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Fiserv Inc. (FISV - Analyst Report) reported an adjusted income from continuing operations (excluding one-time items) of $168 million or $1.20 per share in the first quarter of 2012 compared to a net income of $151 million or $1.02 per share in the previous year quarter and $181 million or $1.27 per share in the fourth quarter of 2011. Earnings surpassed the Zacks Consensus Estimate of $1.15 per share comprehensively.
Adjusted revenues (excluding output solutions postage reimbursements) came to a record $1.034 billion, rising 5.3% year over year but falling 4.3% sequentially. Revenue growth across both the major segments was the primary cause for the annual rise in adjusted revenues for the quarter. This, however, missed the Zacks Consensus Estimate of $1.1 billion.
The Payments and Industry Products segment reported adjusted revenues of $545 million, up 6.0% year over year but down 2.3% sequentially. The Wachovia bill payment de-conversion and Durbin effect were detrimental to revenue improvement during the quarter but strong sales across card services, output solutions and digital channels largely counteracted the damaging effect.
The Financial Institution Services segment revenues came in at $501 million, up 4.4% but down 7.2% sequentially, attributable to strength accruing from termination fees, Account Processing and Lending business sales which were partially offset by weakened item processing revenues as expected by management.
The Corporate and Other segment recorded a loss of $12 million, remaining flat year over year and reducing 14.3% sequentially.
Adjusted operating margin (excluding mergers, severance costs and amortization of acquisition-related intangible assets) in the quarter came to 28.7% versus 28.3% in the previous year quarter and 30.0% in the last quarter. The yearly rise was attributable to operational efficiencies achieved during the quarter.
The Payments and Industry Products’ adjusted operating margin was 29.5% compared to 30.3% in the year-ago quarter and 31.2% in the last quarter. Heavy investments incurred in Online Banking and mobile platforms ameliorated operating incomes during the quarter.
The Financial Institution Services segment’s operating margin came in at 30.2%, rising from 28.9% in the previous year quarter but falling from 33.1% in the previous quarter.
Fiserv reported an adjusted effective tax rate of 34.5%, in line with management’s expectations for the quarter.
Balance Sheet and Cash Flow
As of March 31, 2012, the company had cash and cash equivalents of $311 million, decreasing from $337 million at the end of the previous quarter. Also, net trade accounts receivable came in for $650 million, deteriorating from $666 million at the end of the previous quarter. Long-term debt remained somewhat consistent at $3.2 billion compared to the previous quarter.
Net cash provided by operating activities amounted to $236 million at the end of the first quarter of 2012 compared to $283 million in the previous year quarter. Capital expenditures incurred during the quarter were $58 million.
During the first quarter of 2012, Fiserv repurchased 3.7 million shares for $245 million. Now it has about 11 million shares remaining under its existing share repurchase authorization program to buy-back.
Fiserv looks quite favorable with regard to its advances towards achieving its 2012 targets and growth is expected to surmount heavily in the second-half of the year.
Management retains its expectations for the full year 2012, thereby projecting an annual adjusted revenue growth rate of 4% - 6% with adjusted EPS expectations of $5.04 - $5.20, representing a yearly growth of 10% - 14%.
Forecasts for adjusted operating margin to generate an increase of 50 basis points for 2012 along with a strong free cash flow generation rising 8% - 12% year over year were also reiterated. Effective tax rate is expected to remain flat compared to 2011 at 36%.