Fiserv, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. The filing is an annual Form 10-K rather than a standalone Q4 filing. Fiserv is a global payments and financial technology provider serving merchants, financial institutions, corporate clients and public-sector customers through its Acceptance, Fintech and Payments segments.
Financial performance and operating metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $17.737 billion | $16.226 billion | Up 9% |
| Processing and services revenue | $14.460 billion | $13.307 billion | Up 9% |
| Product revenue | $3.277 billion | $2.919 billion | Up 12% |
| Operating income | $3.740 billion | $2.288 billion | Up 63% |
| Operating margin | 21.1% | 14.1% | Up 700 basis points |
| Net income attributable to Fiserv | $2.530 billion | $1.334 billion | Up 90% |
| Diluted earnings per share | $3.91 | $1.99 | Up 96% |
| Net cash provided by operating activities | $4.618 billion | $4.034 billion | Up 14% |
| Capital expenditures | $1.479 billion | $1.160 billion | Up 28% |
Processing and services represented 82% of total revenue, reflecting Fiserv’s recurring, account- and transaction-based business model. Approximately 14% of revenue was generated outside the United States. Foreign exchange reduced reported revenue growth by approximately 2%.
Segment results
| Segment | 2022 revenue | Revenue growth | 2022 operating margin |
|---|---|---|---|
| Acceptance | $7.292 billion | 13% | 31.8% |
| Fintech | $3.170 billion | 5% | 36.5% |
| Payments | $6.262 billion | 7% | 45.1% |
Acceptance growth was driven by merchant acquiring volumes, increased Clover active merchants and value-added services. Fintech benefited from higher processing revenue and license and termination fees. Payments growth was led by debit processing, Output Solutions and credit processing.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $902 million at December 31, 2022; $614 million was classified as unavailable due primarily to joint venture, foreign exchange-control or regulatory-capital restrictions.
- Total debt was approximately $21.4 billion, including $16.8 billion of fixed-rate senior notes and $4.0 billion of variable-rate debt.
- Variable-rate borrowings included $3.5 billion of commercial paper, $200 million of term loans, $35 million drawn on the revolving facility and $198 million of foreign lines of credit.
- The company had a $6.0 billion revolving credit facility maturing in June 2027 and reported $870 million of available capacity after designated commitments and borrowings.
- A 1% increase in variable interest rates would increase annual interest expense by approximately $40 million based on year-end balances.
- Fiserv repurchased $2.5 billion of common stock in 2022 and had approximately 16.9 million shares remaining under its then-existing authorization at year-end. The board authorized an additional 75 million shares on February 22, 2023.
- Fiserv has never paid common-stock dividends and does not anticipate paying dividends in the foreseeable future.
Material changes versus 2021
- Revenue increased 9%, while operating income increased 63%, primarily due to revenue growth, operating leverage and lower acquisition and integration costs.
- Operating margin expansion included approximately 390 basis points from lower acquisition and integration expenses and approximately 90 basis points from lower amortization of acquisition-related intangible assets.
- Severance costs increased to $187 million from $95 million and partially offset operating improvements.
- Fiserv recorded a $54 million net pretax gain on business and asset sales, including a $137 million gain from merchant contracts and a $44 million gain from the sale of Fiserv Costa Rica and Systems Integration Services, partly offset by a $127 million loss on the sale of Korea operations.
- Interest expense increased 6% to $733 million as interest rates rose.
- The effective tax rate declined to 18.9% from 21.8%; 2021 included $134 million of tax expense from foreign tax-rate changes.
- Fiserv acquired Finxact and several Acceptance businesses for aggregate 2022 consideration of approximately $994 million. Capital expenditures increased to $1.479 billion.
- The company repaid a $485 million receivables securitized loan, redeemed $700 million of senior notes due in 2022 and funded portions of acquisitions and debt activity through commercial paper.
Outlook, risks and unusual items
Management emphasizes long-term growth through integrated payments and financial technology solutions, digital channels, Clover and Carat expansion, innovation, operational efficiency, disciplined acquisitions, debt repayment and share repurchases. The filing does not provide a specific quantitative 2023 revenue or earnings forecast.
- Goodwill totaled $36.811 billion, and goodwill plus intangible assets represented approximately 59% of total assets. No goodwill impairment was recorded, but four reporting units with aggregate goodwill of $10.9 billion had only 7% to 18% fair-value cushion over carrying value.
- Fiserv guarantees debt of lending joint ventures. Guaranteed debt totaled approximately $437 million at year-end, with $40 million recorded for non-contingent obligations and $21 million for estimated credit losses. No payments had been required under the guarantees.
- Litigation accruals totaled $21 million, with an estimated possible exposure beyond recorded accruals ranging from zero to approximately $60 million. Management does not expect pending matters to materially affect the consolidated financial statements.
- Key risks include cybersecurity and operational failures, payment fraud and chargebacks, dependence on third-party networks and vendors, competitive pressure, contract renewals, regulatory and privacy requirements, economic recession, inflation, rising interest rates, foreign exchange, geopolitical developments and supply-chain constraints.
- Merchant credit-loss expense increased to $62 million from $41 million; available merchant collateral declined to $1.5 billion from $2.2 billion.
- Management began actions in early 2023 to terminate certain U.S. and U.K. pension plans. A non-cash pension settlement charge is expected, but the amount is not provided.
Important facts for investors to verify
- Reconcile the reported cash-flow statement ending cash of $3.192 billion with balance-sheet cash of $902 million; the difference primarily reflects settlement and restricted cash.
- Assess refinancing requirements for 2023 maturities and commercial paper, including reliance on continued capital-market access and the revolving credit facility.
- Monitor goodwill impairment sensitivity, particularly the four reporting units with limited fair-value cushions.
- Evaluate whether Clover, Acceptance volumes and digital payments growth remain sufficient to offset foreign exchange, macroeconomic and competitive pressures.
- Review the effect of higher interest rates on variable-rate debt and the potential impact of further credit-rating changes.
- Track pending litigation, tax audits, merchant chargebacks, joint venture guarantees and regulatory developments affecting payments, privacy and money transmission.
- Confirm the timing and financial impact of pension-plan termination actions and any additional restructuring or severance costs.