Fiserv Q4 income slips

Source: Fiserv

Fiserv (NASDAQ: FISV), a leading provider of information technology solutions to the financial industry, today reported financial results for the fourth quarter and full year 2008.

These financial results reflect the acquisition of CheckFree in December 2007 and the disposition of a 51% interest in Fiserv's insurance operations ("Fiserv Insurance") in July 2008.

Total GAAP revenues were $1.06 billion for the fourth quarter of 2008 compared with $1.11 billion in 2007. Total adjusted revenues, excluding Fiserv Insurance, were $1.01 billion for the fourth quarter of 2008 and $816 million for the fourth quarter of 2007. For the full year, total GAAP revenues were $4.74 billion in 2008 and $3.90 billion in 2007. Total adjusted revenues, excluding Fiserv Insurance, were up 38 percent to $4.05 billion in 2008 compared with $2.94 billion in 2007.

GAAP earnings per share for the fourth quarter of 2008 were $0.39, compared with $0.58 for the fourth quarter of 2007. GAAP earnings per share from continuing operations for the fourth quarter of 2008 were $0.45, which included a $0.20 after-tax loss on the sale of businesses primarily related to Fiserv Insurance, compared with $0.55 for the fourth quarter of 2007. For the full year, GAAP earnings per share were $3.49 in 2008, compared with $2.60 in 2007. GAAP earnings per share from continuing operations were $2.12 in 2008, which included a $0.35 after-tax loss from the sale of businesses, compared with $2.45 in 2007.

Adjusted earnings per share from continuing operations for the quarter were up 23 percent to $0.85 compared with $0.69 for the fourth quarter of 2007. For the year, adjusted earnings per share were also up 23 percent to $3.29 compared with $2.67 in 2007. Adjusted internal revenue growth, excluding Fiserv Insurance, was down 2 percent for the fourth quarter and up 1 percent for the full year.

Adjusted operating margin increased 300 basis points to 26.8 percent in the fourth quarter, and increased 190 basis points to 26.1 percent for the full year compared with the 2007 periods.

"During 2008, we delivered on our commitments to substantially grow earnings and cash flow while integrating CheckFree, both in the face of a challenging market. Our outstanding free cash flow allows us to stay focused on serving clients exceptionally well and continue to invest in future growth opportunities," said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. "Although we are disappointed with the internal revenue growth in our financial segment, which was negatively impacted by lower home equity processing and discretionary license revenues, we continue to make great progress in building our base of recurring revenue. Our payments segment, which nearly doubled in revenue during 2008 to more than $2 billion, continues to deliver solid revenue and earnings growth."

FOURTH QUARTER BUSINESS AND OPERATING HIGHLIGHTS

  • Free cash flow increased 38 percent to a record $611 million for 2008;
  • Adjusted internal revenue growth in the payments segment was 3 percent in the fourth quarter and 4 percent for the full year, driven by solid performance in many of the company's electronic payments solutions businesses and offset by a significant reduction in float revenue. Adjusted operating margin in the payments segment was up 220 basis points to 30.0 percent in 2008 due to a combination of favorable changes in the company's business mix, including the acquisition of CheckFree in December 2007, scale efficiencies, and operating leverage;
  • Adjusted internal revenue growth in the financial segment was down 6 percent in the fourth quarter and down 2 percent for the full year. This growth was negatively impacted by 5 percentage points in the fourth quarter and 3 percentage points for the full year related to revenue declines in the home equity processing business. Adjusted operating margin in the financial segment decreased 60 basis points to 24.9 percent in 2008, due primarily to weak results in the company's lending businesses and reduced higher-margin license revenue;
  • The company signed 128 clients for its electronic bill payment services in the fourth quarter, for a total of more than 550 clients signed in 2008. Fiserv also extended its value added reseller bill payment relationship with Digital Insight for three years;
  • Commerce Bank/Harrisburg, a $2 billion financial retailer headquartered in Harrisburg, Penn., chose Fiserv as its key technology partner to provide a full suite of account processing technology solutions. In all, Commerce Bank/Harrisburg will utilize 14 integrated solutions from Fiserv, including account processing, online banking and electronic bill payment and risk solutions;
  • Piraeus Bank, one of Greece's leading financial institutions with operations in 11 countries and more than $70 billion in total assets, selected the Fiserv Universal Banking solution under a ten-year agreement. Fiserv's Universal Banking solution, an integrated product suite, provides the bank a single source for a range of banking technology needs that allows the bank to diversify its income streams and extend services to corporate clients. The solution was implemented at the bank's Cyprus operations and is currently being implemented in Egypt;
  • BB&T Corporation, the nation's 12th largest financial holding company with $137 billion in assets, rolled out the Fiserv Branch Source Capture solution, a part of the Fiserv Source Capture Suite, to more than 330 branches, resulting in dramatic improvements to its operational processes and workflows. Additionally, BB&T selected Fiserv's Personix Card Services to provide outsourced personalized card solutions, card manufacturing, and mailing services to its clients in a four-year agreement;
  • Fiserv acquired i_Tech Corporation in December 2008 from First Interstate BancSystem Inc., a multi-state, $6 billion financial institution headquartered in Billings, Mont. i_Tech provides outsourced account processing services as a licensee and reseller of the Fiserv ITI Premier account processing banking system to 158 financial institutions including First Interstate, along with a variety of complementary services, including EFT, check processing and ATM operations in 13 states;
  • The company repurchased 5.6 million shares of its common stock in the fourth quarter and 10.6 million shares for full year 2008.

OUTLOOK FOR 2009
Fiserv expects 2009 adjusted earnings per share from continuing operations in a range of $3.61 to $3.75, which represents growth of 10 to 14 percent compared with adjusted earnings per share from continuing operations of $3.29 in 2008. The company expects 2009 adjusted internal revenue growth to be in a range of 0 to 4 percent. The adjusted earnings per share outlook excludes the impact of extraordinary gains or charges, merger and integration costs, and amortization of acquisition-related intangible assets.

"As we embark upon our 25th year, our strong client relationships and industry-leading position should allow us to grow earnings at double-digit levels in an environment which we believe will face significant challenges in 2009. We are pragmatically approaching our cost structure this year, balanced against our commitment to invest in solutions that will help our clients navigate the market turbulence and extend Fiserv's market differentiation," said Yabuki.

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