Fiserv, Inc. (FI) is a leading global provider of payments and financial services technology solutions. The company's robust ecosystem of products and services spans both the merchant and financial institution landscapes, empowering clients with the tools and expertise to thrive in an increasingly digital world.
Business Overview
Fiserv was founded in 1984 as a provider of financial services technology, initially offering data processing and business automation services to financial institutions. Over the next two decades, the company expanded its product and service offerings through a series of strategic acquisitions, adding capabilities such as electronic bill payment, account processing, and internet banking.
The company's business is organized into two primary segments: Merchant Solutions and Financial Solutions. The Merchant Solutions segment provides commerce-enabling products and services to businesses of all sizes, including small businesses, enterprises, and financial institutions acting as merchant acquirers. The Financial Solutions segment, on the other hand, caters to financial institution, corporate, and public sector clients, enabling the processing of customer loan and deposit accounts, digital payments, and card transactions.
Fiserv has faced challenges over the years, including navigating regulatory changes in the financial services industry and adapting to evolving consumer preferences toward digital payments and mobile banking. In 2020, the company also dealt with the economic impacts of the COVID-19 pandemic, which disrupted merchant operations and transaction volumes. However, Fiserv has successfully integrated its operations and continued to innovate its suite of products and services.
Throughout its 40-year history, Fiserv has achieved several key milestones. The company was included in the Fortune 500 list for the first time in 2003 and has remained on the list ever since. More recently, Fiserv was named to the IDC FinTech Rankings, a list of the top global providers of financial technology, for two consecutive years in 2023 and 2024. These achievements underscore Fiserv's position as a leading player in the financial technology industry.
Financial Performance and Ratios Financials
Fiserv's financial performance has been consistently strong, with the company reporting solid revenue and earnings growth over the past several years. In fiscal year 2023, the company generated total revenue of $19.09 billion and net income of $3.07 billion, reflecting year-over-year increases of 7.6% and 21.8%, respectively.
In the most recent quarter (Q3 2024), Fiserv reported revenue of $5.21 billion, representing a 7% year-over-year increase. Net income for the quarter was $564 million. The revenue growth was driven by strong performance across both the Merchant and Financial segments. The Merchant segment saw 9% adjusted revenue growth, while the Financial segment grew 5% on an adjusted basis. Foreign currency was a 15 percentage point headwind in the quarter.
Geographically, the majority of Fiserv's revenue is generated domestically, with international markets (EMEA, LATAM, APAC) comprising around 15% of total revenue.
The company's financial ratios also demonstrate its financial stability and efficient operations. As of the latest reporting period, Fiserv's current ratio stood at 1.03, indicating a healthy ability to meet short-term obligations. The debt-to-equity ratio of 0.87 suggests a well-managed capital structure, and the return on equity of 10.7% reflects the company's profitability.
Liquidity
Fiserv's strong cash flow generation is another key strength, with operating cash flow and free cash flow of $5.16 billion and $3.77 billion, respectively, in fiscal year 2023. In Q3 2024, operating cash flow was $2.24 billion, while free cash flow reached $1.84 billion. This robust cash flow allows the company to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders through share repurchases and dividends.
As of Q3 2024, Fiserv had cash and cash equivalents of $1.20 billion. The company also maintains a $6 billion revolving credit facility, of which only $70 million was outstanding, providing ample liquidity for future operations and investments. The company's quick ratio stands at 0.99, further underlining its strong liquidity position.
Segmental Performance
Fiserv's two business segments have demonstrated impressive performance in recent quarters, showcasing the company's diversified revenue streams and ability to capitalize on evolving industry trends.
The Merchant Solutions segment has been a standout, with organic revenue growth of 29% year-to-date, driven by strong performance across its Small Business, Enterprise, and Processing business lines. The segment's adjusted operating margin also expanded by 330 basis points to 36.2% during this period, highlighting the scalability of Fiserv's merchant-focused offerings.
In the first nine months of 2024, the Merchant segment generated $7.13 billion in revenue, up 10% year-over-year. Operating income for the segment was $2.58 billion, with an operating margin of 36.2%. The strong performance was driven by growth in payment volume, productivity improvements, and the expansion of value-added services.
The Merchant segment provides a wide range of commerce-enabling products and services, including merchant acquiring and digital commerce services, mobile payment services, security and fraud protection solutions, stored-value solutions, and pay-by-bank solutions. The segment is divided into three main business lines: Small Business, Enterprise, and Processing.
In the Financial Solutions segment, organic revenue grew 6% year-to-date, with robust demand for the company's digital payments, issuing, and banking solutions. The segment's adjusted operating margin increased by 60 basis points to 45.8%, underscoring the high-value nature of Fiserv's financial technology products and services.
For the first nine months of 2024, the Financial segment generated $7.08 billion in revenue, up 5% year-over-year. Operating income for the segment was $3.24 billion, with an operating margin of 45.8%. The segment's growth was driven by increased transaction volume, including growth in Zelle person-to-person payments, as well as strong demand for issuing services across various verticals.
The Financial segment offers a comprehensive suite of products and services, including digital payments, issuing, and banking solutions. These encompass debit and credit card processing, prepaid card processing, bill payment, person-to-person payments, account-to-account transfers, and core banking services.
Fiserv also maintains a Corporate and Other segment, which supports the Merchant and Financial reportable segments. In the first nine months of 2024, this segment had an operating loss of $1.61 billion, which included a $570 million non-cash impairment charge related to Fiserv's equity method investment in the Wells Fargo Merchant Services joint venture.
Ongoing Initiatives and Future Outlook
Fiserv is at the forefront of several key industry trends, including the rapid digitalization of payments and financial services, the growing need for integrated, end-to-end solutions, and the increased focus on data-driven insights and artificial intelligence.
To capitalize on these opportunities, the company has been investing heavily in product innovation and strategic partnerships. Its recently launched SMB bundle, for example, integrates Fiserv's merchant and financial solutions to create a comprehensive platform for small and medium-sized businesses, addressing their evolving needs for streamlined operations and digital capabilities.
Additionally, Fiserv's collaborations with industry leaders like Walmart and DoorDash demonstrate its ability to deliver innovative, embedded finance solutions that drive value for clients and consumers alike. The company's ongoing efforts to modernize core banking systems, expand its international footprint, and leverage data and AI further position it as a trusted partner in the digital transformation of both the merchant and financial services landscapes.
Looking ahead, Fiserv's management has provided updated guidance for fiscal year 2024. The company has raised its organic revenue growth outlook from 15-17% to 16-17%. Additionally, Fiserv is increasing its adjusted margin expansion outlook from more than 135 basis points to at least 150 basis points.
Fiserv has also raised its full-year 2024 adjusted earnings per share (EPS) outlook to a range of $8.73 to $8.80, up from the prior range of $8.65 to $8.80. This represents an acceleration in forecasted adjusted EPS growth to 16% to 17%, up from the previous 15% to 17%. The company has updated its free cash flow guidance from about $4.7 billion to above $4.7 billion and expects the full-year 2024 adjusted effective tax rate to be slightly below 20%.
These revised projections reflect the company's confidence in its ability to execute on its strategic priorities and capitalize on the significant growth opportunities within its addressable markets.
Conclusion
Fiserv's comprehensive suite of payments and financial technology solutions, coupled with its strong market positioning and consistent financial performance, make it a compelling investment opportunity. The company's focus on innovation, strategic partnerships, and seamless integration across the merchant and financial ecosystems positions it well to navigate the rapidly evolving fintech landscape and drive sustainable growth in the years to come.
With its robust financial performance, strong liquidity position, and favorable industry trends, Fiserv is well-equipped to maintain its leadership in the payments and financial technology sector. The company's ability to consistently deliver value to its clients across both the Merchant and Financial segments, while simultaneously expanding its margins and growing its free cash flow, underscores its operational efficiency and strategic acumen.
As the global shift towards digital payments and embedded finance continues to accelerate, Fiserv's diverse portfolio of solutions and its commitment to innovation position it at the forefront of these transformative trends. The company's raised guidance for 2024 reflects not only its current strength but also its optimistic outlook for continued growth and value creation in the coming years.