Earnings

Fiserv Tops Street in Q4 As Payments Segment Grows

Fiserv beat analyst expectations for the fourth quarter of last year, boosted in part by traction in its payments segment, as reported Wednesday (Feb. 7th).

Revenues (measured on a GAAP basis) overall were up seven percent year over year to $1.54 billion, while internal revenues grew by six percent to $1.42 billion.  That GAAP number topped the Street at $10 million.  Earnings per share came in at $1.41, topping the Street by three pennies.

Internal revenue has been defined by the company as sales that exclude the impacts of acquired revenues and dispositions, as noted in supplemental materials provided with the fourth quarter earnings release.

By segment, payments revenue grew by seven percent and on an adjusted basis was $792 million, while financial revenues grew by five percent and on an adjusted basis was $668 million. Operating margins for those segments grew by a respective 330 basis points and 140 basis points to (respectively) 36.4 percent, and 35.1 percent.

During the conference call with analysts, CEO Jeffrey Yabuki said that the internal revenue growth for the company, at six percent, was the highest level in several years.

Initiatives in 2018 will include, in part, a focus on digital payments, said the CEO. He stated that DNA — Fiserv’s account processing platform for banks, which was acquired in 2013 — had a strong year, with signings growing more than 30 percent, doubling the number of institutions signed with more than $1 billion in assets, and signing, for example, Sallie Mae in the quarter.  As further proof positive of digital momentum, Architect sales grew by 300 percent over 2016’s levels.

The company grew its Mobiliti for ASP subscribers 24 percent to 6.8 million for the year.  Mobiliti Business also grew, with subscribers here up 75 percent for the year.  Growth is expected to continue, said the executive, as mobile becomes the preferred conduit for depository activity for financial institutions and their customers.

Fiserv also saw growth in adoption of its turnkey Zelle solutions, calling out SunTrust and Citizen’s Bank as customers here and there saw a 90 percent increase, sequentially, in Zelle transactions.

In the question and answer session with analysts, when asked if there were other assets such as the lending business that might be ripe for disposition, management said they would continue to look at the business mix and whether it fits well with strategy going forward.

Said the CEO, “as we sit here today I would not say that we have an immediate list of [businesses] that we would look to divest, but we will continue to monitor that over time.” As was reported Wednesday, the company said it is selling a majority stake in Fiserv’s lending unit Warburg Pincus, a private equity firm, for $395 million.

The CEO said that banks are putting more money into payments modernization, marked in part by more investments by credit unions.

The company said it looks for internal revenue growth of 4.5 percent and above for the year, with adjusted earnings to grow 22 percent to 27 percent.

“We expect accelerated internal revenue growth in 2018 resulting primarily from continuing growth in high-value solutions,” said Yabuki.

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