Fiserv, Inc. (FISV) has reported a net income of $157 million from continuing operations (excluding merger costs and other adjustments, severance costs and amortization of acquisition-related intangibles) or $1.04 per share in the third quarter of 2010, up 10.5% year over year. The reported figure easily beat the Zacks Consensus Estimate of $1.00.
Including one-time items, net income from continuing operations came in at $134 million, up 8.1% year over year.
Fiserv assists financial institutions and health plan administrators in managing their information systems to help them to efficiently deliver services to their customers.
Revenues came in at $1.03 billion in the third quarter of 2010, up 3.3% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $1.02 billion.
The company operates in two business segments: Financial Institution Services, and Payments and Industry Products.
Adjusted revenue (excluding output solutions postage reimbursements) came in at $978 million, up 3% year over year, primarily due to a 5% growth in the Payments segment and 2% growth in the Financial segment. The 3% internal growth in the second quarter is highest since the second quarter of 2008.
Financial Services generated $486 million of revenues in the quarter, up 2.3% from the year-ago quarter. The growth in the quarter was driven by expansion in Account Processing businesses, which was partially offset by the continued reductions in check processing volumes and softness in lending solutions businesses.
Payments and Industry Products generated $501 million of revenues in the quarter, up 5.7% from the year-ago quarter driven by growth in each major business. Fiserv continued to expand its consumer payment footprint by signing 124 electronic bill payment clients and 59 debit clients in the quarter. In the first nine months, Fiserv signed 374 electronic bill payment clients and 163 debit clients.
Bill payment transaction volume increased 8% in the quarter and year-to-date. Debit transaction volume increased 21% in the third quarter and is up 22% year to date, driven by a combination of a secular shift towards debit and new debit clients wins.
Operating margin (excluding mergers and severance costs and amortization of acquisition-related intangible assets) came in at 29.4%, up from 28.9% in the year-ago quarter.
Fiserv repurchased 1 million shares of its common stock in the quarter for $52 million and still had 1.9 million shares remaining under its existing repurchase authorization as on September 30, 2010.
As of September 30, 2010, Fiserv had a total debt of $3.7 billion, up from $3.4 billion at the end of the previous quarter. Fiserv completed a $750 million debt refinancing in September and used the proceeds to pay down $480 million of short-term loan and fund a tender to purchase $250 million of its outstanding 6% senior notes due in November 2012.
However, as the tender did not close by the quarter-end, the balance sheet does not reflect the same. Fiserv also replaced its revolving credit facility, which was set to expire in early 2011 with a new four-year, $1 billion credit facility. Fiserv ended the quarter with cash and equivalents of $743 million, up from $338 million at the end of the previous quarter.
The market continues to be choppy. Going forward, Fiserv reiterated its guidance for 2010. It expects an internal revenue growth in the range of 1% –3% in 2010 driven by strong growth in the Payment segment. Earnings per share are projected between $3.96 and $4.07, a growth of 8% to 11% compared to $3.66 in 2009.
The results did not have much of an impact on investors. Shares of Fiserv are down $1 (-1.8%) in Wednesday morning trading.
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