Fiserv Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Fiserv, Inc. (NASDAQ: FISV) reported its fourth quarter and full year 2020 results, revealing a 5% decline in Q4 revenue to $3.83 billion, while full year revenue increased 46% to $14.85 billion. Q4 GAAP earnings per share was $0.44, a 22% rise year-over-year, although annual EPS dropped 18% to $1.40. The company's adjusted operating margin improved to 35.6% in Q4. Fiserv anticipates 2021 internal revenue growth of 8% to 12% and adjusted EPS between $5.30 and $5.50. The company also repurchased shares and reduced debt significantly in 2020.

Positive

• Full year revenue increased by 46% to $14.85 billion.
• Fourth quarter adjusted earnings per share rose 16% to $1.30.
• Adjusted operating margin improved to 35.6% in Q4.
• Sales results increased by 19% in Q4 and 22% for the full year.
• The company repurchased 16.1 million shares for $1.64 billion in 2020.

Negative

• Fourth quarter GAAP revenue declined by 5% compared to the prior year.
• Q4 Acceptance segment revenue decreased by 7%.
• Full year GAAP earnings per share fell 18% compared to the prior year.

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 2020.

Fourth Quarter and Full Year 2020 GAAP Results

GAAP revenue for the fourth quarter of 2020 of $3.83 billion declined 5% compared to the prior year period, with the Acceptance segment down 7%, the Fintech segment down 1% and the Payments segment down 2%. GAAP revenue for the full year of 2020 of $14.85 billion grew 46% compared to the prior year, with the Acceptance segment up 115%, the Fintech segment down 1% and the Payments segment up 41%. GAAP revenue growth within the Acceptance and Payments segments for the full year of 2020 includes the impact of revenue from acquired First Data Corporation ("First Data") businesses as the financial results of First Data are included in the consolidated results of Fiserv, Inc. from July 29, 2019, the date of acquisition.

GAAP earnings per share was $0.44 in the fourth quarter and $1.40 for the full year of 2020, an increase of 22% and decrease of 18%, respectively, compared to the prior year periods. GAAP operating margin was 13.5% and 12.5% in the fourth quarter and full year 2020, respectively, compared to 11.8% and 15.8% in the fourth quarter and full year 2019, respectively. GAAP earnings per share and operating margin for the full year of 2020 included integration costs and acquired intangible asset amortization from the application of purchase accounting associated with the First Data acquisition, as well as gains from the sale of a 60% interest of the company's Investment Services business ("Investment Services Transaction") and the dissolution of the Banc of America Merchant Services joint venture ("BAMS").

Net cash provided by operating activities increased by 1% to $1.19 billion in the fourth quarter and increased by 48% to $4.15 billion in the full year 2020 compared to the prior year periods. The increase in the full year 2020 was primarily attributable to the First Data acquisition.

“Fiserv delivered terrific financial and operational results in 2020 despite the unprecedented market conditions, demonstrating the strength and resilience of our business,” said Frank Bisignano, President and Chief Executive Officer of Fiserv. “I am incredibly proud of our associates for their unwavering focus on delivering the mission-critical products that help our clients succeed. That focus has enabled us to deliver our 35^th consecutive year of double-digit adjusted earnings per share growth.”

Fourth Quarter and Full Year 2020 Non-GAAP Results and Additional Information

On an adjusted non-GAAP basis, the company's financial performance measures in this news release, including adjusted revenue, internal revenue, internal revenue growth, adjusted operating margin, adjusted net income, adjusted earnings per share and free cash flow, have been recalculated to provide full year 2019 results on a combined company basis to enhance investors' ability to evaluate the company's operating performance including First Data.

• Fourth quarter adjusted revenue of $3.62 billion declined 2% compared to the prior year period and full year adjusted revenue of $13.91 billion declined 4% compared to the prior year period.
• Internal revenue growth was 1% in the fourth quarter, with 3% growth in the Acceptance segment, and a 1% decline in both the Fintech and Payments segments.
• Internal revenue for the total company and each of the Acceptance, Fintech and Payments segments was flat for the full year.
• Fourth quarter adjusted earnings per share of $1.30 increased 16% compared to the prior year period and full year adjusted earnings per share of $4.42 increased 12% compared to the prior year period.
• Fourth quarter free cash flow of $1.05 billion increased by 7% compared to the prior year period and full year free cash flow of $3.65 billion increased by 11% compared to the prior year period.
• Fourth quarter adjusted operating margin of 35.6% increased 420 basis points compared to the prior year period and full year adjusted operating margin of 31.4% increased 170 basis points compared to the prior year period.
• Sales results increased 19% in the fourth quarter and 22% for the full year compared to the prior year periods.
• The company's Board of Directors approved a new 60 million share repurchase authorization in the fourth quarter.
• The company repurchased 1.8 million shares of common stock for $200 million in the fourth quarter, and 16.1 million shares of common stock for $1.64 billion in the full year.
• The company repaid $749 million of debt in the fourth quarter and $1.78 billion in the full year.
• In January 2021, the company completed its previously announced acquisition of Ondot Systems, Inc., a digital experience platform provider for financial institutions.
• In February 2021, Fiserv was named one of FORTUNE Magazine World's Most Admired Companies^® for the eighth consecutive year.

Outlook for 2021

Fiserv expects internal revenue growth of 8% to 12% and adjusted earnings per share in a range of $5.30 to $5.50, representing growth of 20% to 24%, for 2021. This outlook assumes no significant extension of COVID-19 impacts beyond the first half of 2021.

“We enter 2021 with good momentum from the strong sales activity of the past several quarters and a solid pipeline,” said Bisignano. “We expect that the strength of our business, together with a strong post-pandemic macro environment, will drive significantly improved financial performance in 2021.”

Earnings Conference Call

The company will discuss its results on a conference call and webcast at 4 p.m. CT on Tuesday, February 9, 2021. 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 full year 2019 unaudited non-GAAP financial performance measures have been recalculated in this news release on a combined company basis reflecting its reportable segments as realigned during the first quarter of 2020. The full year 2019 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 full year 2019 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 date or of the combined companies in the future. The full year 2019 combined financial information does not reflect any cost savings or other synergies anticipated as a result of the acquisition. In addition, the full year 2019 combined financial information does not reflect the impact of any purchase accounting adjustments that arose from the acquisition as those impacts would be excluded in the preparation of the combined financial information. The unaudited 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 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 "adjusted revenue," "internal revenue," "internal revenue growth," "adjusted operating income," "adjusted operating margin," "adjusted net income," "adjusted earnings per share," and "free cash flow." In addition, the company supplements its and First Data’s full year 2019 reporting of information determined in accordance with GAAP with “combined revenue,” “combined operating income,” “combined net income attributable to Fiserv,” “combined earnings per share” and “combined net cash provided by operating activities.” Management believes that providing combined full year 2019 financial information and making adjustments for certain non-cash or other items and excluding certain pass-through revenue and expenses should enhance shareholders' ability to evaluate the company's performance, including providing additional insights into the factors and trends affecting the company's business and, with respect to combined financial information, providing a reasonable basis of comparison with its post-acquisition results. Therefore, the company excludes these items from its GAAP financial measures, and its and First Data's combined full year 2019 financial information, 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 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 or losses, 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 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, 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 will be, amplified by the COVID-19 pandemic: the duration and intensity of the COVID-19 pandemic including whether the global economy generally recovers from the impact of the COVID-19 pandemic in the first half of 2021; 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, 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 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; 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, Annual Report on Form 10-K for the year ended December 31, 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,
	2020				2019				2020				2019
Revenue
Processing and services	$	3,097			$	3,344			$	12,215			$	8,573
Product	735				701				2,637				1,614
Total revenue	3,832				4,045				14,852				10,187
Expenses
Cost of processing and services	1,353				1,571				5,841				4,016
Cost of product	504				538				1,971				1,293
Selling, general and administrative	1,459				1,463				5,652				3,284
Gain on sale of businesses	—				(5)				(464)				(15)
Total expenses	3,316				3,567				13,000				8,578
Operating income	516				478				1,852				1,609
Interest expense, net	(174)				(194)				(709)				(473)
Debt financing activities	—				—				—				(47)
Other income (expense)	(6)				(6)				28				(6)
Income before income taxes and income (loss) from investments in unconsolidated affiliates	336				278				1,171				1,083
Income tax provision	(20)				(54)				(196)				(198)
Income (loss) from investments in unconsolidated affiliates	(3)				17				—				29
Net income	313				241				975				914
Less: net income (loss) attributable to noncontrolling interests	13				(6)				17				21
Net income attributable to Fiserv	$	300			$	247			$	958			$	893
GAAP earnings per share attributable to Fiserv - diluted	$	0.44			$	0.36			$	1.40			$	1.71
Diluted shares used in computing earnings per share attributable to Fiserv	681.2				694.7				683.4				522.6
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,
	2020				2019				2020				2019
GAAP net income	$	300			$	247			$	958			$	893
GAAP net income attributable to First Data 1	—				—				—				303
Combined net income attributable to Fiserv	300				247				958				1,196
Combined adjustments:
Merger and integration costs 2	254				148				902				467
Severance and restructuring costs 3	16				75				108				150
Amortization of acquisition-related intangible assets 4	501				533				2,024				1,222
Debt financing activities 5	—				—				—				287
Impact of divestitures 6	—				(5)				—				(46)
Non wholly-owned entity activities 7	41				(33)				94				(53)
Tax impact of adjustments 8	(187)				(169)				(719)				(470)
Gain on sale of businesses 6	—				(5)				(464)				(12)
Tax impact of gain on sale of businesses 8	—				1				124				3
Discrete tax items 9	(39)				(13)				(7)				(5)
Adjusted net income	$	886			$	779			$	3,020			$	2,739
Weighted average common shares outstanding - diluted	681.2

FAQ

What are Fiserv's Q4 2020 revenue figures?

Fiserv reported Q4 2020 revenue of $3.83 billion, a 5% decline year-over-year.

How did Fiserv perform in terms of GAAP EPS for full year 2020?

Fiserv's full year 2020 GAAP earnings per share was $1.40, reflecting an 18% decrease compared to the prior year.

What is Fiserv's outlook for 2021?

Fiserv expects internal revenue growth of 8% to 12% and adjusted earnings per share between $5.30 and $5.50 for 2021.

How much did Fiserv repurchase in shares during 2020?

In 2020, Fiserv repurchased 16.1 million shares of common stock for $1.64 billion.

What was Fiserv's adjusted operating margin in Q4 2020?

Fiserv's adjusted operating margin in Q4 2020 was 35.6%, an increase of 420 basis points compared to the prior year.