Fiserv, Inc. (NASDAQ: FISV), a leading global provider of financial services technology solutions, today reported financial results for the third quarter of 2016.

Third Quarter 2016 GAAP Results

GAAP revenue for the company increased 5 percent in the third quarter to $1.38 billion, with 8 percent growth in the Payments segment and 2 percent growth in the Financial segment, compared to the third quarter of 2015. GAAP revenue for the company increased 5 percent in the first nine months of 2016 to $4.07 billion, with 8 percent growth in the Payments segment and 1 percent growth in the Financial segment, compared to the prior year period.

GAAP earnings per share was $0.96 in the third quarter and $3.18 in the first nine months of 2016, increasing 4 percent and 46 percent, respectively, compared to the prior year periods. GAAP earnings per share in the third quarter of 2015 included an $0.08 per share gain on the sale of a subsidiary business at StoneRiver Group, L.P. (“StoneRiver”), a joint venture in which the company owns a 49% interest. During the first nine months, GAAP earnings per share also included a net investment gain of $0.39 per share in 2016 driven by the sale of a business interest at StoneRiver and debt extinguishment and refinancing costs of $0.25 per share in 2015.

GAAP operating margin was 26.8 percent in the third quarter and 26.3 percent in the first nine months of 2016, increasing 80 basis points and 100 basis points, respectively, compared to the prior year periods.

Net cash provided by operating activities was $1.04 billion in the first nine months of 2016 compared with $955 million in the prior year period, an increase of 9 percent.

“Strong operating performance in the quarter drove double-digit adjusted earnings per share growth and excellent free cash flow,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Outstanding sales results in the quarter should provide additional market momentum and growth.”

Third Quarter 2016 Non-GAAP Results and Additional Information

• Adjusted revenue increased 5 percent in both the third quarter and first nine months to $1.31 billion and $3.86 billion, respectively, compared to the prior year periods.
• Internal revenue growth for the company was 4 percent in the third quarter, driven by 5 percent growth in the Payments segment and 2 percent growth in the Financial segment.
• Internal revenue growth for the company was 4 percent in the first nine months of 2016, led by 6 percent growth in the Payments segment and 1 percent growth in the Financial segment.
• Adjusted earnings per share increased 11 percent in the third quarter to $1.14 and 15 percent in the first nine months of 2016 to $3.28 compared to the prior year periods.
• Adjusted operating margin decreased 30 basis points to 32.8 percent in the quarter and increased 20 basis points to 32.2 percent in the first nine months compared to the prior year periods.
• Free cash flow increased 12 percent to $747 million in the first nine months of 2016 compared to the prior year period.
• Sales performance increased 34 percent in the quarter and 21 percent in the first nine months of 2016 compared to the prior year periods.
• The company repurchased 3.1 million shares of common stock for $329 million in the third quarter and 9.3 million shares of common stock for $933 million in the first nine months of 2016. As of September 30, 2016, the company had 8.1 million remaining shares authorized for repurchase.

Outlook for 2016

Fiserv expects 2016 internal revenue growth of 4 percent and adjusted earnings per share in a range of $4.43 to $4.46, which represents 14 to 15 percent growth over 2015.

“We continue to expect strong operating results despite a slight shortfall in revenue growth for the year. We anticipate revenue growth to accelerate in the fourth quarter and into 2017,” said Yabuki.

Earnings Conference Call

The company will discuss its third quarter 2016 results on a conference call and webcast at 4 p.m. CT on Wednesday, October 26, 2016. To register for the event, go to www.fiserv.com and click on the Q3 Earnings webcast link. Supplemental materials will be available in the “Investor Relations” section of the website.

About Fiserv

Fiserv, Inc. (NASDAQ: FISV) enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization. For more than 30 years, Fiserv has been a global leader in financial services technology. Fiserv is a FORTUNE® 500 company and this year was honored to be named a FORTUNE magazine’s World’s Most Admired Company for the third consecutive year. In 2015 the company was recognized among Forbes magazine’s America’s Best Employers. For more information, visit www.fiserv.com.

Use of Non-GAAP Financial Measures

In this earnings release, we supplement our reporting of information determined in accordance with GAAP, such as revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities, with “adjusted revenue,” “internal revenue growth,” “adjusted operating income,” “adjusted operating margin,” “adjusted net income,” “adjusted earnings per share” and “free cash flow.” Management believes that adjustments for certain non-cash or other items and the exclusion of certain pass-through revenue and expenses enhance our shareholders’ ability to evaluate our performance as such measures provide additional insights into the factors and trends affecting our business. Therefore, we exclude these items from GAAP revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities to calculate these non-GAAP measures. The corresponding reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are included in this earnings release, except for forward-looking measures where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and low visibility of the non-cash and other items described below that are excluded from the non-GAAP outlook measures. See page 11 for additional information regarding the company’s forward-looking non-GAAP financial measures.

Examples of non-cash or other items may include, but are not limited to, non-cash deferred revenue adjustments arising from acquisitions, non-cash intangible asset amortization expense associated with acquisitions, non-cash impairment charges, gains or losses from unconsolidated affiliates, severance costs, charges associated with early debt extinguishment, merger and integration costs related to acquisitions, and certain costs associated with the achievement of our operational effectiveness objectives. We exclude these items to more clearly focus on the factors we believe are pertinent to the management of our operations, and we use this information to make operating decisions, including the allocation of resources to our various businesses.

Internal revenue growth and free cash flow are non-GAAP financial measures and are described on page 10. We believe internal revenue growth is useful because it presents revenue growth excluding the effects of acquisitions and dispositions and the impact of postage reimbursements in our Output Solutions business, and including deferred revenue purchase accounting adjustments. We believe free cash flow is useful to measure the funds generated in a given period that are available for debt service requirements and strategic capital decisions. We believe this supplemental information enhances our shareholders’ ability to evaluate and understand our core business performance.

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should be considered in addition to, and not as a substitute for, revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated internal revenue growth, adjusted earnings per share and adjusted earnings per share growth. Statements can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “could,” “should” or words of similar meaning. Statements that describe the company’s future plans, objectives or goals are also forward-looking statements. Forward-looking statements are subject to assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that may affect the company’s results include, among others: pricing and other actions by competitors; the capacity of the company’s technology to keep pace with a rapidly evolving marketplace; the impact of market and economic conditions on the financial services industry; the impact of a security breach or operational failure on the company’s business; the effect of legislative and regulatory actions in the United States and internationally; the company’s ability to comply with government regulations; the company’s ability to successfully identify, complete and integrate acquisitions, and to realize the anticipated benefits associated with the same; the impact of the company’s strategic initiatives; and other factors included in the company’s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2015 and in other documents that the company files with the SEC. You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements. The company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.