Adjusted internal revenue growth of 3 percent;
Adjusted earnings per share increase of 13 percent;
Year to date free cash flow of $532 million
Fiserv, Inc. (NASDAQ: FISV), the leading global provider of financial services technology solutions, today reported financial results for the third quarter of 2010.
GAAP revenue in the third quarter of 2010 was $1.03 billion compared with $992 million in the third quarter of 2009. Adjusted revenue increased 3 percent to $978 million in the third quarter compared with $945 million in 2009. For the first nine months of 2010, GAAP revenue was $3.06 billion compared with $3.02 billion in 2009, and adjusted revenue increased 1 percent to $2.90 billion versus $2.86 billion in 2009.
GAAP earnings per share from continuing operations for the third quarter was $0.89 compared with $0.79 in 2009. GAAP earnings per share from continuing operations for the first nine months of 2010 was $2.54 compared with $2.21 for the comparable period in 2009.
Adjusted earnings per share from continuing operations in the third quarter increased 13 percent to $1.04 compared with $0.92 in 2009. Year to date adjusted earnings per share increased 10 percent to $2.99 compared with $2.72 in 2009.
"We continued to see revenue growth build in the quarter highlighted by 5 percent payments growth and strong earnings performance," said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. "Investments in innovation are translating into increased value for clients, and an enhanced long-term growth profile. We are pleased with our results."
Third Quarter 2010
• Adjusted internal revenue growth was 3 percent in the quarter, reflecting 5 percent growth in the Payments segment and 2 percent growth in the Financial segment.
• Adjusted operating margin increased 50 basis points to 29.4 percent in the quarter compared with the third quarter of 2009. Adjusted operating margin was 29.3 percent through September 30, a 40-basis-point increase over the first nine months of 2009.
• Free cash flow increased 5 percent to $532 million for the first nine months of 2010 compared with $506 million in 2009.
• The company raised $750 million in a public offering of 5-year and 10-year senior notes in the quarter with a weighted average interest rate of 4.025 percent and a weighted average term of 8 years. The proceeds from the offering were used to repay $480 million of the company's term loan in September and to fund the purchase of $250 million of its 6.125 percent senior notes due in 2012, which was completed in October.
• The company repurchased 1 million shares of common stock in the quarter for $52 million. The company has repurchased 5.2 million shares through September 30 for a total of $254 million.
• For the sixth time in the last seven years, Fiserv was ranked number one on the FinTech 100 by American Banker, Bank Technology News and IDC Financial Insights.
• The company launched Mobile Source Capture(TM) from Fiserv, a new remote deposit capture solution that extends the convenience of remote capture to camera-equipped smartphones.
• The company expanded its consumer payments footprint in the quarter by signing 124 electronic bill payment clients and 59 debit clients. The company has signed 374 electronic bill payment clients and 163 debit clients through the first nine months of the year.
Over 270 clients committed to offer ZashPay(TM), Fiserv's new person-to-person payments service, in the quarter. As of September 30, 2010, more than 400 financial institutions have agreed to offer the service.
• The company signed a number of new and expanded client relationships in the quarter:
- Center Bank of Los Angeles, a $2.2 billion community bank, is now live on the Premier(R) bank platform from Fiserv. The solution includes online banking, cash management, electronic document management, bill payment and e-statements.
- Eagle Savings Bank of Cincinnati, Ohio, has chosen an integrated banking solution based on the Cleartouch(R) bank platform from Fiserv. Eagle Savings Bank is Ohio's oldest savings bank and has $106 million in assets. In addition to account processing, the Fiserv solution includes online banking, bill payment, workflow management, document management, electronic funds transfer and item processing services.
- Granite State Credit Union of Manchester, N.H., signed an agreement to implement Acumen(TM) from Fiserv. The credit union plans to leverage the solution's member relationship management capabilities to serve its more than 25,000 members. The implementation will also include CheckFree(R) RXP(R) and AML Manager from Fiserv.
- Kern Schools Federal Credit Union, a California credit union with $1.3 billion in assets, selected the XP2(R) account processing platform from Fiserv. In addition to XP2, Kern Schools FCU will implement a full suite of Fiserv solutions to meet the needs of its 195,000 members including Branch Source Capture(TM), Corillian(R) Online, CheckFree RXP and Mobile Money(TM).
- Liberty Bank, headquartered in Springfield, Mo., selected the Premier bank platform from Fiserv to process accounts. The $970 million community bank will integrate a comprehensive selection of Fiserv solutions including online banking, e-commerce, bill payment, risk management, cash management, branch banking and source capture solutions, among others.
- Navy Federal Credit Union, the nation's largest credit union with $43 billion in assets and more than 3.5 million members, extended its relationship with Fiserv through a multi-year renewal agreement for the CheckFree RXP electronic bill payment service. As part of the agreement, Navy Federal will also begin using ZashPay to enable person-to-person payments for its members.
- Patelco Credit Union of San Francisco, Calif. with $3.5 billion in assets, signed an agreement to implement Acumen from Fiserv. In addition to implementing this Internet-based account processing solution to meet the needs of its 280,000 members, Patelco will be using debit and credit solutions from Fiserv, including UChoose Rewards(R).
- Standard Chartered PLC, a leading international bank with $437 billion in assets, engaged Fiserv to jointly develop and implement a sales management framework as an enabler for delivery of the bank's customer-focused strategy. The bank is implementing Customer Value Enhancement(TM) from Fiserv.
- U.S. Bancorp, the parent company of U.S. Bank, the fifth largest commercial bank in the United States, expanded its existing relationship with Fiserv. The bank chose Corillian Online to enable the delivery of integrated banking, bill payment and personal financial management tools to retail banking customers through the online channel.
- Virgin Money, the financial services arm of Virgin Group, Ltd., selected Fiserv as its technology partner to support its retail banking expansion plans in the UK. Virgin Money will utilize the Signature(TM) bank platform for account processing, Aperio(TM) from Fiserv for its customer channel management solution and Teller for Signature for branch teller applications and transaction processing.
Outlook for 2010
Fiserv continues to expect full year adjusted earnings per share from continuing operations to be in a range of $3.96 to $4.07, which represents growth of 8 to 11 percent compared with 2009. The company also expects 2010 adjusted internal revenue growth to be in a range of 1 to 3 percent. The adjusted earnings per share outlook excludes the impact of extraordinary items, merger and integration costs and the amortization of acquisition-related intangible assets.
"The combination of strong performance and very solid sales execution is providing momentum as we head into 2011," said Yabuki.
Earnings Conference Call
The company will discuss its third quarter 2010 results on a conference call and webcast at 4 p.m. CDT on Tuesday, October 26, 2010. To register for the event, go to www.fiserv.com and click on the Q3 Earnings Webcast icon. Supplemental materials and an accompanying presentation will be available in the "For Investors" section of the website.
Use of Non-GAAP Financial Measures
We supplement our reporting of revenue, operating income, income from continuing operations and earnings per share information determined in accordance with GAAP by using "adjusted revenue," "adjusted operating income," "adjusted income from continuing operations," "adjusted earnings per share from continuing operations," "adjusted operating margin," "free cash flow" and "adjusted internal revenue growth" in this earnings release. Management believes that adjustments for certain non-cash or unusual revenue or expense items and the exclusion of certain pass-through revenue and expenses enhance our shareholders' ability to evaluate our performance because such items do not reflect how we manage our operations. Therefore, we exclude these items from GAAP revenue, operating income, income from continuing operations and earnings per share to calculate these non-GAAP measures.
Examples of non-cash or unusual items may include, but are not limited to, non-cash intangible asset amortization expense associated with acquisitions, severance costs, merger and integration expenses and non-cash deferred revenue adjustments arising from acquisitions. We exclude these items to more clearly focus on the factors we believe are pertinent to the management of our operations. We regularly report our adjusted results to our chief executive officer, who uses this information to allocate resources to our various businesses.
Free cash flow and adjusted internal revenue growth are described on pages 10 and 12. Adjusted internal revenue growth percentage is a non-GAAP financial measure that we believe is useful to investors because it presents revenue growth excluding acquired revenue, postage reimbursements in our Output Solutions business and deferred revenue purchase accounting adjustments. We believe this supplemental information enhances our shareholders' ability to evaluate and understand our core business performance.
These non-GAAP measures should be considered in addition to, and not as a substitute for, revenue, operating income, income from continuing operations and earnings per share or any other amount determined in accordance with GAAP. These non-GAAP measures reflect management's judgment of particular items and may not be comparable to similarly titled measures reported by other companies.