Fiserv (FISV) profits soar, Spotify (SPOT) subscriptions, ad sales grow

Financial technology firm Fiserv, Inc. (NASDAQ: FISV) and music streaming company Spotify Technology S.A. (NYSE: SPOT) reported growth in their third-quarter revenue, helped by increased transactions, subscriptions, and ad sales.

The FISV stock traded at US$100.19, down 8.79%; likewise, SPOT stock traded at US$263.56, up 4.50%, at around 10:50 am ET after the results.

Third-quarter Highlights

Fiserv posted GAAP revenue of US$4.16 billion, up 10% YoY.

Its reporting segments are Acceptance, Fintech, and Payments.

Fiserv’s internal revenue growth was 11% in the first nine months of 2021. Its GAAP operating margin was 15.3% in the quarter compared to 14.3% in the same period a year ago. 

Its net income was US$428 million, an increase of 62% YoY. 

Its GAAP earnings per share were US$0.64 in Q3 2021, up 64%, compared to Q3 of 2020.

The adjusted earnings per share were US$1.47 in the quarter, up 23%. 

For the first nine months of the year, its free cash flow was US$2.29 billion compared to US$2.59 billion a year ago. The decrease was due to low cash from operating activities, payment on merger and integration, and taxes.

This month, the company entered into a definitive merger agreement to acquire digital marketing and restaurant commerce platform, BentoBox. The transaction may complete by the end of 2021, subject to approvals and other conditions.

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Outlook for 2021

Fiserv kept the internal revenue growth target unchanged at 11% but improved the adjusted earnings per share outlook. The adjected EPS is to be in the range of US$5.55 to US$5.60.

The technology company provides data processing services like electronic funds transfer, payment handling, and loan processing. Based in Brookfield, Wisconsin, the company has a market capitalization of US$66 billion.    

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Source - Pixabay

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Spotify Technology S.A.

Spotify reported a 19% YoY growth in monthly active users (MAUs). Its total MAUs were 381 million, close to its high-end guidance range compared to 365 million in the year-ago quarter. 

The company earns revenue from the Premium Service segment and Ad-Supported service.

The premium subscribers were 172 million in the third quarter, up 19% YoY, compared to 165 million in Q3 the previous year. 

Its total revenue was €2,501 million, up 27% YoY, driven by ad income. 

The Premium revenue grew 22% over the year to €2,178 million, while Ad-Supported revenue grew by 75% YoY to €323 million. 

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Its gross margin was 26.7%, more than the guidance range due to revenue mixes like the shift towards podcasts and improved music advertising.

The net income was €2 million compared to a loss of €101 million in the same quarter the previous year. The loss per share diluted was €0.41 against an EPS diluted of €0.59 in Q3, 2020.

The free cash flow decreased by €4 million to €99 million in Q3 due to increased podcast-related and licensor payments. The company had 7,431 full-time equivalents (FTEs) at the end of the third quarter of 2021.

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Guidance for Q4 2021

The company expects total MAUs to be within 400 million to 407 million and total Premium subscribers to be between 177 million and 181 million. Also, the revenue to be between €2.54 billion and €2.68 billion, and the gross margin range of 25.1% to 26.1%.

The Luxembourg-based broadcaster and streaming service provider has a current market capitalization of US$50 billion.  

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Bottomline

Fiserv’s Q3 revenue beat Wall Street expectations. Still, the company kept the internal revenue growth forecast the same as the first nine months this year. On the other hand, Spotify’s Q3 revenue surged, helped by ad income. However, the FISV stock was down 13% YTD, and the SPOT stock fell 14% YTD. Hence, investors should apply due diligence before investing in stocks.