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    FISV   US3377381088

FISERV, INC.

(FISV)
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FISERV : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/28/2021 | 07:36am EDT
Forward-Looking Statements
This quarterly report contains "forward-looking statements" intended to qualify
for the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include those that
express a plan, belief, expectation, estimation, anticipation, intent,
contingency, future development or similar expression, and 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 our future plans, objectives or goals are also
forward-looking statements.
The forward-looking statements in this report involve significant risks and
uncertainties, and a number of factors, both foreseen and unforeseen, that could
cause actual results to differ materially from our current expectations. The
factors that may affect our results include, among others, the following, many
of which are, and may continue to be, amplified by the COVID-19 pandemic: the
duration and intensity of the COVID-19 pandemic, including how quickly the
global economy recovers from the impact of the pandemic; governmental and
private sector responses to the COVID-19 pandemic and the impact of such
responses on us; the impact of the COVID-19 pandemic on our employees, clients,
vendors, operations and sales; the possibility that we may be unable to achieve
expected synergies and operating efficiencies from the acquisition of First Data
Corporation ("First Data") within the expected time frames or that the
integration of First Data may be more difficult, time-consuming or costly than
expected; our ability to compete effectively against new and existing
competitors and to continue to introduce competitive new products and services
on a timely, cost-effective basis; changes in customer demand for our products
and services; the ability of our technology to keep pace with a rapidly evolving
marketplace; the successful management of our merchant alliance program which
involves several alliances not under our sole control; the impact of a security
breach or operational failure on our business including disruptions caused by
other participants in the global financial system; the failure of our vendors
and merchants to satisfy their obligations; the successful management of credit
and fraud risks in our business and merchant alliances; changes in local,
regional, national and international economic or political conditions and the
impact they may have on us and our customers; the effect of proposed and enacted
legislative and regulatory actions affecting us or the financial services
industry as a whole; our ability to comply with government regulations and
applicable card association and network rules; the protection and validity of
intellectual property rights; the outcome of pending and future litigation and
governmental proceedings; our ability to successfully identify, complete and
integrate acquisitions, and to realize the anticipated benefits associated with
the same; the impact of our strategic initiatives; our ability to attract and
retain key personnel; volatility and disruptions in financial markets that may
impact our ability to access preferred sources of financing and the terms on
which we are able to obtain financing or increase our costs of borrowing;
adverse impacts from currency exchange rates or currency controls; changes in
corporate tax and interest rates; and other factors included in "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31, 2020 and in
other documents that we file with the Securities and Exchange Commission, which
are available at http://www.sec.gov. You should consider these factors carefully
in evaluating forward-looking statements and are cautioned not to place undue
reliance on such statements, which speak only as of the date of this report. We
undertake no obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this report.
Management's discussion and analysis of financial condition and results of
operations is provided as a supplement to our unaudited consolidated financial
statements and accompanying notes to help provide an understanding of our
financial condition, the changes in our financial condition and our results of
operations. Our discussion is organized as follows:
•Overview. This section contains background information on our company and the
services and products that we provide, acquisitions and dispositions, and the
trends affecting our industry in order to provide context for management's
discussion and analysis of our financial condition and results of operations.
•Changes in critical accounting policies and estimates. This section contains a
discussion of changes since our Annual Report on Form 10-K for the year ended
December 31, 2020 in the accounting policies that we believe are important to
our financial condition and results of operations and that require judgment and
estimates on the part of management in their application.
•Results of operations. This section contains an analysis of our results of
operations presented in the accompanying unaudited consolidated statements of
income by comparing the results for the three and six months ended June 30, 2021
to the comparable periods in 2020.
•Liquidity and capital resources. This section provides an analysis of our cash
flows and a discussion of our outstanding debt at June 30, 2021.
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Overview
Company Background
We are a leading global provider of payments and financial services technology
solutions. We provide account processing and digital banking solutions; card
issuer processing and network services; payments; e-commerce; merchant acquiring
and processing; and the Clover® cloud-based point-of-sale ("POS") solution. We
serve clients around the globe, including banks, credit unions, other financial
institutions, corporate clients and merchants.
We aspire to move money and information in a way that moves the world by
delivering superior value for our clients through leading technology, targeted
innovation and excellence in everything we do. We are focused on driving growth
and creating value by assembling a high-performing and diverse team, integrating
our solutions, delivering operational excellence, allocating capital in a
disciplined manner, including share repurchase and merger and acquisition
activity, and delivering breakthrough innovation.
Our operations are comprised of the Merchant Acceptance ("Acceptance") segment,
the Financial Technology ("Fintech") segment and the Payments and Network
("Payments") segment.
The businesses in our Acceptance segment provide a wide range of
commerce-enabling solutions and serve merchants of all sizes around the world.
These services include POS merchant acquiring and digital commerce services;
mobile payment services; security and fraud protection products; CaratSM, our
omnichannel commerce solution; and our cloud-based Clover® POS platform. We
distribute the products and services in the global Acceptance segment businesses
through a variety of channels, including direct sales teams, strategic
partnerships with agent sales forces, independent software vendors, financial
institutions, and other strategic partners in the form of joint venture
alliances, revenue sharing alliances, and referral agreements. Merchants,
financial institutions and distribution partners in the Acceptance segment are
frequently clients of our other segments.
The businesses in our Fintech segment provide financial institutions around the
world with the technology solutions they need to run their operations, including
products and services that enable financial institutions to process customer
deposit and loan accounts and manage an institution's general ledger and central
information files. As a complement to the core account processing functionality,
the global Fintech segment businesses also provide digital banking, financial
and risk management, professional services and consulting, item processing and
source capture, and other products and services that support numerous types of
financial transactions. Some of the businesses in the Fintech segment provide
products or services to corporate clients to facilitate the management of
financial processes and transactions. Many of the products and services offered
in the Fintech segment are integrated with products and services provided by our
other segments.
The businesses in our Payments segment provide financial institutions and
corporate clients around the world with the products and services required to
process digital payment transactions. This includes card transactions such as
debit, credit and prepaid card processing and services; a range of network
services, security and fraud protection products; card production and print
services. In addition, the global Payments segment businesses offer non-card
digital payment software and services, including bill payment,
account-to-account transfers, person-to-person payments, electronic billing, and
security and fraud protection products. Clients of the Payments segment
businesses reflect a wide range of industries, including merchants, distribution
partners and financial institution customers in our other segments.
Corporate and Other supports the reportable segments described above, and
consists of amortization of acquisition-related intangible assets, unallocated
corporate expenses and other activities that are not considered when we evaluate
segment performance, such as gains or losses on sales of businesses, costs
associated with acquisition and divestiture activity, and our Output Solutions
postage reimbursements. Corporate and Other also includes the historical results
of our Investment Services business prior to the disposition of our controlling
financial interest in February 2020, as well as certain transition services
revenue associated with various dispositions.
Acquisitions and Dispositions
We frequently review our portfolio to ensure we have the right set of businesses
to execute on our strategy. We expect to acquire businesses when we identify: a
compelling strategic need, such as a product, service or technology that helps
meet client demand; an opportunity to change industry dynamics; a way to achieve
business scale; or similar considerations. We expect to divest businesses that
are not in line with our market, product or financial strategies.
Acquisitions
On June 14, 2021, we acquired Spend Labs Inc. ("SpendLabs"), a mobile-native,
cloud-based software provider of commercial card payment solutions. SpendLabs is
included within the Payments segment and further expands our digital
capabilities across
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mobile and desktop devices for small and mid-sized businesses. On May 4, 2021,
we acquired Pineapple Payments Holdings, LLC ("Pineapple Payments"), an
independent sales organization that provides payment processing, proprietary
technology, and payment acceptance solutions for merchants. Pineapple Payments
is included within the Acceptance segment, and expands the reach of our payment
solutions through its technology- and relationship-led distribution channels. On
March 1, 2021, we acquired Radius8, Inc. ("Radius8"), a provider of a platform
that uses consumer location and other information to drive incremental merchant
transactions. Radius8 is included within the Acceptance segment and enhances our
ability to help merchants increase sales, expand mobile application registration
and improve one-to-one target marketing. On January 22, 2021, we acquired a
remaining ownership interest in Ondot Systems, Inc. ("Ondot"), a digital
experience platform provider for financial institutions. We previously held a
noncontrolling equity interest in Ondot, which was accounted for at cost. Ondot
is included within the Payments segment and further expands our digital
capabilities, enhancing our suite of integrated payments, banking and merchant
solutions. We acquired these businesses for an aggregate purchase price of
approximately $526 million, net of $19 million of acquired cash, and including
earn-out provisions estimated at an aggregate fair value of $33 million. The
results of operations for these acquired businesses are included in our
consolidated results from the respective dates of acquisition.
On March 2, 2020, we acquired MerchantPro Express LLC ("MerchantPro"), an
independent sales organization that provides processing services, point-of-sale
equipment and merchant cash advances to businesses across the United States.
MerchantPro is included within the Acceptance segment and further expands our
merchant services business. On March 18, 2020, we acquired Bypass Mobile, LLC
("Bypass"), an independent software vendor and innovator in enterprise
point-of-sale systems for sports and entertainment venues, food service
management providers and national restaurant chains. Bypass is included within
the Acceptance segment and further enhances our ability to help businesses
deliver seamless physical and digital customer experiences. On May 11, 2020, we
acquired Inlet, LLC ("Inlet"), a provider of secure digital delivery solutions
for enterprise and middle-market biller invoices and statements. Inlet is
included within the Payments segment and further enhances our digital bill
payment strategy. We acquired these businesses for an aggregate purchase price
of $167 million, net of $2 million of acquired cash, and including earn-out
provisions estimated at an aggregate fair value of $45 million. The results of
operations for these acquired businesses are included in our consolidated
results from the respective dates of acquisition.
Dispositions
Effective July 1, 2020, we and Bank of America ("BANA") dissolved the Banc of
America Merchant Services joint venture ("BAMS" or the "joint venture"), of
which we maintained a 51% controlling ownership interest. Upon dissolution of
the joint venture's operations, the joint venture transferred a proportionate
share of value, primarily the client contracts, to each party via an agreed upon
contractual separation. The remaining activities of the joint venture consist of
supporting the transition of the business to each party and an orderly wind down
of remaining BAMS assets and liabilities. The revenues and expenses of the BAMS
joint venture were consolidated into our financial results through the date of
dissolution. The business transferred to us is included within our Acceptance
segment.
We continue to provide merchant processing and related services to former BAMS
clients allocated to BANA, at BAMS pricing, through June 2023. We also provide
processing and other support services to new BANA merchant clients pursuant to a
five-year non-exclusive agreement which, after June 2023, will also apply to the
former BAMS clients allocated to BANA. In addition, both companies are entitled
to certain transition services, at fair value, from each other through June
2023.
On February 18, 2020, we sold a 60% controlling interest of our Investment
Services business, subsequently renamed as Tegra118, LLC ("Tegra118"). We
received pre-tax proceeds of $584 million, net of related expenses, resulting in
a pre-tax gain on the sale of $428 million, with a related tax expense of $112
million. The revenues, expenses and cash flows of the Investment Services
business were consolidated into our financial results through the date of the
sale transaction, and is reported within Corporate and Other. On February 2,
2021, Tegra118 completed a merger with a third party, resulting in a dilution of
our ownership interest in the combined new entity, Wealthtech Holdings, LLC,
which was subsequently renamed as InvestCloud Holdings, LLC ("InvestCloud"). In
connection with the transaction, we made an additional capital contribution of
$200 million into the combined entity and recognized a pre-tax gain of $28
million, with a related tax expense of $6 million. On June 30, 2021, we sold our
entire ownership interest in InvestCloud for $466 million, resulting in a
pre-tax gain of $33 million, with a related tax expense of $8 million. We will
continue to provide various technical and data center related services for
defined periods under the terms of a pre-existing transition services agreement.
Industry Trends
The global payments landscape continues to evolve, with rapidly advancing
technologies and a steady expansion of digital payments, e-commerce, and
innovation in real-time payments infrastructure. Because of this growth,
competition also continues to evolve. Business and consumer expectations
continue to rise, with a focus on convenience and security. To meet these
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expectations, payments companies are focused on modernizing their technology,
expanding the use of data and enhancing the customer experience.
Merchants
The rapid growth in and globalization of mobile and e-commerce, driven by
consumers' desire for simpler, more efficient shopping experiences, has created
an opportunity for merchants to reach consumers in high-growth online and mobile
settings, which often requires a merchant acquiring provider to enable and
optimize the acceptance of payments. Merchants are demanding simpler,
integrated, and modern POS systems to help manage their everyday business
operations. When combined with the ever-increasing ways a consumer can pay for
goods and services, merchants have sought modern POS systems to streamline this
complexity. Furthermore, merchants can now search, discover, compare, purchase
and even install a new POS system through direct, digital-only experiences. This
direct, digital-only channel is quickly becoming a source of new merchant
acquisition opportunities, especially with respect to smaller merchants.
In addition, there are numerous software-as-a-service ("SaaS") solutions in the
industry, many of which have chosen to integrate merchant acquiring within their
software as a way to further monetize their client relationships. SaaS solutions
that integrate payments are often referred to as independent software vendors,
and we believe there are thousands of these potential distribution partnership
opportunities available to us.
We believe that our merchant acquiring products and solutions create compelling
value propositions for merchant clients of all sizes, from small and mid-sized
businesses to medium-sized regional businesses to global enterprise merchants,
and across all verticals. Furthermore, we believe that our sizable and diverse
client base, combined with valued partnerships with merchant acquiring
businesses of small, medium and large financial institutions, and non-financial
institutions, gives us a solid foundation for growth.
Financial Institutions
The market for products and services offered by financial institutions continues
to evolve rapidly. The traditional financial industry and other market entrants
regularly introduce and implement new payment, deposit, risk management, lending
and investment products, and the distinctions among the products and services
traditionally offered by different types of financial institutions continue to
narrow as they seek to serve the same customers. At the same time, the evolving
global regulatory and cybersecurity landscape has continued to create a
challenging operating environment for financial institutions. These conditions
are driving heightened interest in solutions that help financial institutions
win and retain customers, generate incremental revenue, comply with regulations
and enhance operating efficiency. Examples of these solutions include electronic
payments and delivery methods such as internet, mobile and tablet banking,
sometimes referred to as "digital channels."
The focus on digital channels by both financial institutions and their
customers, as well as the growing volume and types of payment transactions in
the marketplace, continues to elevate the data and transaction processing needs
of financial institutions. We expect that financial institutions will continue
to invest significant capital and human resources to process transactions,
manage information, maintain regulatory compliance and offer innovative new
services to their customers in this rapidly evolving and competitive
environment. We anticipate that we will benefit over the long term from the
trend of financial institutions moving from in-house technology to outsourced
solutions as they seek to remain current on technology changes in an evolving
marketplace. We believe that economies of scale in developing and maintaining
the infrastructure, technology, products, services and networks necessary to be
competitive in such an environment are essential to justify these investments,
and we anticipate that demand for products that facilitate customer interaction
with financial institutions, including electronic transactions through digital
channels, will continue to increase, which we expect to create revenue
opportunities for us.
In addition to the trends described above, the financial institutions
marketplace has experienced change in composition as well. During the past 25
years, the number of financial institutions in the United States has declined at
a relatively steady rate of approximately 3% per year, primarily as a result of
voluntary mergers and acquisitions. Rather than reducing the overall market,
these consolidations have transferred accounts among financial institutions. If
a client loss occurs due to merger or acquisition, we receive a contract
termination fee based on the size of the client and how early in the contract
term the contract is terminated. These fees can vary from period to period with
the variance depending on the quantum of financial institution merger activity
in a given period and whether or not our clients are involved in the activity.
Our focus on long-term client relationships and recurring, transaction-oriented
products and services has also reduced the impact that consolidation in the
financial services industry has had on us. We believe that the integration of
our products and services creates a compelling value proposition for our clients
by providing, among other things, new sources of revenue and opportunities to
reduce their costs. Furthermore, we believe that our sizable and diverse client
base, combined with our position as a leading provider of non-discretionary,
recurring revenue-based products and services, gives us a solid foundation for
growth.
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Recent Market Conditions
Since early 2020, the world has been, and continues to be, impacted by the novel
strain of the coronavirus ("COVID-19") pandemic. The COVID-19 pandemic, and
various measures imposed by the governments of many countries, states, cities
and other geographic regions to prevent its spread, have negatively impacted
global economic and market conditions, including levels of consumer and business
spending. Consequently, our operating performance, primarily within our merchant
acquiring and payment-related businesses, which earn transaction-based fees, has
been adversely affected, and may continue to be adversely affected, by the
economic impact of the COVID-19 pandemic. Such uncertainty remains despite
improving trends in global economic activity and market conditions.
We have taken several actions since the onset of the pandemic to protect the
health, safety and well-being of our employees while maintaining business
continuity. These actions include, among others, requiring a majority of our
employees to work remotely, eliminating non-essential travel, limiting visitors
to our facilities, disinfecting facilities and workspaces extensively and
frequently, providing personal protective equipment to associates and requiring
employees who are present at our facilities to adhere to a variety of safety
protocols. In addition, we have expanded paid time-off for employees impacted by
COVID-19, provided increased pay for certain employees involved in critical
infrastructure who could not work remotely, and expanded our Fiserv Cares
program to benefit employees in need around the world. We recently began a
limited reopening of our offices and expect to continue to gradually reopen
additional facilities during the second half of 2021 while observing appropriate
safety measures.
Our operating performance is subject to global economic and market conditions,
as well as their impacts on levels of consumer and business spending. As a
result of the COVID-19 pandemic and the related decline in global economic
activity, we experienced a significant decrease in payments volume and
transactions beginning in late March 2020 that negatively impacted our merchant
acquiring and payment-related businesses, which earn transaction-based fees, as
well as modest declines in other businesses. Merchant acquiring transaction and
payment volumes began to partially recover throughout the remainder of 2020 with
continued transaction and payment volume growth through the second quarter of
2021. Accordingly, our merchant acquiring and payment-related businesses were
less impacted by the COVID-19 pandemic during the first six months of 2021 than
they were throughout most of fiscal 2020. While this recent business trend is
positive, the uncertainty caused by the pandemic continues to create an economic
environment where our future financial results remain difficult to anticipate.
We currently expect payments volume and transactions to continue to improve
throughout 2021, consistent with consumer and business spending experienced to
date.
The extent of the impact of the pandemic on our future operational and financial
performance will depend on, among other matters, the duration and intensity of
the pandemic; governmental and private sector responses to the pandemic and the
impact of such responses on us; the level of success of global vaccination
efforts; and the impact of the pandemic on our employees, clients, supply chain,
operations and sales, all of which are uncertain and cannot be predicted.
Changes in Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes have been prepared
in accordance with accounting principles generally accepted in the United
States, which require management to make estimates, judgments and assumptions
that affect the reported amount of assets, liabilities, revenue and expenses. In
our Annual Report on Form 10-K for the year ended December 31, 2020, we
identified our critical accounting policies and estimates. We continually
evaluate the accounting policies and estimates that we use to prepare our
consolidated financial statements, including for recently adopted accounting
pronouncements, and base our estimates on historical experience and assumptions
that we believe are reasonable in light of current circumstances. Actual amounts
and results could differ materially from these estimates. There have been no
material changes to our critical accounting policies and estimates from those
disclosed in our Annual Report on Form 10-K for the year ended December 31,
2020.
Results of Operations
The following table presents certain amounts included in our consolidated
statements of income, the relative percentage that those amounts represent to
revenue and the change in those amounts from year-to-year. This information
should be read together with the unaudited consolidated financial statements and
accompanying notes. The unaudited financial results presented below have been
affected by acquisitions, dispositions, and foreign currency fluctuations.
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                                                                                             Three Months Ended June 30,
                                                                                            Percentage of
                                                                                             Revenue (1)                                     Increase
(Decrease)
(In millions)                               2021                 2020                 2021                    2020                           $                           %
Revenue:
Processing and services               $    3,361              $ 2,890                      83.0  %              83.4  %       $             471                           16  %
Product                                      690                  575                      17.0  %              16.6  %                     115                           20  %
Total revenue                              4,051                3,465                     100.0  %             100.0  %                     586                           17  %
Expenses:
Cost of processing and services            1,498                1,466                      44.6  %              50.7  %                      32                            2  %
Cost of product                              469                  454                      68.0  %              79.0  %                      15                            3  %
Sub-total                                  1,967                1,920                      48.6  %              55.4  %                      47                            2  %
Selling, general and administrative        1,440                1,377                      35.5  %              39.7  %                      63                            5  %
Loss on sale of business                       -                    3                         -  %               0.1  %                      (3)                            n/m
Total expenses                             3,407                3,300                      84.1  %              95.2  %                     107                            3  %
Operating income                             644                  165                      15.9  %               4.7  %                     479                          290  %
Interest expense, net                       (175)                (174)                     (4.3) %              (5.0) %                       1                            1  %

Other income                                   1                    1                         -  %                 -  %                       -                            -  %
Income (loss) before income taxes and
income (loss) from investments in
unconsolidated affiliates                    470                   (8)                     11.6  %              (0.2) %                     478                             n/m
Income tax (provision) benefit              (228)                  27                      (5.6) %               0.8  %                     255                             n/m
Income (loss) from investments in
unconsolidated affiliates                     42                  (10)                      1.0  %              (0.3) %                      52                             n/m
Net income                                   284                    9                       7.0  %               0.3  %                     275                             n/m
Less: net income attributable to
noncontrolling interests                      15                    7                       0.4  %               0.2  %                       8                          114  %
Net income attributable to Fiserv,
Inc.                                  $      269              $     2                       6.6  %               0.1  %       $             267                             n/m


(1)Percentage of revenue is calculated as the relevant revenue, expense, income
or loss amount divided by total revenue, except for cost of processing and
services and cost of product amounts, which are divided by the related component
of revenue.
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                                                                                                  Six Months Ended June 30,
                                                                                              Percentage of
                                                                                               Revenue (1)                                     Increase (Decrease)
(In millions)                                   2021               2020                 2021                    2020                           $                            %
Revenue:
Processing and services                    $   6,415            $ 5,965                      82.2  %              82.5  %       $             450                             8  %
Product                                        1,391              1,269                      17.8  %              17.5  %                     122                            10  %
Total revenue                                  7,806              7,234                     100.0  %             100.0  %                     572                             8  %
Expenses:
Cost of processing and services                2,895              3,101                      45.1  %              52.0  %                    (206)                           (7) %
Cost of product                                  979                986                      70.4  %              77.7  %                      (7)                           (1) %
Sub-total                                      3,874              4,087                      49.6  %              56.5  %                    (213)                           (5) %
Selling, general and administrative            2,813              2,781                      36.0  %              38.4  %                      32                             1  %
Gain on sale of business                           -               (428)                        -  %              (5.9) %                     428                              n/m
Total expenses                                 6,687              6,440                      85.7  %              89.0  %                     247                             4  %
Operating income                               1,119                794                      14.3  %              11.0  %                     325                            41  %
Interest expense, net                           (351)              (361)                     (4.5) %              (5.0) %                      10                             3  %

Other income                                      22                 21                       0.3  %               0.3  %                       1                             5  %
Income before income taxes and income
(loss) from investments in unconsolidated
affiliates                                       790                454                      10.1  %               6.3  %                     336                            74  %
Income tax provision                            (246)               (52)                     (3.2) %              (0.7) %                    (194)                          373  %
Income (loss) from investments in
unconsolidated affiliates                         58                (16)                      0.7  %              (0.2) %                      74                              n/m
Net income                                       602                386                       7.7  %               5.3  %                     216                            56  %
Less: net income (loss) attributable to
noncontrolling interests                               29            (8)                      0.4  %              (0.1) %                      37                              n/m
Net income attributable to Fiserv, Inc.    $     573            $   394                       7.3  %               5.4  %       $             179                            45  %


(1)Percentage of revenue is calculated as the relevant revenue, expense, income
or loss amount divided by total revenue, except for cost of processing and
services and cost of product amounts, which are divided by the related component
of revenue.
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                                                                           Three Months Ended June 30,
                                                                                                             Corporate
(In millions)                   Acceptance                 Fintech                Payments                   and Other                    Total
Total revenue:
2021                        $    1,666                $    754                $ 1,421                $               210             $ 4,051
2020                             1,223                     714                  1,320                                208               3,465
Revenue growth              $      443                $     40                $   101                $                 2             $   586
Revenue growth percentage           36  %                    6  %                   8  %                                                  17  %
Operating income (loss):
2021                        $      524                $    273                $   629                $             (782)             $   644
2020                               245                     252                    548                              (880)                 165
Operating income growth     $      279                $     21                $    81                $                98             $   479
Operating income growth
percentage                         114  %                    8  %                  15  %                                                 290  %
Operating margin:
2021                              31.4  %                 36.2  %                44.3  %                                                15.9  %
2020                              20.0  %                 35.4  %                41.5  %                                                 4.7  %
Operating margin growth (1)         1,140 bps               80    bps             280    bps                                           1,120    bps



                                                                        Six Months Ended June 30,
                                                                                                        Corporate
(In millions)                   Acceptance                Fintech                Payments               and Other                 Total
Total revenue:
2021                        $    3,063                $ 1,490                $ 2,826                $     427                $ 7,806
2020                             2,624                  1,432                  2,706                      472                  7,234
Revenue growth              $      439                $    58                $   120                $     (45)               $   572
Revenue growth percentage           17  %                   4  %                   4  %                                            8  %
Operating income (loss):
2021                        $      911                $   519                $ 1,207                $  (1,518)               $ 1,119
2020                               562                    456                  1,113                   (1,337)                   794
Operating income growth     $      349                $    63                $    94                $    (181)               $   325
Operating income growth
percentage                          62  %                  14  %                   8  %                                           41  %
Operating margin:
2021                              29.7  %                34.9  %                42.7  %                                         14.3  %
2020                              21.4  %                31.9  %                41.2  %                                         11.0  %
Operating margin growth (1)           830 bps             300    bps             150    bps                                      330    bps


(1)Represents the basis point growth or decline in operating margin.
Operating margin percentages are calculated using actual, unrounded amounts.
Total Revenue
Total revenue increased $586 million, or 17%, in the second quarter of 2021 and
increased $572 million, or 8%, in the first six months of 2021 compared to 2020.
The revenue increase was primarily due to improved payment and transaction
volumes in our merchant acquiring and payment-related businesses, which were
adversely affected by the economic impact of the COVID-19 pandemic during the
last two weeks of March and throughout the second quarter of 2020. This growth
was partially offset by the loss of revenue attributable to dispositions that
had revenue of $68 million and $153 million in the second quarter and first six
months of 2021, respectively.
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Revenue in our Acceptance segment increased $443 million, or 36%, in the second
quarter of 2021 and increased $439 million, or 17%, in the first six months of
2021 compared to 2020. The revenue increase was primarily due to improved
merchant acquiring payment and transaction volumes, which were adversely
affected in the second quarter of 2020 by the economic impact of the COVID-19
pandemic. Revenue increases from volume growth were partially offset by revenue
reductions from the dissolution of the BAMS joint venture of 5% in each of the
second quarter and first six months of 2021.
Revenue in our Fintech segment increased $40 million, or 6%, in the second
quarter of 2021 and increased $58 million, or 4%, in the first six months of
2021 compared to 2020, driven by recurring revenue growth from higher processing
revenue across our Fintech businesses. Fintech revenue growth was partially
offset by 1% in both the second quarter and first six months of 2021 from a
decline in termination fee revenue.
Revenue in our Payments segment increased $101 million, or 8%, in the second
quarter of 2021 and increased $120 million, or 4%, in the first six months of
2021 compared to 2020. Increased transaction volumes drove revenue contributions
across multiple Payments segment businesses in 2021, including revenue
contributions of 4% and 3% from our debit processing business in the second
quarter and first six months of 2021, respectively, and 1% from our Zelle®
business in each period. In addition, our prepaid solutions business contributed
1% to Payments segment revenue growth in both the second quarter and first six
months of 2021, attributable to increased card fulfillment. These increases were
partially offset by revenue reductions of 1% and 2% from our bill payment
business in the second quarter and first six months of 2021, respectively.
Revenue at Corporate and Other increased $2 million, or 1%, in the second
quarter of 2021 and decreased $45 million, or 10%, in the first six months of
2021 compared to 2020. Postage revenue declines and the disposition of a 60%
controlling interest of our Investment Services business reduced Corporate and
Other revenue in the first six months of 2021 by 6% and 4%, respectively.
Total Expenses
Total expenses increased $107 million, or 3%, in the second quarter of 2021 and
increased $247 million, or 4%, in the first six months of 2021 compared to 2020.
Total expenses as a percentage of total revenue decreased 1,110 basis points to
84.1% in the second quarter and decreased 330 basis points to 85.7% in the first
six months of 2021 compared to 2020. Total expenses as a percentage of total
revenue were favorably impacted in 2021 by operating leverage accompanying
revenue growth, along with lower acquisition and integration related expenses of
$77 million in the second quarter and $181 million in the first six months of
2021, respectively, and lower severance costs of $28 million in the second
quarter and $65 million in the first six months of 2021, respectively.
Cost of processing and services as a percentage of processing and services
revenue decreased to 44.6% in the second quarter of 2021 compared to 50.7% in
the second quarter of 2020 and decreased to 45.1% in the first six months of
2021 compared to 52.0% in the first six months of 2020. Cost of processing and
services as a percentage of processing and services revenue was favorably
impacted in the second quarter and first six months of 2021 primarily due to
strong operating leverage across our businesses, along with approximately 90
basis points and 110 basis points from decreased acquisition and integration
related expenses and approximately 30 basis points and 50 basis points from
decreased severance costs compared to the second quarter and first six months of
2020, respectively.
Cost of product as a percentage of product revenue decreased to 68.0% in the
second quarter of 2021 compared to 79.0% in the second quarter of 2020 and
decreased to 70.4% in first six months of 2021 compared to 77.7% in the first
six months of 2020. The cost of product as a percentage of product revenue
improved in the second quarter and first six months of 2021 as a result of
revenue mix, including lower postage pass-through revenue.
Selling, general and administrative expenses as a percentage of total revenue
decreased to 35.5% in the second quarter of 2021 compared to 39.7% in the second
quarter of 2020 and decreased to 36.0% in the first six months of 2021 compared
to 38.4% in the first six months of 2020. The decrease in selling, general and
administrative expenses as a percentage of total revenue was primarily due to
strong operating leverage across our businesses, along with approximately 170
basis points from decreased acquisition and integration related expenses and
approximately 40 basis points from decreased severance costs compared to both
the second quarter and first six months of 2020.
The gain on sale of business of $428 million in the first quarter of 2020
resulted from the sale of a 60% interest of our Investment Services business in
February 2020.
Operating Income and Operating Margin
Total operating income increased $479 million, or 290%, in the second quarter of
2021 and increased $325 million, or 41%, in the first six months of 2021
compared to 2020. Total operating margin increased 1,120 basis points to 15.9%
in the second
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quarter of 2021 and increased 330 basis points to 14.3% in the first six months
of 2021 compared to 2020. Total operating income and total operating margin
benefited from improved operating leverage accompanying scalable revenue growth
in the second quarter and first six months of 2021 and were also impacted by a
$428 million gain on sale of a 60% interest of our Investment Services business
in the first quarter of 2020.
Operating income in our Acceptance segment increased $279 million, or 114%, in
the second quarter of 2021 and increased $349 million, or 62%, in the first six
months of 2021 compared to 2020. Operating margin increased 1,140 basis points
to 31.4% in the second quarter of 2021 and increased 830 basis points to 29.7%
in the first six months of 2021 compared to 2020. Acceptance operating margin
growth in both the second quarter and first six months of 2021 was primarily due
to scalable revenue growth as discussed above.
Operating income in our Fintech segment increased $21 million, or 8%, in the
second quarter of 2021 and increased $63 million, or 14% in the first six months
of 2021 compared to 2020. Operating margin increased 80 basis points to 36.2% in
the second quarter of 2021 and increased 300 basis points to 34.9% in the first
six months of 2021 compared to 2020. Fintech segment operating margin
improvement in the second quarter of 2021 was driven by revenue growth as
discussed above. Operating margin improvement in the first six months of 2021
also reflects the impact of expense management initiatives across the segment,
including lower personnel costs of approximately 100 basis points and additional
expense reductions attributable to lower travel and marketing expenses of
approximately 60 basis points.
Operating income in our Payments segment increased $81 million, or 15%, in the
second quarter of 2021 and increased $94 million, or 8%, in the first six months
of 2021 compared to 2020. Operating margin increased 280 basis points to 44.3%
in the second quarter of 2021 and increased 150 basis points to 42.7% in the
first six months of 2021 compared to 2020. Payments segment operating margin
growth in both the second quarter and first six months of 2021 was primarily
attributable to scalable revenue growth as discussed above.
The operating loss in Corporate and Other decreased $98 million in the second
quarter of 2021 and increased $181 million in the first six months of 2021
compared to 2020. Corporate and Other was favorably impacted in 2021 by a
reduction of acquisition and integration related costs of $77 million in the
second quarter and $181 million in the first six months of 2021 and lower
severance costs of $28 million in the second quarter and $65 million in the
first six months of 2021 compared to 2020. Corporate and Other was favorably
impacted in the first six months of 2021 by a $428 million gain on the sale of a
60% interest of our Investment Services business.
Interest Expense, Net
Interest expense, net was relatively consistent in the second quarter of 2021
compared to 2020, and decreased $10 million, or 3%, in the first six months of
2021 compared to 2020 primarily due to lower outstanding borrowings.
Other Income
Other income was relatively consistent through the first six months of 2021
compared to 2020. Other income includes net foreign currency transaction gains
and losses, gains or losses from a change in fair value of investments in
certain equity securities, amounts related to the release of risk under our
non-contingent guarantee arrangements and changes in the provision of estimated
credit losses associated with indebtedness of certain joint ventures. Other
income includes net foreign currency transaction gains of $1 million and $11
million in the first six months of 2021 and 2020, respectively, as well as $12
million in the first six months of 2021 related to a pre-tax gain on the
remeasurement of a previously held investment in Ondot to fair value upon
acquiring the remaining ownership interest in that entity.
Income Tax Provision
Income tax (provision) benefit as a percentage of income (loss) before income
taxes and income (loss) from investments in unconsolidated affiliates was 48.5%
and 337.5% for the three months ended June 30, 2021 and 2020, respectively, and
was 31.1% and 11.5% for the first six months of 2021 and 2020, respectively. The
effective income tax rate for the three months ended June 30, 2021 includes $134
million of income tax expense attributed to the revaluation of certain net
deferred tax liabilities, primarily related to intangible assets and investments
in joint ventures recognized at fair value in connection with the acquisition of
First Data, reflecting the effect of enacted corporate income tax rate changes
in the United Kingdom (tax rate increase from 19% to 25% starting in 2023) and
Argentina (tax rate increase from 25% to 35%), partially offset by decreases in
uncertain tax positions. For the three months ended June 30, 2020, the income
tax benefit of $27 million on an $8 million loss before income taxes and loss
from investments in unconsolidated affiliates included equity compensation
related tax benefits, changes in uncertain tax positions and other discrete tax
items. The effective income tax rate for the six months ended June 30, 2021
includes $134 million of income tax expense noted above, partially offset by
discrete tax benefits from subsidiary restructurings and equity compensation
related tax benefits. The effective income tax rate for the six months ended
June 30,
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2020, included $112 million of income tax expense associated with the $428
million gain on the sale of a 60% interest of our Investment Services business,
partially offset by the impact of equity compensation related tax benefits on a
lower level of pre-tax income and changes in uncertain tax positions.
Income (Loss) from Investments in Unconsolidated Affiliates
Our share of net income or loss from affiliates accounted for using the equity
method of accounting is reported as income (loss) from investments in
unconsolidated affiliates and the related tax expense or benefit is reported
within the income tax (provision) benefit in the consolidated statements of
income. Income (loss) from investments in unconsolidated affiliates, including
acquired intangible asset amortization from valuations in purchase accounting,
was $42 million and $(10) million in the second quarter of 2021 and 2020,
respectively, and $58 million and $(16) million in the first six months of 2021
and 2020, respectively. Income from investments in unconsolidated affiliates for
the three months ended June 30, 2021 included a $33 million pre-tax gain
resulting from the sale of our remaining ownership interest in InvestCloud.
Income from investments in unconsolidated affiliates for the first six months of
2021 also included a $28 million pre-tax gain resulting from the dilution of our
ownership interest in connection with the Tegra118 merger with a third party.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests and redeemable
noncontrolling interests relates to the ownership interest of our consolidated
alliance partners in our consolidated results. Net income (loss) attributable to
noncontrolling interests, including acquired intangible asset amortization from
valuations in purchase accounting, was $15 million and $7 million in the second
quarter of 2021 and 2020, respectively, and $29 million and $(8) million in the
first six months of 2021 and 2020, respectively.
Net Income Per Share - Diluted
Net income attributable to Fiserv, Inc. per share-diluted was $0.40 and $0.00 in
the second quarter of 2021 and 2020, respectively, and was $0.85 and $0.57 in
the first six months of 2021 and 2020, respectively. Net income attributable to
Fiserv, Inc. per share-diluted in the first six months of 2021 included discrete
tax items related to the revaluation of deferred taxes due to a change in the
respective statutory tax rates in the United Kingdom and Argentina. Net income
attributable to Fiserv, Inc. per share-diluted in the first six months of 2020
included a gain from the sale of a 60% interest of our Investment Services
business, along with higher merger and integration costs associated with the
acquisition of First Data.
Liquidity and Capital Resources
General
Our primary liquidity needs in the ordinary course of business are to: (i) fund
normal operating expenses; (ii) meet the interest and principal requirements of
our outstanding indebtedness, including finance leases; and (iii) fund capital
expenditures and operating lease payments. We believe these needs will be
satisfied using cash flow generated by our operations, along with our cash and
cash equivalents of $841 million, proceeds from the issuance of U.S. commercial
paper notes, and available capacity under our revolving credit facility of $2.4
billion (net of $1.1 billion of capacity designated for outstanding borrowings
under our commercial paper notes program) at June 30, 2021.

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The following table summarizes our operating cash flow and capital expenditure
amounts for the six months ended June 30, 2021 and 2020, respectively:
                                                           Six Months Ended
                                                               June 30,                                 Increase (Decrease)
(In millions)                                           2021              2020                          $                            %
Net income                                          $     602          $    386          $             216
Depreciation and amortization                           1,635             1,673                        (38)

Share-based compensation                                  127               202                        (75)

Deferred income taxes                                     (69)              (94)                        25
Gain on sale of business                                    -              (428)                       428

(Income) loss from investments in unconsolidated
affiliates                                                (58)               16                        (74)

Distributions from unconsolidated affiliates               13                12                          1
Non-cash impairment charges                                 5                40                        (35)
Net changes in working capital and other                 (242)              112                       (354)
Operating cash flow                                 $   2,013          $  1,919          $              94                             5  %
Capital expenditures, including capitalized
software and other intangibles                      $     494          $    488          $               6                             1  %


Our net cash provided by operating activities, or operating cash flow, was $2.0
billion in the first six months of 2021, an increase of 5% compared with $1.9
billion in the first six months of 2020. This increase was primarily
attributable to improved operating results compared to the prior period,
partially offset by unfavorable fluctuations in working capital, including
increased accounts receivable corresponding to revenue growth.
Our current policy is to use our operating cash flow primarily to fund capital
expenditures, share repurchases, acquisitions and to repay debt rather than to
pay dividends. Our capital expenditures were approximately 6% and 7% of our
total revenue for the first six months of 2021 and 2020, respectively.
Share Repurchases
In May 2021, New Omaha Holdings L.P. ("New Omaha"), a shareholder of ours,
completed an underwritten secondary public offering of 23.0 million shares of
our common stock (the "offering"). We repurchased from the underwriters 5.0
million shares of our common stock that were subject to the offering. The share
repurchase totaled $588 million and was funded with cash on hand. The
repurchased shares were cancelled and no longer outstanding following the
completion of the share repurchase.
Including the repurchase described above, we purchased $1.2 billion and $1.4
billion of our common stock during the first six months of 2021 and 2020,
respectively. As of June 30, 2021, we had approximately 55.5 million shares
remaining under our current repurchase authorization. Shares repurchased are
generally held for issuance in connection with our equity plans.
Acquisitions and Dispositions
Acquisitions
In June 2021 we acquired SpendLabs, in May 2021 we acquired Pineapple Payments,
and in March 2021 we acquired Radius8. Additionally, in January 2021, we
acquired a remaining ownership interest in Ondot, in which we previously held a
noncontrolling equity interest. We acquired these businesses for an aggregate
purchase price of approximately $526 million, net of $19 million of acquired
cash, and including earn-out provisions estimated at an aggregate fair value of
$33 million. We funded these acquisitions by utilizing a combination of
available cash and existing availability under our revolving credit facility.
The results of operations for these acquired businesses are included in our
consolidated results from the respective dates of acquisition.
In May 2020, we acquired Inlet and, in March 2020, we acquired MerchantPro and
Bypass. We acquired these businesses for an aggregate purchase price of $167
million, net of $2 million of acquired cash, and including earn-out provisions
estimated at a fair value of $45 million. We funded these acquisitions by
utilizing a combination of available cash and existing availability under our
revolving credit facility. The results of operations for these acquired
businesses are included in our consolidated results from the respective dates of
acquisition.
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Dispositions
Effective July 2020, we and BANA dissolved the BAMS joint venture, of which we
maintained a 51% controlling ownership interest. Upon dissolution of the joint
venture's operations, the joint venture transferred a proportionate share of
value, primarily the client contracts, to each party via an agreed upon
contractual separation. The remaining activities of the joint venture consist of
supporting the transition of the business to each party and an orderly wind down
of remaining BAMS assets and liabilities. The revenues and expenses of the BAMS
joint venture were consolidated into our financial results through the date of
dissolution. The business transferred to us is included within our Acceptance
segment.
We continue to provide merchant processing and related services to former BAMS
clients allocated to BANA, at BAMS pricing, through June 2023. We also provide
processing and other support services to new BANA merchant clients pursuant to a
five-year non-exclusive agreement which, after June 2023, will also apply to the
former BAMS clients allocated to BANA. In addition, both companies are entitled
to certain transition services, at fair value, from each other through June
2023.
In February 2020, we sold a 60% controlling interest of our Investment Services
business, subsequently renamed as Tegra118. We received pre-tax proceeds of $584
million, net of related expenses, resulting in a pre-tax gain on the sale of
$428 million, with the related tax expense of $112 million. The revenues,
expenses and cash flows of the Investment Services business were consolidated
into our financial results through the date of the sale transaction. The net
proceeds from the sale were primarily used to repurchase shares of our common
stock. In February 2021, Tegra118 completed a merger with a third party,
resulting in a dilution of our ownership interest in the combined new entity,
Wealthtech Holdings, LLC, which was subsequently renamed as InvestCloud. In
connection with the transaction, we made an additional capital contribution,
funded under our revolving credit facility, of $200 million into the combined
entity and recognized a pre-tax gain of $28 million, with a related tax expense
of $6 million. In June 2021, we sold our entire ownership interest in
InvestCloud for $466 million, resulting in a pre-tax gain of $33 million, with a
related tax expense of $8 million. The net proceeds from the sale were primarily
used to pay down the outstanding borrowings on our term loan facility.
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Indebtedness
(In millions)                                                        June 30, 2021           December 31, 2020

Short-term and current maturities of long-term debt:

  Foreign lines of credit                                          $          131          $              144
  Finance lease and other financing obligations                               287                         240

Total short-term and current maturities of long-term debt $

   418          $              384

Long-term debt:

  4.750% senior notes due June 2021                                $            -          $              400
  3.500% senior notes due October 2022                                        700                         700
  0.375% senior notes due July 2023 (Euro-denominated)                        596                         612
  3.800% senior notes due October 2023                                      1,000                       1,000
  2.750% senior notes due July 2024                                         2,000                       2,000
  3.850% senior notes due June 2025                                           900                         900
  2.250% senior notes due July 2025 (British Pound-denominated)               729                         709
  3.200% senior notes due July 2026                                         2,000                       2,000
  2.250% senior notes due June 2027                                         1,000                       1,000
  1.125% senior notes due July 2027 (Euro-denominated)                        596                         612
  4.200% senior notes due October 2028                                      1,000                       1,000
  3.500% senior notes due July 2029                                         3,000                       3,000
  2.650% senior notes due June 2030                                         1,000                       1,000
  1.625% senior notes due July 2030 (Euro-denominated)                        596                         612
  3.000% senior notes due July 2031 (British Pound-denominated)               729                         709
  4.400% senior notes due July 2049                                         2,000                       2,000
  Receivable securitized loan                                                 425                         425
  Term loan facility                                                          755                       1,250
  Unamortized discount and deferred financing costs                          (141)                       (155)
  U.S. commercial paper notes                                               1,060                           -
  Revolving credit facility                                                     -                          22
  Finance lease and other financing obligations                               480                         504
Total long-term debt                                               $       20,425          $           20,300


At June 30, 2021, our debt consisted primarily of $17.8 billion of fixed-rate
senior notes, $1.1 billion of outstanding borrowings under our U.S. commercial
paper notes program, and $755 million of variable rate term loan. Interest on
our U.S. dollar-denominated senior notes is paid semi-annually, while interest
on our Euro and British Pound-denominated senior notes is paid annually.
Interest on our revolving credit facility and commercial paper notes is
generally paid weekly, or more frequently on occasion, and interest on our term
loan is paid monthly. Outstanding borrowings under the commercial paper notes
program are classified in the consolidated balance sheet as long-term, as we
have the intent to refinance these notes on a long-term basis through the
continued issuance of new commercial paper notes upon maturity, and we also have
the ability to refinance such notes under our revolving credit facility. We used
the net proceeds from the issuance of commercial paper notes to repay
outstanding borrowings under our revolving credit facility, to repay our 4.750%
senior notes that matured in June 2021, and for other general corporate
purposes.
The indentures governing our senior notes contain covenants that, among other
matters, limit (i) our ability to consolidate or merge with or into, or convey,
transfer or lease all or substantially all of our properties and assets to,
another person, (ii) our and certain of our subsidiaries' ability to create or
assume liens, and (iii) our and certain of our subsidiaries' ability to engage
in sale and leaseback transactions. We may, at our option, redeem the senior
notes, in whole or from time to time in part, at any time prior to the
applicable maturity date.
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The revolving credit facility and term loan facility contain various
restrictions and covenants that require us, among other things, to (i) limit our
consolidated indebtedness as of the end of each fiscal quarter to no more than
three and one-half times our consolidated net earnings before interest, taxes,
depreciation, amortization, non-cash charges and expenses and certain other
adjustments ("EBITDA") during the period of four fiscal quarters then ended,
subject to certain exceptions, and (ii) maintain EBITDA of at least three times
our consolidated interest expense as of the end of each fiscal quarter for the
period of four fiscal quarters then ended.
During the first six months of 2021, we were in compliance with all financial
debt covenants. Our ability to meet future debt covenant requirements will
depend on our continued ability to generate earnings and cash flows. We expect
to remain in compliance with all terms and conditions associated with our
outstanding debt, including financial debt covenants.
Variable Rate Debt
Our variable rate debt consisted of the following at June 30, 2021:
                                                                                                                      Outstanding
(In millions)                                     Maturity                 Weighted-Average Interest Rate             Borrowings
Foreign lines of credit                             n/a                                30.27%                                  131
Receivable securitized loan                      July 2022                             0.95%                                   425
Term loan facility                               July 2024                             1.33%                      $            755
U.S. commercial paper program                     various                              0.18%                                 1,060
Revolving credit facility                      September 2023                            -%                                      -
Total variable rate debt                                                                                          $          2,371


We maintain certain short-term lines of credit with foreign banks and alliance
partners primarily to fund settlement activity. These arrangements are primarily
associated with our international operations and are in various functional
currencies, the most significant of which is the Argentine peso.
We maintain a consolidated wholly-owned subsidiary, First Data Receivables, LLC
("FDR"). FDR is a party to certain receivables financing arrangements, including
an agreement ("Receivables Financing Agreement") with certain financial
institutions and other persons from time to time party thereto as lenders and
group agents, pursuant to which certain of our wholly-owned subsidiaries have
agreed to transfer and contribute receivables to FDR, and FDR in turn may obtain
borrowings from the financial institutions and other lender parties to the
Receivables Financing Agreement secured by liens on those receivables. FDR's
assets are not available to satisfy the obligations of any other of our entities
or affiliates, and FDR's creditors would be entitled, upon its liquidation, to
be satisfied out of FDR's assets prior to any assets or value in FDR becoming
available to us. FDR held $1.1 billion in receivables as part of the
securitization program, and utilized the receivables as collateral in borrowings
of $425 million at June 30, 2021. At June 30, 2021, the collateral capacity
under the Receivables Financing Agreement was $840 million, and the maximum
borrowing capacity was $500 million.
Beginning in May 2021, we have maintained a U.S. unsecured commercial paper
notes program with various maturities ranging from one to three weeks.
Outstanding borrowings under the commercial paper notes bear interest based on
the prevailing rates at the time of issuance.
We maintain an amended and restated revolving credit facility with aggregate
commitments available for $3.5 billion of total capacity. Outstanding borrowings
under the revolving credit facility and term loan bear interest at a variable
rate based on LIBOR or a base rate, plus, in each case, a specified margin based
on our long-term debt rating in effect from time to time. There are no
significant commitment fees and no compensating balance requirements on the
revolving credit facility.
Cash and Cash Equivalents
Investments (other than those included in settlement assets) with original
maturities of three months or less that are readily convertible to cash are
considered to be cash equivalents. At June 30, 2021 and December 31, 2020, we
held $841 million and $906 million in cash and cash equivalents, respectively.
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The table below details the cash and cash equivalents at:
                                     June 30, 2021                          

December 31, 2020

     (In millions)      Domestic       International       Total      Domestic      International       Total
     Available         $     261      $          188      $ 449      $    337      $          177      $ 514
     Unavailable (1)          52                 340        392            57                 335        392
     Total             $     313      $          528      $ 841      $    394      $          512      $ 906


(1)Represents cash held primarily by our joint ventures that is not available to
fund operations outside of those entities unless the board of directors for said
entities declares a dividend, as well as cash held by certain other entities
that are subject to foreign exchange controls in certain countries or regulatory
capital requirements.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has created significant uncertainty as to general global
economic and market conditions. We believe we have adequate capital resources
and sufficient access to external financing sources to satisfy our current and
reasonably anticipated requirements for funds to conduct our operations and meet
other needs in the ordinary course of our business. However, as the impact of
the pandemic on the economy and our operations further evolves, we will continue
to assess our liquidity needs. The ability to continue to service debt and meet
lease and other obligations as they come due is dependent on our continued
ability to generate earnings and cash flows. A lack of continued recovery or
further deterioration in economic and market conditions could materially affect
our future access to our sources of liquidity, particularly our cash flows from
operations.
We engage in regular communication with the banks that participate in our
revolving credit facility. During these communications, none of the banks have
indicated that they may be unable to perform on their commitments. We
periodically review our banking and financing relationships, considering the
stability of the institutions, pricing we receive on services, and other aspects
of the relationships. Based on these communications and our monitoring
activities, we believe the likelihood of one of our banks not performing on its
commitment is remote. We maintain a U.S. commercial paper notes program to
access funding for general corporate purposes at favorable rates and to provide
a source of liquidity. As of June 30, 2021, we had a commercial paper credit
rating of P-2 from Moody's Investors Service, Inc. ("Moody's") and A-2 from
Standard & Poor's Rating Services ("S&P). Any downgrade to our commercial paper
credit ratings or instability in the commercial paper markets may adversely
impact our ability to access funding through our commercial paper notes program
and require us to rely more heavily on more expensive financing arrangements,
including our revolving credit facility. In addition, the long-term debt markets
have historically provided us with a source of liquidity. Although we do not
currently anticipate an inability to obtain financing from long-term debt
markets in the future, the COVID-19 pandemic could make financing more difficult
and/or expensive to obtain. Our ability to access the long-term debt markets on
favorable interest rates and other terms also depends on the ratings assigned by
the credit rating agencies to our indebtedness. As of June 30, 2021, we had a
corporate credit rating of Baa2 with a stable outlook from Moody's and BBB with
a stable outlook from S&P. In the event that the ratings of our outstanding
long-term debt securities were substantially lowered or withdrawn for any
reason, or if the ratings assigned to any new issue of long-term debt securities
were significantly lower than those noted above, particularly if we no longer
had investment grade ratings, our ability to access the debt markets could be
adversely affected and our interest expense could increase under the terms of
certain of our long-term debt securities.

© Edgar Online, source Glimpses

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