 31,
2019
2018
2019
2018
Acquisition-related intangible assets
$
560
$
43
$
1,036
$
163
Capitalized software
43
36
160
137
Purchased software
46
12
103
47
Financing costs, debt discounts and
other
11
2
127
11
Sales commissions
22
20
83
78
Deferred conversion costs
6
13
22
28
Total amortization
$
688
$
126
$
1,531
$
464
First Data acquisition-related intangible
assets
$
—
$
106
$
233
$
431
First Data capitalized software
—
26
62
94
First Data purchased software
—
34
72
123
First Data financing costs, debt discounts
and other
—
4
7
17
First Data sales commissions
—
—
—
—
First Data deferred conversion costs
—
11
22
41
Total First Data amortization 2
$
—
$
181
$
396
$
706
Combined acquisition-related intangible
assets
$
560
$
149
$
1,269
$
594
Combined capitalized software
43
62
222
231
Combined purchased software
46
46
175
170
Combined financing costs, debt discounts
and other
11
6
134
28
Combined sales commissions
22
20
83
78
Combined deferred conversion costs
6
24
44
69
Total combined amortization
$
688
$
307
$
1,927
$
1,170
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 year ended
December 31, 2019, this includes the results of First Data from
January 1, 2019 through July 28, 2019. For the three months and
year ended December 31, 2018, this includes the results of First
Data from October 1, 2018 through December 31, 2018 and from
January 1, 2018 through December 31, 2018, respectively.
Fiserv, Inc. Full Year Forward-Looking
Non-GAAP Financial Measures
Internal Revenue Growth - The company's internal revenue growth
outlook for 2020 excludes the impact of foreign currency
fluctuations, acquisitions, dispositions and the impact of the
company's Output Solutions postage reimbursements and merchant
services adjustments, and includes deferred revenue purchase
accounting adjustments. Additionally, the internal revenue growth
outlook is calculated based on the combined results of Fiserv and
First Data. On a GAAP basis, the financial results of First Data
are included in the consolidated results of Fiserv from the date of
acquisition. Therefore, the company expects GAAP revenue growth to
be significantly higher than internal revenue growth.
Adjusted Earnings Per Share - The company's adjusted earnings
per share outlook for 2020 excludes certain non-cash or other items
which should enhance shareholders' ability to evaluate the
company's performance, as such measures provide additional insights
into the factors and trends affecting its business. Non-cash or
other items may be significant and 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 and
restructuring costs; net charges associated with debt financing
activities including foreign currency transaction gains, early debt
extinguishment and bridge financing costs; merger and integration
costs; gains or losses from the sale of businesses; and certain
discrete tax benefits and expenses. Adjustments to earnings per
share that have been incurred in 2019 are presented on page 8 but
are not necessarily indicative of adjustments that may be incurred
in 2020. Estimates of these adjustments on a forward-looking basis
are not available due to the variability, complexity and limited
visibility of these items.
The company's adjusted earnings per share growth outlook for
2020 is based on 2019 adjusted earnings per share performance,
including the historical results of First Data on an adjusted
combined company basis, as adjusted for the Investment Services
Transaction and other divestitures.
2019 adjusted earnings per share 1
$
4.00
Net impact from divestitures, including
the Investment Services Transaction
(0.05
)
2019 adjusted earnings per share, as
adjusted for divestitures
$
3.95
2020 adjusted earnings per share
outlook
$4.86 - $5.02
2020 adjusted earnings per share growth
outlook
23% - 27%
See pages 3-5 for disclosures related to
the use of non-GAAP financial measures.
1
See page 8 for a reconciliation of GAAP
earnings per share to adjusted earnings per share.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200204005962/en/
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
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