Fiserv Q3 Posts Low Single Digit Payments Growth

Financial services technology firm Fiserv reported results for the third quarter that showed top line growth even as some revenue streams were pressured. Earnings missed consensus estimates.

The company said that earnings were $1.27 on a adjusted basis, below the projected earnings of $1.31. The top line came in at $1.40 billion, gaining from the third quarter of 2016, where revenues were $1.38 billion. The latest tally missed estimates by about $50 million.

Drilling down into business results by segment, payments were up 3 percent year over year, while the financial segment slipped by 1 percent. In a statement that accompanied the release, CEO Jeffrey Yabuki said that the earnings growth came despite “pressure from lower periodic revenue in the quarter” and tough comparison for EMV card production revenue growth as measured year over year.

During the conference call with analysts, management stated that the periodic revenue decline (down $16 million year over year) was tied in part to contract termination fees, and there remained reasonable conviction that revenues in this segment would rebound over the near term.

The payments growth helped boost internal growth for the firm at 2 percent for the quarter. In addition, mobility ASP subscribers were up 20 percent year over year to 6.4 million. Yabuki also spotlighted Zelle as an important catalyst for the company, noting additional signings from the likes of BMO Harris Bank.

Debit transactions were up mid-single digits and P2P transactions were up 20 percent, said CFO Bob Hau.

During the question and answer session with analysts, Yabuki said that “based on what we see in conversations with the market on a daily basis … banks will continue to focus their energy on all things digital in terms of whether it’s moving over to technology such as Zelle … we are seeing a lot of demand for our Architect and Commercial Center solutions and so that is a critical element of where spend is going. You also have a lot of focus in areas of risk, cyber and in just ensuring that back offices and the back office infrastructure can keep up with the front office demands of rising expectations.”

In terms of guidance, Fiserv is looking for internal revenue growth of 4 percent for the year, and earnings should grow at multiples of that, at 14 percent to 16 percent on an adjusted basis. Management pointed to acquisitive activity in the quarter as boosting operations and offerings, including the deals to acquire PCLender, focused on mortgage software; Dovetail Group, which provides liquidity management technology and Monitise, which offers digital banking solutions.