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Fiserv Reports Second Quarter 2018 Results

July 31, 2018

BROOKFIELD, Wis.--(BUSINESS WIRE)--Jul 31, 2018--Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions, today reported financial results for the second quarter of 2018.

Second Quarter 2018 GAAP Results

GAAP revenue for the company increased 2 percent to $1.42 billion in the second quarter of 2018 compared to the prior year period, with 7 percent growth in the Payments segment and 5 percent decline in the Financial segment. For the first six months of 2018, GAAP revenue increased 3 percent to $2.86 billion compared to the prior year period, with 7 percent growth in the Payments segment and 3 percent decline in the Financial segment. The sale of a 55 percent interest of the company’s Lending Solutions business (the “Lending Transaction”) in the first quarter of 2018 resulted in a decline of GAAP revenue in 2018 for the Financial segment.

GAAP earnings per share was $0.60 in the second quarter and $1.61 in the first six months of 2018, increasing 18 percent and 49 percent, respectively, compared to the prior year periods. GAAP earnings per share in the first six months of 2018 included a gain of $0.36 per share on the Lending Transaction. The company completed a two-for-one stock split in the first quarter of 2018. Accordingly, all share data and per share amounts are presented on a split-adjusted basis.

GAAP operating margin was 25.2 percent in the second quarter and 33.8 percent in the first six months of 2018, respectively, compared to 26.8 percent in the second quarter and 26.5 percent in the first six months of 2017, respectively. GAAP operating margin in the first six months of 2018 included a $229 million gain resulting from the Lending Transaction.

Net cash provided by operating activities was $613 million in the first six months of 2018, which did not reflect $419 million of sale proceeds from the Lending Transaction. Net cash provided by operating activities was $691 million in the first six months of 2017, which included cash distributions of $31 million from StoneRiver Group, L.P. (“StoneRiver”), a joint venture in which the company owns a 49 percent interest.

“Our second quarter results were excellent and have us well-positioned to achieve our full-year objectives,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “We continue to focus on service quality, innovation and integration which is reflected in both our current results and sales pipeline entering the second half of the year.”

Second Quarter 2018 Non-GAAP Results and Additional Information

Adjusted revenue increased 2 percent to $1.35 billion in the second quarter and 3 percent to $2.72 billion in the first six months of 2018 compared to the prior year periods. Internal revenue growth for the company was 6 percent in the second quarter, with 5 percent growth in the Payments segment and 7 percent growth in the Financial segment. Internal revenue growth for the company was 5 percent in the first six months of 2018, with 5 percent growth in the Payments segment and 4 percent growth in the Financial segment. Adjusted earnings per share increased 32 percent to $0.75 in the second quarter and 27 percent to $1.51 in the first six months of 2018 compared to the prior year periods. Adjusted operating margin increased 40 basis points to 32.4 percent in the second quarter and increased 20 basis points to 32.5 percent in the first six months of 2018 compared to the prior year periods. Free cash flow was $491 million in the first six months of 2018 compared to $555 million in the prior year period. Sales results were up 6 percent in the quarter and 9 percent in the first six months of 2018 compared to the prior year periods. The company repurchased 5.4 million and 11.0 million shares of common stock for $390 million and $789 million in the second quarter and first half of 2018, respectively. The company had 10.4 million remaining shares authorized for repurchase as of June 30, 2018.

Outlook for 2018

Fiserv continues to expect internal revenue growth of at least 4.5 percent and adjusted earnings per share in a split-adjusted range of $3.02 to $3.15, which represents growth of 22 to 27 percent over 2017 as adjusted for the Lending Transaction.

“Our first-half performance has set us up for strong full-year results and additional momentum as we look into 2019,” said Yabuki.

Earnings Conference Call

The company will discuss its second quarter 2018 results on a conference call and webcast at 4 p.m. CT on Tuesday, July 31, 2018. To register for the event, go to Fiserv.com and click on the Q2 Earnings webcast link. Supplemental materials will be available in the “Investor Relations” section of the website.

About Fiserv

Fiserv, Inc. (NASDAQ: FISV) enables clients worldwide to create and deliver financial services experiences in step with the way people live and work today. For more than 30 years, Fiserv has been a trusted leader in financial services technology, helping clients achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and insights and optimization. Fiserv is a member of the FORTUNE ® 500 and has been named among the FORTUNE Magazine World’s Most Admired Companies ® for five consecutive years, recognized for strength of business model and innovation leadership. For more information, visit Fiserv.com.

Use of Non-GAAP Financial Measures

In this earnings release, the company supplements its reporting of information determined in accordance with GAAP, such as revenue, operating income, operating margin, income from continuing operations, net income, earnings per share from continuing operations, earnings per share and net cash provided by operating activities, with “adjusted revenue,” “internal revenue growth,” “adjusted operating income,” “adjusted operating margin,” “adjusted net income,” “adjusted earnings per share,” “adjusted earnings per share, as adjusted for the Lending Transaction,” and “free cash flow.” Management believes that adjustments for certain non-cash or other items and the exclusion of certain pass-through revenue and expenses should enhance shareholders’ ability to evaluate the company’s performance, as such measures provide additional insights into the factors and trends affecting its business. Therefore, the company excludes these items from GAAP revenue, operating income, operating margin, income from continuing operations, net income, earnings per share from continuing operations, earnings per share and net cash provided by operating activities to calculate these non-GAAP measures. The corresponding reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are included in this earnings 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 11 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 costs, merger and integration costs, certain costs associated with the achievement of the company’s operational effectiveness objectives, gains or losses from dispositions and unconsolidated affiliates, and certain discrete tax benefits. The company excludes these items to more clearly focus on the factors management believes are pertinent to its operations, and management uses this information to make operating decisions, including the allocation of resources to the company’s various businesses.

Internal revenue growth and free cash flow are non-GAAP financial measures and are described on page 10. Management believes internal revenue growth is useful because it presents revenue growth excluding acquisitions, dispositions and the impact of postage reimbursements in the company’s Output Solutions business, and including deferred revenue purchase accounting adjustments. 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 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, income from continuing operations, net income, earnings per share from continuing operations, earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP.

Forward-Looking Statements

This press 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 and adjusted earnings per share growth. 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 may affect the company’s results include, among others: pricing and other actions by competitors; the capacity of the company’s technology to keep pace with a rapidly evolving marketplace; the impact of a security breach or operational failure on the company’s business; the effect of legislative and regulatory actions in the United States and internationally; the company’s ability to comply with government regulations; 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 impact of market and economic conditions on the financial services industry; and other factors included in the company’s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2017, and in other documents that the company files with the SEC. 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 press release.

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