Fiserv (FI): A Payments Powerhouse Delivering Consistent Growth

Published on September 24, 2024 | Ticker: FI

Fiserv, Inc. (FI) is a leading global provider of payments and financial services technology solutions, serving clients around the globe, including merchants, banks, credit unions, other financial institutions, corporate and public sector clients. The company has a long history of innovation and excellence, delivering superior value to its clients through leading technology, targeted innovation, and operational excellence.

Business Overview

Fiserv operates in two reportable segments - the Merchant Solutions ("Merchant") segment and the Financial Solutions ("Financial") segment. The Merchant segment provides commerce-enabling products and services to companies of all sizes around the world, including merchant acquiring and digital commerce services, mobile payment services, security and fraud protection solutions, stored-value solutions, and pay-by-bank solutions. The Financial segment provides products and services to financial institution, corporate and public sector clients across the world, enabling the processing of customer loan and deposit accounts, digital payments and card transactions.

Financials

In 2023, Fiserv generated annual revenue of $19.09 billion, with processing and services revenue accounting for 82% of the total. The company's net income for the year was $3.07 billion, and it generated $5.30 billion in annual operating cash flow and $3.91 billion in annual free cash flow.

For the second quarter of 2024, Fiserv reported revenue of $5.11 billion, up 7.4% year-over-year. Net income for the quarter was $894.0 million, an increase of 31% compared to the same period in 2023. The company's operating cash flow for the quarter was $2.17 billion, and free cash flow was $1.0 billion.

Segment Performance

Fiserv's Merchant segment delivered strong performance in the second quarter, with organic revenue growth of 28% and adjusted operating margin expansion of 290 basis points to 36.6%. The company's Small Business business, which includes its Clover point-of-sale platform, saw 35% organic revenue growth and 28% Clover revenue growth. The Enterprise business also performed well, with 27% organic revenue growth.

In the Financial segment, Fiserv reported 8% organic revenue growth in the second quarter, with the Digital Payments and Issuing businesses contributing 8% and 9% organic growth, respectively. The Banking business grew 6% organically, excluding periodic revenue.

Geographic Footprint

Fiserv's geographic footprint is diverse, with the majority of its revenue generated domestically in the U.S. and Canada. However, the company has a significant international presence, with approximately 15% of its total revenue coming from the Europe, Middle East, and Africa (EMEA), Latin America (LATAM), and Asia Pacific (APAC) regions.

Liquidity

The company has a strong financial position, with a debt-to-adjusted EBITDA ratio of 2.8x as of June 30, 2023, well within its target leverage range. Fiserv has also been actively returning capital to shareholders, repurchasing $3.0 billion of its common stock in the first half of 2024.

Outlook

Looking ahead, Fiserv has raised its full-year 2024 adjusted earnings per share guidance to a range of $8.65 to $8.80, representing an acceleration in forecasted adjusted EPS growth to 15% to 17%. The company is maintaining its 2024 organic revenue growth outlook of 15% to 17%, with the expectation that the normalized organic growth, excluding the transitory benefit from excess inflation and interest in Argentina, will be 11% to 13%.

Conclusion

Fiserv's strong performance, diverse product portfolio, and global reach position the company well to continue delivering consistent growth and value to its clients and shareholders. The company's focus on innovation, operational excellence, and disciplined capital allocation have been key drivers of its success, and Fiserv is well-positioned to capitalize on the ongoing trends in the payments and financial services technology industry.

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