Fiserv, Inc.

Fiserv (Nasdaq: FISV) provides payments and financial technology to merchants and financial institutions. Merchant Solutions includes payment acceptance and the Clover business-management platform. Financial Solutions provides account processing, digital banking, payments and related services to financial institutions.

Revenue is stabilizing after the August reset

Organic revenue was flat year over year in the third quarter, after declining 5% in the second quarter. Financial Solutions moved from an 8% decline to 2% growth, while Merchant Solutions moved from a 1% decline to a 2% decline. These are each quarter's comparisons with the corresponding prior-year period.

The quarter included a $6.452 billion noncash goodwill impairment. Adjusted earnings remove that charge, acquisition-related intangible amortization, transformation and severance costs, and selected other items. Adjusted operating margin uses adjusted revenue excluding postage reimbursements.

The annual organic revenue forecast remains a decline of 1% to no growth, with adjusted EPS of $7.20 to $7.40. Both ranges are unchanged from August's reduced outlook. Management expects revenue acceleration in the fourth quarter.

The cash comparison and its working-capital bridge

Nine-month operating cash flow was $3.094 billion, versus $4.118 billion. Subtracting the original first-half figures gives third-quarter cash flow of $1.012 billion versus $1.805 billion.

Five working-capital movements used $274 million in the quarter, versus a $535 million release a year earlier. Before those movements, our calculated cash subtotal was $1.286 billion versus $1.270 billion. Accounts payable and other liabilities account for most of the swing.

Company-defined free cash flow was $2.039 billion for nine months, versus $2.879 billion. The calculated quarter was $679 million versus $1.334 billion. The measure deducts capital spending from operating cash and makes further adjustments. Its nine-month reconciliation adds back $199 million of cash severance and integration payments and $251 million of transformation payments, alongside affiliate, distribution and tax adjustments.

Debt, buybacks and the savings plan

Balance-sheet cash was $545 million at September 30, versus $627 million in June and $798 million at year-end. Short-term borrowings and current debt maturities of $1.254 billion plus long-term debt of $25.809 billion total $27.063 billion, down from $28.997 billion at year-end.

Fiserv expects $500 million of fourth-quarter repurchases under its existing authorization. Management says growing confidence allows a return earlier than anticipated. In the first half it had repurchased $300 million of shares.

The projected Project Elevate savings estimate is now $1 billion, versus the prior $500 million estimate cited in the November release.

Completed portfolio changes

Fiserv completed the sale of its student-loan servicing business in the third quarter, following an agreement entered into in May. It also completed the MoneyPass Group joint venture, combining MoneyPass Network, ATM Managed Services and Cash Intelligence. Fiserv retains a 49% interest; completion was already reported in August.

The next results can test whether Financial Solutions' revenue recovery broadens, how operating cash changes as bills and other balances move, and how actual repurchases compare with the fourth-quarter plan.