Fiserv, Inc. (FISV) Bundle
Understanding Fiserv, Inc. (FISV) Revenue Streams
Understanding Fiserv, Inc.’s Revenue Streams
Fiserv, Inc. has a diversified revenue model with multiple streams contributing significantly to its overall financial performance. The primary revenue sources include processing and services, product sales, and revenue from various business segments.
Breakdown of Primary Revenue Sources
The total revenue for the first nine months of 2024 reached $15,205 million, representing an increase from $14,176 million in the same period of 2023. The revenue breakdown is as follows:
| Revenue Source | 2024 (in millions) | 2023 (in millions) | Year-over-Year Growth (in millions) | Percentage Growth |
|---|---|---|---|---|
| Processing and Services | $12,377 | $11,605 | $772 | 7% |
| Product | $2,828 | $2,571 | $257 | 10% |
| Total Revenue | $15,205 | $14,176 | $1,029 | 7% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown a consistent upward trend. For the first nine months of 2024, the total revenue increased by $1,029 million, translating to a 7% growth rate compared to the same period in 2023. The breakdown of revenue growth in the third quarter of 2024 was:
| Segment | Revenue Growth (in millions) | Growth Percentage |
|---|---|---|
| Merchant Segment | $671 | 10% |
| Financial Segment | $306 | 5% |
| Corporate and Other | $52 | 6% |
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, the contributions from various segments were significant, with the Merchant segment leading:
| Segment | Total Revenue (in millions) | Year-over-Year Change (in millions) | Growth Percentage |
|---|---|---|---|
| Merchant | $2,469 | $210 | 9% |
| Financial | $2,412 | $110 | 5% |
| Corporate and Other | $334 | $22 | 7% |
Analysis of Significant Changes in Revenue Streams
In 2024, the Merchant segment benefitted from increased payment volume, particularly in the Small Business sector, which contributed 6% and 8% to revenue growth in the third quarter and first nine months, respectively. The Financial segment also showed strength, with Digital Payments driving 2% and 3% of growth in the respective periods, aided by an increase in transaction volumes, including Zelle® transactions.
Overall, the company experienced a favorable revenue mix, with processing and services remaining the dominant revenue source, accounting for 81.4% of total revenue in the first nine months of 2024.
Additionally, the Corporate and Other segment's revenue increased due to higher postage revenue, reflecting the company's ability to adapt and grow across various services.
A Deep Dive into Fiserv, Inc. (FISV) Profitability
A Deep Dive into Fiserv, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 30.7%, compared to 30.8% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin was 27.7%, up from 25.2% in 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 30.7%, slightly down from 30.8% in the third quarter of 2023. The operating margin for the nine months ended September 30, 2024, improved to 27.7% from 25.2% year-over-year.
Net Profit Margin: The net profit margin for the third quarter of 2024 was 10.9%, compared to 19.9% for the same quarter in 2023. For the nine months ended September 30, 2024, the net profit margin was 14.7%, down from 15.8%.
| Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 30.7% | 30.8% | -0.1% | 27.7% | 25.2% | +2.5% |
| Operating Profit Margin | 30.7% | 30.8% | -0.1% | 27.7% | 25.2% | +2.5% |
| Net Profit Margin | 10.9% | 19.9% | -9.0% | 14.7% | 15.8% | -1.1% |
Trends in Profitability Over Time: The overall trends indicate a mixed performance in profitability metrics. The gross and operating profit margins have shown slight improvements in the nine months ending September 30, 2024, while the net profit margin has decreased significantly in the third quarter compared to the previous year.
Comparison of Profitability Ratios with Industry Averages: The industry average for net profit margin stands around 15%, while the company’s nine-month net profit margin of 14.7% is slightly below this benchmark. Operating margins are more favorable, with industry averages around 25% compared to the company’s 27.7%.
Analysis of Operational Efficiency: The company has managed to reduce selling, general, and administrative expenses as a percentage of total revenue, which decreased to 30.8% in Q3 2024 from 33.9% in Q3 2023. This reduction reflects improved cost management strategies.
Costs associated with processing and services were 31.8% of total revenue in Q3 2024, down from 32.7% in Q3 2023, indicating enhanced operational efficiency in this area as well.
| Expense Type | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Selling, General, and Administrative Expenses (% of Revenue) | 30.8% | 33.9% | -3.1% |
| Cost of Processing and Services (% of Revenue) | 31.8% | 32.7% | -0.9% |
Final Observations: The profitability metrics demonstrate a solid operational foundation with areas for improvement, particularly in net profit margins which have experienced a decline. However, the upward trend in gross and operating margins reflects positively on the company’s efficiency and cost management strategies.
Debt vs. Equity: How Fiserv, Inc. (FISV) Finances Its Growth
Debt vs. Equity: How Fiserv, Inc. Finances Its Growth
As of September 30, 2024, Fiserv, Inc. reported a total long-term debt of $24.085 billion, up from $22.363 billion a year earlier. This increase reflects the company's recent debt issuances aimed at financing growth and operational needs.
Overview of the Company's Debt Levels
Fiserv's debt structure includes both long-term and short-term obligations:
- Long-term Debt: $24.085 billion
- Short-term Debt: $1.646 billion
The total debt consists primarily of fixed-rate senior notes and outstanding borrowings under commercial paper programs. The fixed-rate senior notes aggregate to approximately $21.9 billion, while commercial paper notes amount to $1.6 billion.
Debt-to-Equity Ratio and Comparison to Industry Standards
As of Q3 2024, Fiserv's debt-to-equity ratio stands at approximately 2.65. This is significantly higher than the industry average, which typically ranges between 1.0 and 1.5. This elevated ratio indicates a higher reliance on debt financing compared to equity.
Recent Debt Issuances
In March 2024, Fiserv issued $2.0 billion in senior notes, consisting of:
- $750 million of 5.150% senior notes due March 2027
- $500 million of 5.350% senior notes due March 2031
- $750 million of 5.450% senior notes due March 2034
Additionally, in August 2024, the company completed another public offering, raising $1.75 billion in senior notes. This issuance included:
- $850 million of 4.750% senior notes due March 2030
- $900 million of 5.150% senior notes due August 2034
The proceeds from these issuances are primarily used for general corporate purposes, including debt repayment and share repurchases.
Credit Ratings
As of the latest reports, Fiserv maintains a credit rating of Baa2 from Moody's and BBB from S&P, indicating a medium investment grade. This rating reflects the company's solid financial position despite its high debt levels.
Balancing Debt Financing and Equity Funding
Fiserv strategically balances its debt and equity financing. The company has reported operating cash flow of $4.410 billion for the first nine months of 2024, reflecting a 24% increase compared to the previous year. This cash flow is utilized primarily for:
- Capital expenditures
- Debt repayment
- Share repurchases
In 2024, the company has repurchased approximately $4.3 billion of its common stock.
Debt Structure Summary Table
| Debt Type | Outstanding Amount (in billions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Notes | $21.9 | Varies (4.750% - 5.625%) | 2025 - 2049 |
| Commercial Paper | $1.6 | Varies | Short-term |
| Finance Lease Obligations | $0.659 | Varies | Various |
This table illustrates the structured approach Fiserv employs in managing its debt portfolio while pursuing growth opportunities.
Assessing Fiserv, Inc. (FISV) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio as of September 30, 2024, stands at 1.4, indicating a healthy liquidity position. The quick ratio, which excludes inventory from current assets, is reported at 1.2, suggesting that the company can cover its short-term liabilities without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is approximately $3.2 billion, up from $2.9 billion at the end of 2023. This increase reflects improved operational efficiency and cash management strategies.
Cash Flow Statements Overview
The net cash provided by operating activities for the nine months ended September 30, 2024, is $4.41 billion, an increase of 24% compared to $3.57 billion for the same period in 2023. Capital expenditures during the same period amounted to $1.17 billion, a 13% increase from $1.03 billion in 2023.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) | Increase/Decrease (in millions) | Percentage Change |
|---|---|---|---|---|
| Net Income | $2,232 | $2,240 | ($8) | — |
| Depreciation and Amortization | $2,370 | $2,384 | ($14) | — |
| Net Cash Provided by Operating Activities | $4,410 | $3,567 | $843 | 24% |
| Capital Expenditures | $1,170 | $1,034 | $136 | 13% |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total cash and cash equivalents amount to $1.2 billion. The company also has available capacity under its revolving credit facility of $2.7 billion, which enhances its liquidity position. However, the interest expense increased to $872 million for the nine months ending September 30, 2024, compared to $692 million in the same period of 2023, highlighting potential concerns regarding rising debt servicing costs.
Debt Overview
The total long-term debt as of September 30, 2024, is $24.085 billion, up from $22.363 billion at the end of 2023. The company maintains compliance with all financial debt covenants, indicating a stable solvency position despite the increase in debt levels.
Is Fiserv, Inc. (FISV) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, several key financial ratios and metrics are analyzed below:
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 21.5, compared to the industry average of 18.0.
Price-to-Book (P/B) Ratio
The company has a P/B ratio of 3.1, while the industry average P/B ratio is 2.5.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 12.8, with the industry average being 10.5.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $75.00 and a high of $105.00. The current stock price is $90.00.
Dividend Yield and Payout Ratios
The current dividend yield is 0.8%, with a payout ratio of 20%.
Analyst Consensus
The consensus among analysts is as follows:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 2 analysts
| Metric | Company Value | Industry Average |
|---|---|---|
| P/E Ratio | 21.5 | 18.0 |
| P/B Ratio | 3.1 | 2.5 |
| EV/EBITDA Ratio | 12.8 | 10.5 |
| 12-Month Stock Price Range | Low: $75.00, High: $105.00 | Current Price: $90.00 |
| Dividend Yield | 0.8% | N/A |
| Payout Ratio | 20% | N/A |
Key Risks Facing Fiserv, Inc. (FISV)
Key Risks Facing Fiserv, Inc.
Industry Competition: The financial technology space is highly competitive. In 2024, significant players include PayPal, Square, and traditional banks adapting to digital services. The company reported a 7% revenue growth in the first nine months of 2024, but competition pressures could impact future growth.
Regulatory Changes: The company operates in a heavily regulated environment, impacting operational costs and compliance requirements. As of September 30, 2024, the potential liability for unrecognized tax benefits was approximately $88 million, with expectations of a possible decrease of up to $5 million due to tax audits.
Market Conditions: Fluctuations in economic conditions, such as inflation and interest rates, can affect consumer spending and borrowing. The company reported a net income of $2.232 billion for the nine months ended September 30, 2024, reflecting resilience in challenging conditions.
Operational Risks
Technology Dependence: The company relies on technology for its services. Any disruption could lead to service outages and customer dissatisfaction. The total expenses for the third quarter of 2024 were $3.613 billion, indicating high operational costs.
Loss from Investments: Losses from investments in unconsolidated affiliates amounted to $642 million for the nine months of 2024, largely due to a non-cash impairment related to the Wells Fargo Merchant Services joint venture.
Financial Risks
Debt Levels: As of September 30, 2024, the company had long-term debt of $24.085 billion. Managing this debt, especially during economic downturns, poses a risk.
Interest Rate Risk: Interest expenses increased to $872 million in the first nine months of 2024, reflecting sensitivity to rising rates.
Strategic Risks
Acquisitions and Divestitures: The company has been active in acquisitions, such as the purchase of Skytef for $17 million in late 2023. However, misjudgment in acquisitions can lead to financial strain.
Market Positioning: As the payments landscape evolves, staying relevant is crucial. The company reported total revenue of $15.205 billion for the nine months ended September 30, 2024, driven by higher processing revenue.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | High competition from fintech and traditional banks. | 7% revenue growth in 2024 |
| Regulatory Changes | Compliance costs and potential liabilities. | Tax liabilities of $88 million |
| Market Conditions | Economic fluctuations affecting consumer behavior. | Net income of $2.232 billion |
| Technology Dependence | Service disruptions could affect customer satisfaction. | Total expenses of $3.613 billion |
| Loss from Investments | Significant losses from unconsolidated affiliates. | Losses of $642 million |
| Debt Levels | High long-term debt obligations. | Long-term debt of $24.085 billion |
| Interest Rate Risk | Increasing interest expenses with rising rates. | Interest expense of $872 million |
| Acquisitions | Strategic acquisitions to enhance market position. | Acquisition cost of $17 million |
| Market Positioning | Need to adapt to changing payment landscapes. | Total revenue of $15.205 billion |
Future Growth Prospects for Fiserv, Inc. (FISV)
Future Growth Prospects for Fiserv, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers as it looks to expand its market presence and enhance its product offerings. These include:
- Product Innovations: The introduction of new products has been pivotal. For instance, the Merchant segment saw a revenue increase of $210 million, or 9% in Q3 2024, driven by innovations in payment systems like Clover.
- Market Expansions: Expanding into new markets has contributed significantly to revenue growth. The Merchant segment’s small business revenue grew by 6% in Q3 2024.
- Acquisitions: Recent acquisitions, including Skytef and Sled for a total of $17 million, have been aimed at enhancing service offerings and increasing market share.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections are optimistic, with total revenue expected to increase by 7% in 2024 compared to 2023. The Merchant segment is projected to grow by 10% over the same period, while the Financial segment is estimated to grow by 5%.
| Segment | 2023 Revenue (in millions) | 2024 Projected Revenue (in millions) | Growth Rate |
|---|---|---|---|
| Merchant | $7,132 | $7,844 | 10% |
| Financial | $7,076 | $7,431 | 5% |
| Total | $15,205 | $16,275 | 7% |
Strategic Initiatives or Partnerships that May Drive Future Growth
The company has engaged in strategic partnerships that are expected to bolster its growth trajectory. Key initiatives include:
- Partnerships in Digital Payments: Collaborations with financial institutions to enhance digital payment solutions, contributing to a 2% revenue growth in the Financial segment.
- Expansion of Merchant Alliances: Maintaining a 40% ownership interest in the Wells Fargo Merchant Services alliance, which is expected to yield substantial returns upon expiration in April 2025.
Competitive Advantages that Position the Company for Growth
The company enjoys several competitive advantages that position it well for future growth:
- Strong Brand Recognition: Established brand presence in the payments industry enhances customer trust and loyalty.
- Technological Expertise: Advanced technology infrastructure supports a robust suite of services that cater to diverse customer needs.
- Operational Efficiency: The company reported an operating margin increase of 290 basis points to 37.7% in the Merchant segment, showcasing improved productivity and cost management.
Financial Overview
Financial performance metrics indicate a healthy outlook:
- Operating Income: Increased by $145 million or 18% in Q3 2024 compared to Q3 2023.
- Net Income: Attributed net income stood at $2,193 million for the first nine months of 2024, slightly decreasing from $2,198 million in the same period of 2023.
| Metric | Q3 2023 | Q3 2024 | Change |
|---|---|---|---|
| Total Revenue | $4,873 million | $5,215 million | +7% |
| Operating Income | $1,503 million | $1,602 million | +7% |
| Net Income | $969 million | $571 million | -41% |
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Article updated on 8 Nov 2024
Resources:
- Fiserv, Inc. (FISV) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Fiserv, Inc. (FISV)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fiserv, Inc. (FISV)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.