Dive Brief:

• Although merger-related “synergy work” caused Fiserv’s expenses to increase in the first half of the year, CEO Frank Bisignano said Monday the company should reap benefits in the remainder of the year as those costs wind down.
• “In the second half of the year, that expense goes away, and the synergy benefit accrues,” Bisignano said during a webcast of his appearance at the Goldman Sachs Communacopia and Technology Conference, when asked about profit margin expansion. “So you get a double benefit in the second half, and that’s really the ramp or the model one should look at,” he said.
• The fourth quarter is likely to see more of a benefit than the third quarter of this year, “but it’s not a complicated problem and it’s not a hard problem,” Bisignano said.

Dive Insight:

Profit margin pressure was a topic of conversation during Fiserv’s second-quarter earnings conference call, when the company cut the rate at which it expects its profit margin to expand this year, pinning that on increased costs.  

Chief Financial Officer Bob Hau told analysts at that time that they should “expect the margins to improve into Q3 and more so into Q4,” as Fiserv wraps up spending related to the acquisitions of BentoBox, Finxact and even the 2019 First Data merger.

The First Data integration period came with “a series of expenses,” Bisignano said Monday during the conference appearance.

As of the end of 2021, Fiserv had “completed the integration activities associated with the achievement of cost synergies, having actioned $1.2 billion in cost synergies as of December 31, 2021, and we expect to incur lower acquisition and integration related costs in 2022,” the company’s most recent 10-K filing noted. 

The company also said in the February filing that it had “achieved 80% of our $600 million revenue synergy target” and expects to snare the remaining revenue synergies by the end of 2022.

The company originally planned for those to be five-year numbers, Bisignano said Monday, but pushed that timeline up, to be complete by the end of 2021. “As that clock expired, if you were still spending money on those efforts, and they were still going on … they came into your [profit and loss statement],” Bisignano said.

In light of higher costs Fiserv has shouldered, Hau told analysts in July that the company has “levers” it can pull. Analysts said that could include job cuts.

As Fiserv cut employees in the first half of the year, severance costs increased. Those expenses rose 80 basis points in the first six months of 2022, compared to the same period in 2021, according to the company’s most recent quarterly report filed with the Securities and Exchange Commission.