Well one of my favorite companies in the world reported this morning for the start of my earnings season and it was a great thing to wake up to. Fiserv bull is back!!! Let's get into the results.
| Fiserv Q2 Earnings:
- EPS $1.81 (Est. $1.79)
- Sales $4.76B
- Adj. Revenue $4.51B
- Raises FY23 Organic Revenue Growth Outlook To 9-11%
- Sees FY23 Adj. EPS $7.40-$7.50 (Est. $7.37)
GAAP revenue growth of 7% in the quarter and 8% year to date; GAAP EPS increased 20% in the quarter and 3% year to date; Organic revenue growth of 10% in the quarter and 11% year to date; Adjusted EPS increased 16% in the quarter and 14% year to date; Company raises 2023 organic revenue growth outlook to 9% to 11% and adjusted EPS outlook to $7.40 to $7.50.
I honestly expected to see another EPS and revenue raise given the strong results and commentary last quarter. So that is great to see.
GAAP revenue for the company increased 7% to $4.76 billion in the second quarter of 2023 compared to the prior year period, with 9% growth in the Acceptance segment, 8% growth in the Payments segment and 2% decline in the Fintech segment. GAAP revenue for the company increased 8% to $9.30 billion in the first six months of 2023 compared to the prior year period, with 10% growth in both the Acceptance and Payments segments, while revenue was flat in the Fintech segment.
GAAP earnings per share was $1.10 in the second quarter and $1.99 in the first six months of 2023, an increase of 20% and 3%, respectively, compared to the prior year periods. The first six months of 2022 included a $201 million pre-tax gain related to certain equity investment transactions. GAAP operating margin was 23.8% and 22.2% in the second quarter and first six months of 2023, respectively, compared to 19.3% and 19.9% in the second quarter and first six months of 2022, respectively. Net cash provided by operating activities was $2.01 billion in the first six months of 2023 compared to $1.81 billion in the prior year period.
Margin expansion going back to previous numbers just like we talked about @ifb_podcast
“We delivered our ninth consecutive quarter of double-digit organic revenue growth, as we sustained our momentum in merchant acceptance and expanded our digital payments proposition for financial institutions,” said Frank Bisignano, Chairman, President and Chief Executive Officer of Fiserv. “The strength and breadth of our products, clients, distribution and geographies continue to drive this standout performance.”
People ask me all the time and say I won't own a boring company like Fiserv especially with no dividend. While they do not pay a dividend (I expect in the future they might) they reinvest alot back into the business and this quarter they returned $1.0 billion to shareholders through share repurchase in the quarter, and $2.5 billion year to date. This isn't your boring company. Fiserv's buyback of shares puts them in the top 10 percent of publicly traded companies that have bought back shares in Q1 2023 as well probably in Q2. Here's the chart I am referring to:
The companies had the highest share buybacks of the past quarter (Q1, will try to update it for Q2 but this is still amazing to see for Fiserv):
Now for a couple of highlights from the quarter:
- Delivered ninth consecutive quarter of double-digit organic revenue growth
- Expanded acquiring relationship with Caixa to add over 13,000 agencies that enable bill payments equal to roughly 11% of Brazil’s card payment volume
- Forum, our first live client conference since merger, saw strong interest from financial institutions
- Completed a public offering of 800 million Euros of 8-year senior notes
- In July (just announced yesterday), completed the sale of the financial reconciliation business for proceeds of approximately $230 million
This was another excellent quarter from Fiserv just like Q1. I still can't believe people aren't talking about them, ohh well. Revenue growth, EPS growth, Margins growth, Free Cash flow very stable. Clover 23% revenue growth what a beast. $267 billion Clover GPV, up 15%. Growth in Zelle transitions up 44% and 29% growth in number of clients. Merchant Acceptance and Payments and Network Segment is on fire executing extremely well. I didn't see anything mentioned about Carat in the press or presentation but I am sure I will hear something about them on the call. Fintech Segment sluggish to basically flat but this isn't their bread and butter like the other two segments. Still had 10 core wins and modern core momentum continues with 4 DNA and 2 Finxact wins. Also had the Forum which hosted nearly 1,000 financial institutions that I mentioned up above that hopefully drives some type of growth in second half of year (it should given they raised guidance could even raise it again if we get something more from this segment. Margins were still up 130 bps in Q2 in this segment which is almost back to highs.
All in all great quarter. Updated revenue and eps guidance as expected. Margins expansion and free cash flow in a great position. I am very pleased with the quarter. Need to listen to the call later today to see what Frank had to say but I am sure he was pleased with the results and guidance for the business. 1 great company down this earnings season, 2 more to go. Bring on CVS!