Fiserv's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Fiserv (FISV)

Q1 2012 Earnings Call

May 01, 2012 5:00 pm ET

Executives

Peter Holbrook - Vice President of Investor Relations

Jeffery Yabuki - Chief Executive Officer, President and Director

Thomas J. Hirsch - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Assistant Secretary

Analysts

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Brett Huff - Stephens Inc., Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

John Kraft - D.A. Davidson & Co., Research Division

David Togut - Evercore Partners Inc., Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Kartik Mehta - Northcoast Research

Presentation

Operator

Welcome to the Fiserv First Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's call is being recorded and is being broadcast live over the Internet at www.fiserv.com. In addition, there are supplemental materials for today's call available at the company's website. To access those materials, go to the company's website at www.fiserv.com, and click on the earnings call link in the Events section of the home page. The call is expected to last about an hour and you may disconnect from the call at any time.

Now I will turn the call over to Peter Holbrook, Vice President of Investor Relations at Fiserv.

Peter Holbrook

Thank you, Carol. Good afternoon, everyone, and thank you for joining us on our first quarter earnings call. With me on today's call is our CEO, Jeff Yabuki; our CFO, Tom Hirsch; and Mark Ernst, our Chief Operating Officer.

Our remarks today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We will make forward-looking statements about, among other matters, adjusted revenue, adjusted internal revenue growth, adjusted earnings per share, adjusted operating margin, free cash flow, free cash flow per share, sales pipelines, acquisitions and our strategic initiatives. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release, which can be found on our website at fiserv.com, for a discussion of these risk factors.

You should also refer to our earnings release for an explanation of the non-GAAP financial measures discussed in this conference call, and for a reconciliation of those measures to the nearest applicable GAAP measures. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior-reported results, and as a basis for planning and forecasting for future periods.

I will now turn the call over to Jeff.

Jeffery Yabuki

Thanks, Peter, and good afternoon. On the heels of our strong finish to 2011, we delivered revenue growth and adjusted EPS that exceeded our internal expectations for the quarter. We are pleased with our start to the year and are well-positioned to achieve results within our full-year guidance.

Adjusted revenue increased 5% in the quarter and adjusted internal revenue growth was 4%, including solid results in both our Payments and Financial segments. Adjusted earnings per share was up 18% for the quarter to $1.20, and adjusted operating margin expanded 40 basis points over the first quarter of 2011.

Free cash flow was $183 million in the quarter, below the outstanding results in the comparative quarter, primarily related to relative changes in working capital. Cash flow remains on track for the year. In February, we reinforced our commitment to building shareholder value through an additional repurchase authorization for 10 million shares. To that end, we also repurchased 3.7 million shares in the quarter.

We have established 3 key enterprise priorities to help you better gauge our current performance and strategic progress in 2012. First, to deliver an increased level of high-quality revenue growth and meet our earnings commitments. Next, to center the Fiserv culture on growth, leading to more clients, deeper relationships and a larger share of our strategic solutions. And third, to deliver innovation that increases differentiation and enhances results for our clients. Adjusted internal revenue growth of 4% matched our strong fourth quarter performance and accelerated from 3% in the first quarter of 2011. Growth in the quarter was driven by recurring revenue in our Debit and Account Processing businesses, along with solid performance across our digital channels, reflecting strong demand for mobile banking solutions and the industry's renewed focus on Online Banking.

Adjusted operating income was up 6% in the quarter, leading to higher operating margin and another quarter of double-digit adjusted EPS growth. Strengthening the foundation of our growth culture leads to better results now and into the future. We are executing against our go-to-market strategy, which is well aligned with technology and consumer trends.

As proof points of the market demand, we signed a combined 230 Payments clients to our bill payment, debit and P2P solutions in the quarter, and nearly 150 clients selected our market-leading mobile solution. We also had 2 additional large credit unions commit to Acumen, our next-generation account processing platform in the quarter. We remain encouraged by the strong interest in this advanced technology platform, and as important, the significant number of additional solutions that are being purchased along with the core.

Last week, we hosted over 3,600 attendees at our 2012 spring client event, Fiserv Forum. This event will end up being one of the largest gatherings of financial institution executives in the U.S. this year. In addition to having marquee speakers such as President Bill Clinton and Dr. Fareed Zakaria, we had strategy sessions, product forums and user groups. We also hosted a 70,000 square-foot solution center showcasing more than 100 of our leading technology solutions geared at driving a broad range of value for our clients. The feedback on the event has been outstanding.

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