Fiserv(FISV) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents Fiserv, Inc.'s unaudited consolidated financial statements, including income, comprehensive income, balance sheets, and cash flows, along with detailed notes Consolidated Statements of Income Fiserv, Inc. shows strong financial performance with significant year-over-year growth in total revenue, operating income, and net income Three Months Ended June 30: | Metric | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenue | $5,516 | $5,107 | $409 | 8% | | Operating Income | $1,696 | $1,428 | $268 | 19% | | Net Income Attributable to Fiserv, Inc. | $1,026 | $894 | $132 | 15% | | Diluted EPS | $1.86 | $1.53 | $0.33 | 22% | Six Months Ended June 30: | Metric | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenue | $10,646 | $9,990 | $656 | 7% | | Operating Income | $3,091 | $2,609 | $482 | 18% | | Net Income Attributable to Fiserv, Inc. | $1,877 | $1,629 | $248 | 15% | | Diluted EPS | $3.36 | $2.76 | $0.60 | 22% | Consolidated Statements of Comprehensive Income Comprehensive income increased substantially for both periods, primarily driven by positive foreign currency translation offsetting prior year losses Comprehensive Income (Three Months Ended June 30): | Metric | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Net Income | $1,030 | $909 | $121 | 13% | | Total Other Comprehensive Income (Loss) | $362 | $(208) | $570 | N/A | | Comprehensive Income Attributable to Fiserv, Inc. | $1,312 | $691 | $621 | 90% | Comprehensive Income (Six Months Ended June 30): | Metric | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Net Income | $1,878 | $1,661 | $217 | 13% | | Total Other Comprehensive Income (Loss) | $605 | $(432) | $1,037 | N/A | | Comprehensive Income Attributable to Fiserv, Inc. | $2,389 | $1,215 | $1,174 | 97% | - Foreign currency translation significantly contributed to other comprehensive income, showing a gain of $260 million (3 months) and $457 million (6 months) in 2025, compared to losses in 2024[12] Consolidated Balance Sheets Total assets and liabilities increased, driven by settlement assets, prepaid expenses, goodwill, and long-term debt, while total equity decreased Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :---------- | :--------- | | Total Assets | $81,531 | $77,176 | $4,355 | 6% | | Total Liabilities | $55,768 | $49,490 | $6,278 | 13% | | Total Equity | $25,763 | $27,686 | $(1,923) | -7% | - Significant increases in assets include settlement assets ($17,554 million from $15,429 million), prepaid expenses and other current assets ($3,805 million from $3,087 million), and goodwill ($37,465 million from $36,584 million)[15] - Long-term debt increased by $4,329 million to $28,059 million[15] Consolidated Statements of Cash Flows Net cash from operating activities increased, but higher cash usage in investing and financing, particularly for acquisitions and merchant cash advances, led to a net decrease in cash Cash Flow Summary (Six Months Ended June 30): | Activity | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Net Cash Provided by Operating Activities | $2,313 | $2,172 | $141 | 6% | | Net Cash Used in Investing Activities | $(1,263) | $(1,207) | $(56) | 5% | | Net Cash Used in Financing Activities | $(1,166) | $(1,114) | $(52) | 5% | | Net Change in Cash and Cash Equivalents | $(24) | $(161) | $137 | -85% | - Operating cash flow increased primarily due to increased profitability, partially offset by higher working capital use[176] - Investing activities included significant payments for acquisition of businesses ($337 million in 2025 vs $0 in 2024) and merchant cash advances ($539 million vs $451 million)[18] Notes to Consolidated Financial Statements These notes provide detailed disclosures supporting the consolidated financial statements, covering policies, pronouncements, revenue, acquisitions, assets, investments, derivatives, fair value, liabilities, debt, equity, and segment information Note 1. Basis of Presentation and Summary of Significant Accounting Policies This note outlines the unaudited nature of interim financial statements, consolidation principles, key accounting policies, and updates on pension plan termination - Interim financial statements are unaudited and include normal recurring adjustments, not necessarily indicative of full-year results[20] - Foreign currency exchange losses from highly inflationary economies (e.g., Argentina) were $46 million for Q2 2025 and $64 million for YTD 2025, included in other expense, net[37] - Defined benefit pension plans were terminated in 2023 (U.S.) and 2024 (U.K. settlement), with a $43 million refund of residual surplus received in Q2 2025 for the U.K. plan[40][41] Note 2. Recent Accounting Pronouncements Fiserv adopted ASU 2023-07 (Segment Reporting) retrospectively and is assessing the impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) - ASU 2023-07 (Segment Reporting) was adopted effective for the year ended December 31, 2024, with retrospective application, enhancing segment information disclosures[43][44] - ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2024, requires greater disaggregation of income tax reconciliation information; impact is currently being assessed[45] - ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2026, requires disaggregation of certain expense categories in footnotes; impact is currently being assessed[46] Note 3. Revenue Recognition This note details Fiserv's revenue recognition policies, disaggregating revenue by business line and reportable segment, showing overall growth with positive contributions from both Merchant and Financial segments Total Revenue by Segment (Three Months Ended June 30): | Segment | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Merchant Solutions | $2,644 | $2,410 | $234 | 10% | | Financial Solutions | $2,552 | $2,379 | $173 | 7% | | Corporate and Other | $320 | $318 | $2 | 1% | | Total Revenue | $5,516 | $5,107 | $409 | 8% | Total Revenue by Segment (Six Months Ended June 30): | Segment | 2025 (Millions) | 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Merchant Solutions | $5,016 | $4,663 | $353 | 8% | | Financial Solutions | $4,969 | $4,664 | $305 | 7% | | Corporate and Other | $661 | $663 | $(2) | 0% | | Total Revenue | $10,646 | $9,990 | $656 | 7% | - International revenue (EMEA, LATAM, APAC) comprised approximately 16% of total revenue for Q2 2025 and 15% for YTD 2025[48] Note 4. Acquisitions Fiserv completed several strategic acquisitions in the first half of 2025, including Payfare, CCV, Pinch Payments, and Money Money, for an aggregate purchase price of $365 million (net of acquired cash), expanding its embedded finance, POS solutions, and risk analysis capabilities - Acquired Payfare (embedded finance, Financial segment) for $95 million (net of cash) on March 2, 2025, recognizing $55 million in goodwill[53][54] - Acquired CCV (POS payment solutions, Merchant segment) for $229 million (net of cash) on March 18, 2025, recognizing $121 million in goodwill[55][56] - Acquired Pinch Payments (payment facilitator, Merchant segment) and Money Money (risk analysis, Merchant segment) for an aggregate of $41 million, recognizing $25 million in goodwill[57] Note 5. Intangible Assets The net book value of identifiable intangible assets increased to $10,418 million at June 30, 2025, from $9,940 million at December 31, 2024, primarily due to capitalized software and other intangibles, partially offset by amortization Identifiable Intangible Assets (Net Book Value): | Asset Type | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Customer relationships | $5,538 | $5,868 | | Acquired software and technology | $738 | $776 | | Trade names | $199 | $225 | | Purchased software | $1,016 | $502 | | Capitalized software and other intangibles | $2,927 | $2,569 | | Total | $10,418 | $9,940 | - Amortization expense for identifiable intangible assets was $1.1 billion for the six months ended June 30, 2025, a decrease from $1.2 billion in the prior year period[59] Note 6. Investments in Unconsolidated Affiliates Fiserv's investments in unconsolidated affiliates decreased significantly due to the non-renewal of the Wells Fargo Merchant Services (WFMS) alliance, resulting in a $453 million cash payment and an additional impairment charge - Investment in merchant alliances decreased to $777 million at June 30, 2025, from $1.2 billion at December 31, 2024[61] - The Wells Fargo Merchant Services (WFMS) alliance expired on April 1, 2025, resulting in a $453 million cash payment to Fiserv[62] - An additional pre-tax impairment charge of $8 million was recorded in Q2 2025 in connection with the WFMS contractual valuation and separation process[63] Note 7. Derivatives and Hedging Instruments Fiserv uses various derivative instruments, including forward exchange contracts and fixed-to-fixed cross-currency rate swap contracts, to hedge against interest rate and foreign currency fluctuations, designating them as cash flow, net investment, or fair value hedges - Uses forward exchange contracts as cash flow hedges for Indian Rupee exposure, with a notional amount of $413 million at June 30, 2025[66] - Employs fixed-to-fixed cross-currency rate swap contracts and foreign currency-denominated debt as net investment hedges for Euro, Singapore Dollar, and Canadian Dollar subsidiaries[68][69] - Foreign currency transaction losses, net of tax, related to net investment hedges were $(72) million (cross-currency swaps) and $(226) million (foreign currency debt) for Q2 2025[71] Note 8. Fair Value Measurements This note details fair value measurements for Fiserv's assets and liabilities, with most recurring measurements categorized as Level 2, while contingent consideration and debt guarantees use Level 3 inputs - Derivative instruments are measured at fair value on a recurring basis using Level 2 inputs[73][74] - Contingent consideration related to acquisitions and the obligation to purchase redeemable noncontrolling interest are measured using Level 3 inputs[73][74] - The estimated fair value of total debt (excluding finance leases) was $27.5 billion at June 30, 2025, compared to a carrying value of $27.8 billion[75] Note 9. Accounts Payable and Other Current Liabilities Total accounts payable and other current liabilities decreased to $4,351 million at June 30, 2025, from $4,799 million at December 31, 2024, primarily due to the absence of transferable federal tax credits Accounts Payable and Other Current Liabilities: | Category | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Trade accounts payable | $768 | $511 | | Client deposits | $988 | $985 | | Transferable federal tax credits | $0 | $866 | | Accrued compensation and benefits | $254 | $296 | | Accrued taxes | $284 | $261 | | Accrued interest | $339 | $335 | | Accrued payment network fees | $320 | $253 | | Operating lease liabilities | $119 | $116 | | Accrued professional fees | $100 | $102 | | Obligation to purchase redeemable noncontrolling interest | $95 | $95 | | Other accrued expenses | $1,084 | $979 | | Total | $4,351 | $4,799 | - The significant decrease in total current liabilities is mainly due to the absence of transferable federal tax credits, which were $866 million at December 31, 2024[81] Note 10. Debt Fiserv's total long-term debt increased significantly to $28,059 million at June 30, 2025, driven by new senior note issuances and increased commercial paper borrowings, while remaining in compliance with all financial debt covenants Total Debt (June 30, 2025 vs. December 31, 2024): | Category | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :---------- | :--------- | | Short-term and current maturities of long-term debt | $1,528 | $1,110 | $418 | 38% | | Long-term debt | $28,059 | $23,730 | $4,329 | 18% | | Total Debt | $29,587 | $24,840 | $4,747 | 19% | - New senior note issuances include €2.175 billion in May 2025, $1.75 billion in August 2024, and $2.0 billion in March 2024, used for general corporate purposes and debt/share repurchases[83][85][86] - U.S. dollar commercial paper notes increased to $1.9 billion (from $221 million) and Euro commercial paper notes increased to $1.3 billion (from $1.2 billion) at June 30, 2025[89] Note 11. Redeemable Noncontrolling Interest The termination of a merchant alliance joint venture agreement led to the reclassification of redeemable noncontrolling interest as a current liability of $95 million, with an anticipated pre-tax gain of approximately $90 million upon settlement in Q3 2025 - Merchant alliance joint venture agreement terminated effective June 2024[93] - Redeemable noncontrolling interest was reclassified as a current liability of $95 million at June 30, 2025[93][81] - Settlement in Q3 2025 through distribution of merchant contracts is expected to result in a pre-tax gain of approximately $90 million[93] Note 12. Equity Fiserv, Inc.'s total shareholders' equity decreased to $25,215 million at June 30, 2025, primarily due to significant treasury stock purchases, partially offset by net income and foreign currency translation gains Total Fiserv, Inc. Shareholders' Equity: | Period | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change ($M) | Change (%) | | :-------------------------------- | :----------------------- | :----------------------- | :---------- | :--------- | | Total Fiserv, Inc. Shareholders' Equity | $25,215 | $27,068 | $(1,853) | -7% | - Purchases of treasury stock were $2,196 million for Q2 2025 and $4,360 million for YTD 2025[96][97] - Accumulated other comprehensive loss improved from $(1,413) million at Dec 31, 2024, to $(901) million at June 30, 2025, primarily due to foreign currency translation gains[97][98] Note 13. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss improved significantly from $(1,413) million to $(901) million, primarily driven by $502 million in foreign currency translation gains Accumulated Other Comprehensive Loss: | Component | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Derivatives | $(69) | $(79) | | Foreign Currency Translation | $(825) | $(1,327) | | Pension Plans | $(7) | $(7) | | Total | $(901) | $(1,413) | - Net current-period other comprehensive income was $512 million for the six months ended June 30, 2025, largely due to $502 million from foreign currency translation[98] Note 14. Share-Based Compensation Share-based compensation expense for the six months ended June 30, 2025, was $215 million, with $486 million in unrecognized cost expected to be recognized over 2.0 years - Share-based compensation expense was $91 million for Q2 2025 (vs $99 million in Q2 2024) and $215 million for YTD 2025 (vs $185 million in YTD 2024)[99] - Total remaining unrecognized compensation cost for restricted stock units, awards, and performance share units is $486 million, expected to be recognized over a weighted-average period of 2.0 years[99] - Stock options outstanding at June 30, 2025, totaled 900 thousand shares with a weighted-average exercise price of $87.52[100] Note 15. Income Taxes Fiserv's effective income tax rate was 19.0% for Q2 2025 and 18.6% for YTD 2025, both lower than the statutory rate due to discrete tax benefits from equity compensation and purchased federal tax credits Income Tax Provision and Effective Rate: | Period | Income Tax Provision (Millions) | Effective Income Tax Rate | | :-------------------------------- | :-------------------------- | :------------------------ | | Three Months Ended June 30, 2025 | $246 | 19.0% | | Three Months Ended June 30, 2024 | $221 | 19.4% | | Six Months Ended June 30, 2025 | $436 | 18.6% | | Six Months Ended June 30, 2024 | $374 | 18.2% | - Effective tax rates were lower than the statutory rate due to discrete tax benefits from equity compensation[101] - The company purchased transferable federal tax credits at negotiated discounts, resulting in an income tax benefit[102] Note 16. Shares Used in Computing Net Income Per Share Attributable to Fiserv, Inc. Weighted-average common shares outstanding for diluted EPS decreased by 6% in Q2 2025 and 5% in YTD 2025 due to the share repurchase program, contributing to increased diluted EPS Weighted-Average Common Shares Outstanding (Millions): | Period | Basic (2025) | Basic (2024) | Diluted (2025) | Diluted (2024) | | :-------------------------------- | :----------- | :----------- | :------------- | :------------- | | Three Months Ended June 30 | 550.8 | 582.7 | 552.7 | 585.4 | | Six Months Ended June 30 | 556.1 | 586.8 | 558.7 | 590.1 | - Diluted weighted-average outstanding shares were reduced by 6% (Q2 2025) and 5% (YTD 2025) compared to prior year due to the share repurchase program[174] Note 17. Cash Flow Information This note provides supplemental cash flow details, including $709 million in interest paid and $1,245 million in net income taxes paid for the six months ended June 30, 2025, along with significant non-cash investing and financing activities Supplemental Cash Flow Information (Six Months Ended June 30): | Item | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Interest paid | $709 | $502 | | Net income taxes paid | $1,245 | $1,277 | | Software obtained under financing arrangements | $554 | $96 | | Hardware obtained under financing arrangements | $193 | $0 | Note 18. Commitments and Contingencies Fiserv maintains a $33 million accrual for legal proceedings, with an estimated possible exposure range of $0 million to $120 million, and manages $1.1 billion in subscriber funds for electronic payments off-balance sheet - Accrual for legal proceedings: $33 million at June 30, 2025[107] - Estimated possible range of exposure for legal proceedings in excess of accruals: $0 million to $120 million[107] - Subscriber funds for electronic payments: $1.1 billion at June 30, 2025, not included in consolidated balance sheets[108] Note 19. Related Party Transactions Fiserv conducts business through merchant alliances, with processing and services revenue from equity method alliances totaling $19 million for Q2 2025 and $51 million for YTD 2025, showing a decrease from the prior year - Processing and other service fees charged to equity method merchant alliances: $19 million for Q2 2025 (vs $37 million in Q2 2024) and $51 million for YTD 2025 (vs $77 million in YTD 2024)[112] - Amounts due from unconsolidated merchant alliances: $14 million at June 30, 2025[112] Note 20. Business Segment Information Fiserv operates through Merchant Solutions and Financial Solutions segments, both showing revenue growth, with the Financial segment demonstrating strong operating income and margin growth, while the Merchant segment's margin contracted due to increased investments - Merchant Solutions segment provides commerce-enabling products and services, including Clover POS, to small businesses, enterprises, and financial institutions[113][115] - Financial Solutions segment provides products and services to financial institutions, corporate, and public sector clients, including digital payments, issuing, and banking solutions[114][115] Segment Revenue and Operating Income (Three Months Ended June 30): | Segment | Revenue 2025 ($M) | Revenue 2024 ($M) | Op. Income 2025 ($M) | Op. Income 2024 ($M) | Op. Margin 2025 (%) | Op. Margin 2024 (%) | | :-------------------------------- | :---------------- | :---------------- | :------------------- | :------------------- | :------------------ | :------------------ | | Merchant | $2,644 | $2,410 | $914 | $882 | 34.6% | 36.6% | | Financial | $2,552 | $2,379 | $1,244 | $1,093 | 48.7% | 45.9% | | Corporate and Other | $320 | $318 | $(462) | $(547) | N/A | N/A | | Total Company | $5,516 | $5,107 | $1,696 | $1,428 | 30.7% | 28.0% | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Fiserv's financial condition and operational results, covering an overview, acquisitions, industry trends, accounting policies, and detailed analysis of revenue, expenses, operating income, and liquidity Forward-Looking Statements This section contains cautionary statements regarding forward-looking information, emphasizing that actual results could differ materially due to significant risks and uncertainties - Forward-looking statements are subject to significant risks and uncertainties, including competition, technology changes, security breaches, economic conditions (inflation, interest rates, recession), and regulatory actions[124] - Readers are cautioned not to place undue reliance on these statements, which speak only as of the report date[124] Overview Fiserv is a leading global provider of payments and financial services technology solutions, focusing on innovation, operational excellence, and disciplined capital allocation to drive growth and value - Fiserv is a leading global provider of payments and financial services technology solutions, with non-discretionary products and services[125][127] - Strategic focus areas include driving growth, creating value through a high-performing team, integrating solutions, operational excellence, disciplined capital allocation (share repurchase, M&A), and organic growth through innovation[127] - The Merchant Segment provides commerce-enabling products and services, including merchant acquiring, digital commerce, mobile payments, and the Clover POS platform[128][133] - The Financial Segment provides products and services to financial institutions, corporate, and public sector clients, including account processing, digital payments, and card transactions[130][133] Company Background Fiserv is a global leader in payments and financial services technology, offering essential solutions to merchants, banks, and other financial institutions worldwide, focused on delivering superior value through innovation and strategic capital allocation - Fiserv is a leading global provider of payments and financial services technology solutions, with non-discretionary products and services[125][127] - Strategic focus areas include driving growth, creating value through a high-performing team, integrating solutions, operational excellence, disciplined capital allocation (share repurchase, M&A), and organic growth through innovation[127] Acquisitions, Dispositions and Other Transactions Fiserv completed several strategic acquisitions in H1 2025, including Payfare, CCV, Pinch Payments, and Money Money, for an aggregate of $365 million (net of cash), and received a $453 million cash payment from the non-renewal of the Wells Fargo Merchant Services alliance - Acquired Payfare (embedded finance), CCV (POS solutions), Pinch Payments (payment facilitator), and Money Money (risk analysis) in H1 2025 for an aggregate of $365 million (net of cash)[132][134][135][136] - Received a $453 million cash payment upon the expiration of the Wells Fargo Merchant Services (WFMS) joint venture on April 1, 2025[137] - Acquired the remaining 19% ownership in ICICI Merchant Services for $22 million in April 2025 and entered an agreement to acquire the remaining 49.9% ownership in AIB Merchant Services, expected to close in Q3 2025[138] Industry Trends The global payments landscape is rapidly evolving with advancing technologies, digital payments, e-commerce, and real-time payment infrastructure, intensifying competition and driving demand for integrated, flexible solutions from merchants and financial institutions - The global payments landscape is characterized by rapid technological advancements, growth in digital payments, e-commerce, and real-time payments, leading to increased competition[139] - Merchants require simpler, integrated, and flexible systems for payment acceptance, cash flow management, and business operations, with a growing direct, digital-only acquisition channel[140] - Financial institutions need tailored, integrated solutions to win and retain customers, generate revenue, comply with regulations, and enhance operating efficiency, focusing on a unified customer experience across mobile and online channels[143][144] Recent Market Conditions Global macroeconomic conditions, including changing interest rates, inflation, supply chain disruptions, and international hostilities, pose potential adverse effects on Fiserv's business, with foreign currency exchange losses from highly inflationary economies significantly impacting results - Global macroeconomic conditions (interest rates, inflation, supply chain, geopolitical events) could materially impact business[148] - Fluctuations in foreign currency exchange rates (Euro, British Pound, Indian Rupee, Brazilian Real, Argentine Peso) can adversely impact operating results[149] - Devaluation of local currencies in highly inflationary economies (e.g., Argentina) resulted in foreign currency exchange losses of $46 million (Q2 2025) and $64 million (YTD 2025)[198] Changes in Critical Accounting Policies and Estimates Fiserv reported no material changes to its critical accounting policies and estimates since the Annual Report on Form 10-K for December 31, 2024, continuing to rely on judgment and estimates for fair value measurements and goodwill impairment assessments - No material changes to critical accounting policies and estimates since the December 31, 2024, Annual Report on Form 10-K[151] - Estimates and assumptions are crucial for financial statements, especially for fair values in acquisitions and goodwill impairment[151] Results of Operations Fiserv's results of operations for the three and six months ended June 30, 2025, show robust growth in total revenue and operating income, with improved operating margins, influenced by acquisitions, non-cash impairment charges, and foreign currency fluctuations - Consolidated financial results were affected by acquisitions, non-cash impairment charges, and foreign currency fluctuations[152] - Total revenue increased by 8% (Q2 2025) and 7% (YTD 2025), driven by higher processing revenue and data/analytics sales[156] - Operating income increased by 19% (Q2 2025) and 18% (YTD 2025), with operating margin improving by 270 bps and 290 bps, respectively[164] Total Revenue Total revenue increased by 8% in Q2 2025 and 7% in YTD 2025, driven by higher processing revenue and data and analytics sales, with both Merchant and Financial segments contributing positively - Total revenue increased $409 million (8%) in Q2 2025 and $656 million (7%) in YTD 2025[156] - Merchant segment revenue grew 10% (Q2) and 8% (YTD), including $55 million from the CCV acquisition in Q2; Small Business (Clover POS) contributed 7% (Q2) and 6% (YTD)[157] - Financial segment revenue grew 7% (Q2 & YTD); Digital Payments contributed 3% (Q2 & YTD) due to license/data sales and Zelle transaction growth, while Issuing contributed 5% (Q2) and 3% (YTD) from data/analytics sales and active accounts[158] Total Expenses Total expenses increased by 4% in Q2 2025 and 2% in YTD 2025, but decreased as a percentage of total revenue due to scalable revenue growth, a favorable revenue mix, and reductions in amortization and acquisition/integration expenses - Total expenses increased $141 million (4%) in Q2 2025 and $174 million (2%) in YTD 2025[159] - Total expenses as a percentage of total revenue decreased by 270 basis points (Q2) and 290 basis points (YTD)[159] - Cost of product as a percentage of product revenue decreased to 57.3% (Q2 2025) from 66.1% (Q2 2024) and to 60.0% (YTD 2025) from 69.7% (YTD 2024), driven by high-margin license and data/analytics sales[162] Operating Income and Operating Margin Total operating income increased by 19% in Q2 2025 and 18% in YTD 2025, with operating margin improving by 270 basis points (Q2) and 290 basis points (YTD), driven by strong Financial segment performance and expense management - Total operating income increased $268 million (19%) in Q2 2025 and $482 million (18%) in YTD 2025[164] - Total operating margin increased to 30.7% (Q2 2025) and 29.0% (YTD 2025)[164] - Merchant segment operating margin decreased by 200 bps (Q2) and 100 bps (YTD) due to increased investments in marketing, sales, distribution, and new software/hardware, and the CCV acquisition[165] - Financial segment operating income and margin grew due to an increase in high-margin license and data/analytics sales, as well as expense management initiatives[166] Interest Expense, Net Interest expense, net increased by 28% in Q2 2025 and 27% in YTD 2025, primarily due to new senior note issuances and higher outstanding borrowings under commercial paper programs and foreign lines of credit - Interest expense, net increased $80 million (28%) in Q2 2025 and $150 million (27%) in YTD 2025[168] - The increase was driven by new senior note issuances and higher outstanding borrowings under commercial paper programs and foreign lines of credit[168] Other Expense, Net Other expense, net increased significantly in Q2 and YTD 2025, primarily due to foreign currency exchange losses from the remeasurement of monetary assets and liabilities in highly inflationary economies, particularly Argentina - Other expense, net increased $34 million in Q2 2025 and $45 million in YTD 2025[169] - Foreign currency exchange losses from highly inflationary economies (e.g., Argentina) were $46 million for Q2 2025 and $64 million for YTD 2025[169] Income Tax Provision The effective income tax rate for Q2 2025 was 19.0% and for YTD 2025 was 18.6%, both lower than the statutory rate due to discrete tax benefits from equity compensation - Effective income tax rate: 19.0% for Q2 2025 and 18.6% for YTD 2025[171] - Rates were lower than the statutory rate due to discrete tax benefits from equity compensation[171] Loss from Investments in Unconsolidated Affiliates Loss from investments in unconsolidated affiliates increased to $16 million in Q2 2025 and $24 million in YTD 2025, including non-cash impairment charges and acquired intangible asset amortization - Loss from investments in unconsolidated affiliates: $16 million for Q2 2025 (vs $8 million in Q2 2024) and $24 million for YTD 2025 (vs $16 million in YTD 2024)[172] - Includes non-cash impairment charges and acquired intangible asset amortization[172] Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests decreased significantly to $4 million in Q2 2025 and $1 million in YTD 2025, primarily due to the termination of a merchant alliance joint venture agreement - Net income attributable to noncontrolling interests: $4 million for Q2 2025 (vs $15 million in Q2 2024) and $1 million for YTD 2025 (vs $32 million in YTD 2024)[173] - The decrease is primarily due to the termination of a merchant alliance joint venture agreement in June 2024[173] Net Income Per Share – Diluted Diluted EPS increased to $1.86 in Q2 2025 and $3.36 in YTD 2025, driven by increased net income attributable to Fiserv, Inc. and a reduction in diluted weighted average outstanding shares due to the share repurchase program - Diluted EPS: $1.86 for Q2 2025 (vs $1.53 in Q2 2024) and $3.36 for YTD 2025 (vs $2.76 in YTD 2024)[174] - Diluted weighted average outstanding shares were reduced by 6% (Q2 2025) and 5% (YTD 2025) due to the share repurchase program[174] Liquidity and Capital Resources Fiserv's liquidity strategy relies on operating cash flow, cash and equivalents, commercial paper, and its revolving credit facility to fund operations, debt, capital expenditures, share repurchases, and acquisitions, while actively managing its debt and maintaining compliance with covenants General Fiserv's primary liquidity needs are funded by operating cash flow, cash and cash equivalents ($999 million at June 30, 2025), commercial paper, and its $2.0 billion available revolving credit facility, with operating cash flow increasing by 6% in YTD 2025 due to increased profitability - Primary liquidity needs: operating expenses, debt service, capital expenditures, operating lease payments[175] - Funding sources: operating cash flow, cash and cash equivalents ($999 million at June 30, 2025), commercial paper, and $2.0 billion available capacity under revolving credit facility[175] - Operating cash flow was $2.3 billion in YTD 2025, a 6% increase from YTD 2024, driven by increased profitability[176] Share Repurchases Fiserv repurchased 21.9 million shares of common stock for $4.4 billion during the first six months of 2025, with approximately 56.1 million shares remaining under existing authorizations - Repurchased 21.9 million shares for $4.4 billion in YTD 2025 (vs 20.2 million shares for $3.0 billion in YTD 2024)[178] - Approximately 56.1 million shares remained under repurchase authorizations as of June 30, 2025[178] Acquisitions Fiserv completed several acquisitions in H1 2025 for an aggregate of $365 million (net of cash), funded by available cash and commercial paper, and received $453 million from the non-renewal of the WFMS joint venture - Acquired Payfare, CCV, Pinch Payments, and Money Money in H1 2025 for an aggregate purchase price of $365 million (net of cash), funded by available cash and commercial paper[179] - Received $453 million cash payment from the expiration of the Wells Fargo Merchant Services (WFMS) joint venture[180] - Acquired remaining 19% ownership in ICICI Merchant Services for $22 million[181] Indebtedness Fiserv's total long-term debt increased to $28,059 million at June 30, 2025, primarily due to new senior note issuances, with certain senior notes and commercial paper programs classified as long-term due to refinancing intent - Total long-term debt: $28,059 million at June 30, 2025 (vs $23,730 million at Dec 31, 2024)[182] - New senior note issuances include €2.175 billion in May 2025, $1.75 billion in August 2024, and $2.0 billion in March 2024[182][183][184] - Debt classified as long-term includes certain senior notes due in July 2025 and commercial paper programs, as the company has the ability and intent to refinance them[186] Variable Rate Debt Fiserv's variable rate debt totaled $4,378 million at June 30, 2025, with a weighted-average interest rate of 9.887%, including foreign lines of credit (primarily in Latin America with high interest rates), U.S. dollar and Euro commercial paper notes, and revolving credit facility borrowings Variable Rate Debt (June 30, 2025): | Category | Maturity | Weighted-Average Interest Rate | Outstanding Borrowings (Millions) | | :-------------------------------- | :------- | :----------------------------- | :-------------------------------- | | Foreign lines of credit | various | 28.425% | $1,100 | | U.S. dollar commercial paper notes | various | 4.604% | $1,908 | | Euro commercial paper notes | various | 2.214% | $1,309 | | Revolving credit facility | June 2027 | 5.430% | $61 | | Total variable rate debt | | 9.887% | $4,378 | - Foreign lines of credit, primarily for Latin America operations, have a weighted-average interest rate of 28.425%, with Argentina at 34.437% and Brazil at 15.840%[187] Revolving Credit Facility Fiserv maintains a $6.0 billion senior unsecured multicurrency revolving credit facility, maturing in June 2027, with outstanding borrowings of $61 million at June 30, 2025, bearing an interest rate of 5.430% - Fiserv maintains a $6.0 billion senior unsecured multicurrency revolving credit facility, maturing in June 2027[189] - Outstanding borrowings under the revolving credit facility were $61 million at June 30, 2025, with a corresponding interest rate of 5.430%[189] Debt Covenants and Compliance Fiserv was in compliance with all financial debt covenants during the first six months of 2025, which limit consolidated indebtedness to no more than 3.75 times consolidated net income before certain adjustments - Fiserv was in compliance with all financial debt covenants during the first six months of 2025[192] - Covenants limit consolidated indebtedness to no more than 3.75 times consolidated net income before interest, taxes, depreciation, amortization, non-cash charges, and certain other adjustments[191] Debt Guarantees Fiserv guarantees $493 million of debt for its Lending Joint Ventures, maintaining a contingent liability of $10 million for expected credit losses, with no anticipated defaults - Guarantees $493 million of debt for Lending Joint Ventures[193] - Maintains a contingent liability of $10 million for current expected credit losses at June 30, 2025[193] - No payments have been made under the guarantees, and no defaults are anticipated[193] Supplemental Guarantor Information Fiserv, Inc. fully, unconditionally, and solely guarantees certain senior notes issued by its indirect wholly-owned subsidiary, Fiserv Funding Unlimited Company, which are unsecured senior obligations ranking equally with its other unsecured senior indebtedness - Fiserv, Inc. fully, unconditionally, and solely guarantees the 2028, 2032, and 2036 senior notes issued by Fiserv Funding Unlimited Company[194] - These guarantees are unsecured senior obligations of Fiserv, Inc. and rank equally with other unsecured senior indebtedness[194] Cash and Cash Equivalents Total cash and cash equivalents were $999 million at June 30, 2025, a decrease from $1,236 million at December 31, 2024, with $467 million classified as unavailable due to joint venture holdings or foreign exchange controls Cash and Cash Equivalents: | Category | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Available | $532 | $665 | | Unavailable | $467 | $571 | | Total | $999 | $1,236 | - Unavailable cash is held by joint ventures or subject to foreign exchange controls/regulatory capital requirements[196] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Fiserv is exposed to market risks primarily from fluctuations in interest rates and foreign currency exchange rates, which it manages using derivative instruments, with foreign currency exchange losses from highly inflationary economies significantly impacting results - Primary market risks: fluctuations in interest rates and foreign currency exchange rates[197] - Uses forward exchange contracts, cross-currency rate swap contracts, and other non-derivative hedging instruments to manage risk[197] - Foreign currency exchange losses from highly inflationary economies (e.g., Argentina) were $46 million for Q2 2025 and $64 million for YTD 2025[198] ITEM 4. CONTROLS AND PROCEDURES Management concluded that Fiserv's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the three months ended June 30, 2025 - Disclosure controls and procedures were effective as of June 30, 2025[200] - No material changes in internal control over financial reporting occurred during Q2 2025[201] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Fiserv is involved in various lawsuits in the normal course of business, with management believing that any resulting liabilities are not expected to have a material adverse effect on the consolidated financial statements - Fiserv is involved in lawsuits in the normal course of business[202] - Liabilities from legal proceedings are not expected to have a material adverse effect on the consolidated financial statements[202] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During Q2 2025, Fiserv repurchased 12.2 million shares of common stock for an average price of $180.31 per share, with approximately 56.1 million shares remaining under existing repurchase authorizations Common Stock Repurchases (Three Months Ended June 30, 2025): | Period | Shares Purchased | Average Price Paid per Share | | :---------------- | :--------------- | :--------------------------- | | April 1-30, 2025 | 3,856,661 | $199.99 | | May 1-31, 2025 | 4,575,000 | $169.44 | | June 1-30, 2025 | 3,774,764 | $166.50 | | Total | 12,206,425 | $180.31 (approx) | - Approximately 56.1 million shares remained under repurchase authorizations as of June 30, 2025[203] ITEM 5. OTHER INFORMATION During the three months ended June 30, 2025, none of Fiserv's directors or Section 16 officers adopted or terminated a Rule 10b5-1 Trading Plan or a "non-Rule 10b5-1 trading arrangement" - No directors or Section 16 officers adopted or terminated Rule 10b5-1 Trading Plans or non-Rule 10b5-1 trading arrangements during Q2 2025[204] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including various indentures related to senior notes, subsidiary issuers of guaranteed securities, certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents - The exhibits include indentures for senior notes, certifications from the CEO and CFO, and Inline XBRL documents[207] SIGNATURES The Quarterly Report on Form 10-Q is duly signed on behalf of Fiserv, Inc. by Robert W. Hau, Chief Financial Officer, and Kenneth F. Best, Chief Accounting Officer, on July 24, 2025 - The report was signed by Robert W. Hau (Chief Financial Officer) and Kenneth F. Best (Chief Accounting Officer) on July 24, 2025[212]