Like many companies, Fiserv is grappling with the effects of inflation and currency volatility. As the Brookfield, Wisconsin-based global payments and fintech services provider plans for 2023, its executives are “preparing for a softer macroeconomic environment,” CEO Frank Bisignano told analysts on the call.

Fiserv reported third-quarter revenue rose 9%, to $4.5 billion. Net income for the quarter climbed 12% over the year-earlier quarter, to $481 million.

During the third quarter, total expenses ticked up 4% over the year-earlier period, coming in at $3.7 billion, the company reported in a Thursday press release. Fiserv’s severance costs for the quarter jumped 46% to $35 million as the company cut jobs. For the first nine months of 2022, severance expense amounted to $134 million.

As Fiserv faced profit margin pressure in recent months, it began to shed employees during the second quarter, which led to the higher severance expense. The company has pared more of its workforce in recent weeks. 

A spokesperson has declined to comment on the number of Fiserv employees dismissed this year, maintaining that the company has “about 44,000 employees” globally. During today’s call, Bisignano reiterated that the company has “more than 40,000 associates” globally. 

Last week, the company confirmed it’s selling an IT engineering services business unit and Costa Rica operations to Infinite Computer Solutions; the spokesperson declined to comment on financial terms of the deal or the number of Fiserv employees impacted by the transaction. Hau today called the three businesses Fiserv is selling “small, non-strategic units that are low margin.”

The company reported it took a loss on the sale of the Korea operations, but didn’t specify how much was paid for the unit.

In addition to the Milwaukee headquarters, Fiserv will have “new, expanded facilities in Dublin, Ireland and Sao Paulo, Brazil,” Bisignano said during the call. He also noted the company has “made the investments in product, people and infrastructure that will allow us to continue driving better top-line growth.”

While Fiserv continued to feel profit margin pressure in the third quarter, due to acquisition-related investments, inflation and the strong U.S. dollar, cost-cutting measures including the divestitures have the company on track to deliver its guidance on profit margin expansion, Hau said.

Analysts said such cost-cutting initiatives point to a heightened focus on improving profit margins as growth stalls. 

Darrin Peller, an analyst with Wolfe Research, said the context of an uncertain macroeconomic environment has companies like Fiserv taking a closer look at cost management. If executives “really want to make numbers,” they need to offset higher costs, Peller said during an Oct. 19 interview.

“I get the impression they’re going to want to try to find a way to prepare, so that next year, 2023, they can still have healthy profitability,” Peller said. 

Bisignano called out the company’s “hybrid workforce strategy,” and its focus on large hubs like its Berkeley Heights, New Jersey campus. Meanwhile, Fiserv has closed more than 70 facilities during the past two years, he said. 

Hau said some profit margin expansion will come from “basic productivity” now that offices have reopened and “our associate base is returning to the office.” Former Fiserv employees have said the company is shifting away from remote work and cutting some of those who don’t live near a central office.

By Caitlin Mullen on Oct 27, 2022
Original link