Fiserv (NASDAQ: FISV), a leading provider of technology solutions, today reported financial results for the third quarter of 2007.
Total revenues increased 5 percent to $1.17 billion for the third quarter compared with $1.12 billion in 2006. For the first nine months of 2007, total revenues were up 9 percent to $3.54 billion compared with $3.24 billion in 2006.
Total earnings per share for the third quarter were $0.73. Earnings per share from continuing operations for the third quarter were $0.72, an increase of 20 percent compared with $0.60 in 2006. Total earnings per share for the first nine months of 2007 were $2.02, with earnings per share from continuing operations of $1.97. Adjusted earnings per share from continuing operations were $2.03 in the first nine months of 2007 compared with $1.80 in 2006.
Overall adjusted operating margin increased 240 basis points to 24.6 percent for the quarter, and was 23.5 percent for the first nine months of 2007, an increase of 90 basis points compared with the prior-year period. Financial segment adjusted operating margin increased 300 basis points to 26.8 percent for the quarter, and was 25.7 percent for the first nine months of 2007, an increase of 260 basis points compared with the prior-year period.
The adjusted internal revenue growth rate for the quarter in the financial segment was 3 percent. This growth rate was negatively impacted in the quarter by continuing pressures in the U.S. mortgage markets which affected the company's mortgage-related processing businesses.
"Financial segment performance and proactive management led to strong earnings growth," said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. "While third quarter internal revenue growth was negatively impacted by market conditions, we are pleased with the continuing strong results of our core processing and payments products."
Other business and operating highlights
- Operating cash flow from continuing operations was $459 million for the first nine months of 2007. Year-to-date free cash flow from continuing operations was up 16 percent to $340 million compared with 2006;
- Performance in the Investment Support Services segment, which is reported as discontinued operations, contributed $0.03 of earnings per share in the quarter before $6.9 million of transaction-related expenses. The company announced the sale of the Fiserv ISS businesses in two separate transactions in May 2007. One transaction is expected to close by the end of 2007 and the other in early 2008;
- Fiserv EFT completed 59 new sales in the quarter with 97 percent made within the Fiserv core processing client base;
- The company signed 82 new clients in the quarter for its electronic bill payment services and now has nearly 640 electronic bill pay clients;
- In the quarter, the company added 272 clients for its branch capture product and 172 clients for its merchant capture product. Fiserv now has more than 970 branch capture clients and more than 870 merchant capture clients;
- Desert Schools Federal Credit Union, a $3.4 billion financial institution based in Arizona, signed a core processing agreement with Fiserv CBS Worldwide during the quarter. The agreement included a number of ancillary services, including NetEconomy risk management and WireXchange;
- In the quarter, Urbana, Ill.-based First Busey Corporation, a $4 billion bank holding company, selected Fiserv to provide core account processing through Fiserv ITI Outsourcing as well as budgeting, planning and financial accounting tools through IPS-Sendero, a unit of Fiserv.
Acquisitions
On Aug. 2, 2007, the company announced a $4.4 billion all-cash acquisition of CheckFree Corporation, a leading provider of financial e-commerce services and products. On Oct. 15, the company received early termination of the waiting period under the Hart-Scott-Rodino antitrust regulations. On Oct. 23, CheckFree stockholders voted to approve the transaction. This transaction is expected to close in the fourth quarter.
On Sept. 21, 2007, Fiserv announced the acquisition of WorkingRx in order to strengthen its workers' compensation pharmacy transaction processing business in its insurance segment. WorkingRx helps pharmacies nationwide reduce the administrative time spent on workers' compensation claims processing.
On Oct. 15, 2007, Fiserv announced its acquisition of BancIntelligence, the only online advisory solution for financial institutions that provides automated analysis and web-based strategy development to more than 500 clients located in 49 states.
"We have made significant progress in enhancing our product and services offerings with a goal of providing the greatest value to clients," said Yabuki. "We will continue to shape our business model to strengthen our leadership position in serving the financial services industry."
Outlook for 2007
As previously indicated at the company's investor day on Oct. 2, 2007, the company's full-year 2007 continuing operations adjusted earnings per share guidance is anticipated to be at the low end of its previously communicated range of $2.74 to $2.82 per share, due primarily to the sharp downturn in the U.S. mortgage market, which negatively impacted the company's lending businesses. Weak performance in the company's insurance segment in the second half of the year also impacted earnings per share guidance. The full-year guidance excludes the second quarter charge of $16.9 million ($0.06 per share) in the insurance segment.
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