Fiserv Inc. (NASDAQ:FISV)

The analysis of the annual current and deferred income tax expenses over the five-year period reveals notable fluctuations and trends in each component and the overall income tax provision.

Current Income Tax Expense

The current income tax expense demonstrates a declining trend from 2017 to 2020, decreasing significantly from $405 million in 2017 to $125 million in 2020. However, in 2021, this trend reverses sharply with a considerable increase to $625 million. This fluctuation suggests variability in taxable income or tax rates impacting current tax liabilities, with a particularly substantial rise in the most recent year.

Deferred Income Tax Expense

Deferred tax expenses exhibit a more volatile pattern. Initially negative in 2017 at -$247 million, which indicates a deferred tax benefit for that year, it turns positive in 2018 at $133 million, continuing to decline to $47 million in 2019 and slightly increasing to $71 million in 2020. In 2021, deferred tax expense shifts sharply back to a negative figure of -$262 million. These movements likely reflect timing differences between accounting and tax recognition of income and expenses as well as adjustments in deferred tax assets and liabilities.

Total Income Tax Provision

The aggregate income tax provision, representing the sum of current and deferred taxes, follows a mixed pattern parallel to its components. After rising from $158 million in 2017 to a peak of $378 million in 2018, it subsequently declines over the next two years to $196 million in 2020, before increasing again to $363 million in 2021. This overall volatility aligns with the movements in current and deferred taxes, indicating shifts in the company's tax position and possibly changes in tax legislation, profits, or deferred tax asset realizations.

In summary, the company's income tax expenses over these years exhibit significant variability, with both current and deferred components contributing to fluctuations. The marked increase in current tax expense in 2021 accompanied by a substantial deferred tax benefit suggests complex underlying tax dynamics impacting the most recent fiscal period. Careful attention to the causes of these changes would be warranted to fully understand the tax strategy and its financial implications.

Statutory Federal Income Tax Rate

The statutory federal income tax rate experienced a significant reduction from 35% in 2017 to 21% in 2018, maintaining 21% through 2021. This change suggests the impact of federal tax reform implemented around 2018, leading to a sustained lower federal tax rate.

State Income Taxes, Net of Federal Effect

State income taxes, net of federal benefits, increased from 2.3% in 2017 to a peak of 3.7% in 2019, then declined steadily to 1.6% by 2021. This decline might reflect adjustments in state tax regulations or strategic tax planning.

Foreign Tax Law Changes

There were no foreign tax law changes reported until 2020, when an impact of 2.8% was recorded. This effect increased substantially to 8% in 2021, indicating notable changes in foreign tax regulations or reporting impacting tax rates during these years.

Foreign Derived Intangibles Income Deduction

This deduction began affecting the tax rate slightly negatively in 2018 (-0.2%) and deepened its impact through 2020 (-3.2%), stabilizing somewhat in 2021 (-3.1%). This trend suggests increasing utilization or effect of this deduction over the period.

Excess Tax Benefit from Share-Based Awards

The excess tax benefit fluctuated between -5.1% in 2019 and a milder -2.2% in 2021, showing volatility in the tax effects related to share-based compensation, but with a general reduction in the negative impact towards the end of the period.

Sale of Businesses and Subsidiary Restructuring

The tax effect due to sale of businesses and restructurings varied, with no impact in 2017, peaking positively at 1.3% in 2018, turning negative at -2.6% in 2019, then near neutral in 2020 and negative again at -2.1% in 2021. This indicates inconsistent impacts of divestitures and restructuring activities on tax expense.

Unrecognized Tax Benefits

This factor was absent in 2017 and 2018, but starting in 2019 showed an increasing negative effect on the tax rate from -0.1% in 2019 to -2.7% in 2021, reflecting growing tax liabilities or uncertain tax positions over these years.

Nondeductible Executive Compensation

The nondeductible executive compensation steadily increased its impact on the tax rate from negligible or zero in 2017 to 2% in 2020, then decreased to 0.7% in 2021. This pattern shows fluctuations in compensation costs that are not deductible for tax purposes.

Valuation Allowance

The valuation allowance impact appeared only from 2019, rising to 0.3%, then shifting to negative effects of -1.7% in 2020 and -1.3% in 2021, suggesting adjustments in deferred tax asset recognition or realizability assessments.

Domestic Production Activities Deduction

This deduction was present only in 2017, reducing the tax rate by 2%, and absent thereafter, indicating changes or elimination of this tax benefit starting 2018.

Other, Net

The miscellaneous tax effects showed minor variations from 0.2% in 2017 to -2% in 2020, then rebounded to a positive 1.9% in 2021. This demonstrates variable other tax items influencing the effective tax rate.

Effective Income Tax Rate Before Federal Tax Reform Benefit

The effective tax rate before the benefit of federal tax reform decreased significantly from 31.9% in 2017 to 16.7% in 2020, then increased to 21.8% in 2021, primarily reflecting statutory rate changes and other tax adjustments excluding direct reform impacts.

Tax Expense (Benefit) Due to Federal Tax Reform

A substantial tax benefit was recognized in 2017 of -20.3%, likely connected to tax law changes enacted late in the year. This was followed by a slight tax expense of 1.2% in 2018, with no reported effects in subsequent years, signaling the one-time nature of the reform's impact on tax expense.

Overall Effective Income Tax Rate

The overall effective income tax rate decreased sharply from 11.6% in 2017 to 16.7% in 2020, with a notable spike to 24.3% in 2018, before stabilizing at 21.8% in 2021. The fluctuations primarily reflect the interplay of statutory rate reductions, federal tax reform benefits, and varying impacts from state taxes, foreign tax laws, and other tax items.

Accrued expenses

Accrued expenses increased significantly from 39 million US dollars in 2017 to a peak of 303 million in 2019, before declining to 171 million by 2021. This pattern suggests a spike in short-term liabilities around 2019, followed by a reduction in the ensuing years.

Share-based compensation

Share-based compensation exhibits a similar trend, rising sharply to 216 million in 2019 from 40 million in 2017, then gradually declining to 134 million by 2021. This indicates heightened employee compensation costs around 2019 that lessened over time.

Net operating loss and credit carry-forwards

This item increased dramatically from 131 million in 2017 to 1,444 million in 2019, before decreasing steadily to 804 million in 2021. The increase indicates growing accumulated losses or credits available for tax purposes up to 2019, with a subsequent reduction possibly due to utilization or write-downs.

Foreign tax credits on undistributed earnings

This item appears only in 2019 at 289 million and is absent in other years, suggesting either a one-time recognition or change in accounting treatment during that period.

Leasing liabilities

Leasing liabilities emerged in 2019 at 219 million, then decreased to 171 million in 2020 and increased slightly to 194 million in 2021. This onset coincides likely with the adoption of new leasing standards, with fluctuations reflecting lease portfolio changes.

Other (liabilities or expenses)

The other category fluctuated with an initial decline from 33 million in 2017 to 30 million in 2018, followed by increases to 65 million in 2019 and a sharp rise to 194 million in 2021. This upward trajectory points to growing miscellaneous obligations or costs.

Deferred tax assets, gross

Deferred tax assets on a gross basis surged from 243 million in 2017 to 2,536 million in 2019 before trending downward to 1,497 million by 2021. This suggests recognition of substantial temporary differences or carryforwards in 2019, with partial reversal or realization thereafter.

Valuation allowance

The valuation allowance follows a negative balance pattern, increasing in magnitude from -103 million in 2017 to -1,145 million in 2019, then improving to -697 million by 2021. This indicates an initially increasing reserve against deferred tax assets, subsequently reduced, perhaps reflecting improved earnings outlook or asset realization.

Deferred tax assets (net)

Net deferred tax assets increased sharply from 140 million in 2017 to 1,391 million in 2019, then declined to 800 million by 2021, mirroring movements in gross deferred tax assets and valuation allowances.

Capitalized software development costs

Capitalized software development costs show a steady negative balance increasing from -117 million in 2017 to -633 million in 2021, indicating a continual investment in software assets recorded as capitalized costs.

Intangible assets

Intangible assets presented a substantial negative balance expanding from -455 million in 2017 to -3,297 million in 2019 and subsequently decreasing in magnitude to -2,676 million in 2021. This demonstrates significant amortization or impairment over time.

Property and equipment

These assets increased in negative balance from -49 million in 2017 to -280 million in 2021, reflecting capital expenditures offset by depreciation or disposals.

Capitalized commissions

Capitalized commissions, appearing from 2018 onwards, consistently deepened in negative balance from -80 million in 2018 to -95 million in 2021, indicating ongoing capitalization of commission costs.

Investments in joint ventures

Investments in joint ventures show a marked negative trend from -78 million in 2018 to a peak negative balance of -908 million in 2020, improving to -630 million in 2021, highlighting fluctuations possibly due to equity accounting adjustments or divestitures.

Leasing right-of-use assets

This item appeared in 2019 at -205 million and declined to -142 million by 2021, consistent with recognized lease assets under new accounting guidance and their subsequent amortization.

Other (assets)

The other category for assets or liabilities, as distinguished by context, moved from -48 million in 2017 to -474 million in 2021, reflecting growth in miscellaneous asset or liability items.

Deferred tax liabilities

Deferred tax liabilities expanded dramatically from -669 million in 2017 to -5,526 million in 2019, then slightly decreased to -4,930 million in 2021. This suggests a substantial increase in taxable temporary differences, followed by moderate reduction.

Net deferred tax assets (liabilities)

The net deferred tax liabilities position deteriorated markedly from -529 million in 2017 to -4,361 million in 2020, with a slight improvement to -4,130 million in 2021, reflecting the interplay of deferred tax assets and liabilities.

Noncurrent Deferred Tax Assets

The noncurrent deferred tax assets exhibited fluctuations over the analyzed period. Starting at 23 million USD in 2017, they decreased slightly to 20 million USD in 2018. In 2019, there was a notable increase to 112 million USD, representing a significant rise compared to previous years. However, this increase was not sustained, with the value declining sharply to 28 million USD in 2020, and then showing a moderate recovery to 42 million USD in 2021.

Noncurrent Deferred Tax Liabilities

The noncurrent deferred tax liabilities displayed an overall upward trend initially, increasing from 552 million USD in 2017 to 745 million USD in 2018. A dramatic surge occurred in 2019, with the liabilities rising sharply to 4,247 million USD, marking nearly a sixfold increase from the previous year. Following this peak, the liabilities remained elevated but showed a slight decline to 4,389 million USD in 2020 and then a further decrease to 4,172 million USD in 2021.

Overall Observations

The data reveals significant volatility in both deferred tax assets and liabilities over the five-year period. Particularly, 2019 is marked by pronounced spikes in values for both items, especially for deferred tax liabilities, which reached their maximum level during this year. While deferred tax assets decreased somewhat after their 2019 peak, deferred tax liabilities remained substantially higher than in earlier years despite a modest decline in the last two years. These trends may reflect changes in tax positions, accounting treatments, or regulatory environments affecting deferred tax calculations.

The financial data reveals notable fluctuations and trends in the reported and adjusted figures for total assets, total liabilities, shareholders’ equity, and net income over the five-year period.

Total Assets

The reported total assets showed a gradual increase from 2017 to 2018, followed by a sharp rise in 2019 to above 77 billion USD. This high level was maintained with minor decreases through 2020 and 2021. The adjusted total assets mirrored this pattern closely, indicating consistency between reported and adjusted figures. The large jump in 2019 represents a significant change, potentially due to an acquisition or revaluation event.

Total Liabilities

Reported total liabilities increased moderately between 2017 and 2018, then surged dramatically in 2019, exceeding 42 billion USD, before slightly decreasing in 2020 and rising again in 2021. Adjusted liabilities follow a similar trajectory but remain consistently lower than reported liabilities, which suggests that deferred taxes or other adjustments reduce the liability figure. The substantial increase in 2019 aligns with the pattern seen in total assets, indicating a major change in the company's financing or obligations.

Shareholders’ Equity

The reported shareholders’ equity declined from 2017 to 2018, then experienced a significant increase in 2019 reaching nearly 33 billion USD. After that, it slightly declined over the subsequent two years. The adjusted equity is consistently higher than the reported equity across all years, implying that the adjustments add value back to equity, likely reflecting deferred tax assets or similar items. The spike in 2019 suggests a major event impacting ownership interests, while the moderate decline afterward may reflect earnings retention changes or dividend distributions.

Net Income Attributable to Shareholders

Reported net income showed a downward trend from 1246 million USD in 2017 to a low of 893 million USD in 2019, followed by a recovery and peak at 1334 million USD in 2021. Adjusted net income, on the other hand, increased from 999 million USD in 2017 to 1320 million USD in 2018, dropped slightly in 2019, and then rose steadily through 2020 and 2021. The adjustments appear to smooth earnings volatility, and the divergence between reported and adjusted figures indicates significant income tax or other deferred income adjustments impacting reported profitability.

Overall, the data shows a transformative period around 2019 characterized by significant increases in assets, liabilities, and equity, accompanied by volatility in net income. The adjustments generally serve to moderate fluctuations in equity and net income, suggesting deferred taxes or similar accounting treatments play an important role in presenting the financial position and performance. Following the 2019 surge, a stabilization phase is observed with moderate decreases in equity and a recovery in net income, indicating possible integration or operational adjustments post-transition.

The financial data exhibits notable fluctuations in key profitability and efficiency metrics over the period from 2017 to 2021. There is a clear downward trend in both reported and adjusted net profit margins, with the reported margin declining from 21.88% in 2017 to 8.22% in 2021, and the adjusted margin showing a similar pattern, decreasing from 17.54% to 6.61% in the same timeframe. This suggests a significant contraction in profitability relative to sales over the years.

The total asset turnover ratio remains fairly stable in both reported and adjusted figures, decreasing sharply in 2019 to 0.13 but recovering slightly to around 0.21 in 2021. This indicates that the company’s efficiency in using its assets to generate revenue weakened significantly in 2019 but has seen some improvement thereafter.

Financial leverage ratios demonstrate a marked reduction starting from high levels in 2017 and 2018 towards more moderate values by 2021. Specifically, the reported financial leverage drops from 3.77 to 2.46 and the adjusted leverage from 3.15 to 2.17. The moderation in leverage suggests a shift to a less aggressive capital structure and possibly a lower risk profile.

Return on equity (ROE) shows a steep decline from very high levels in 2017 and 2018 (reported ROE of 45.62% and 51.77%, adjusted ROE of 30.64% and 43.74%) to much lower values by 2019 and onward, hovering below 5%. Return on assets (ROA) follows a similar trend, dropping from double-digit percentages in 2017 and 2018 to values ranging approximately between 1% and 1.75% during 2019–2021. Such decreases indicate a reduction in the company’s ability to generate profits from both equity and assets, especially during the later periods.

Overall, the data reflects a period of decreased profitability and operational efficiency, accompanied by a strategic reduction in financial leverage. The volatility in asset turnover and the sustained low profitability ratios post-2018 signal challenges in maintaining previous levels of financial performance. The adjusted figures closely mirror the reported data, indicating that after-tax adjustments do not drastically change the overall financial trends observed.

Net Profit Margins

Declined steadily from 2017 through 2021, indicating reduced profitability.

Total Asset Turnover

Sharp decline in 2019 with partial recovery, suggesting fluctuating asset utilization efficiency.

Financial Leverage

Decreased considerably, implying a move toward a more conservative capital structure.

Return on Equity

Sharp drop from very high levels in early years to very low levels by 2019 onward.

Return on Assets

Similar downward trend as ROE, reflecting diminished asset-based profitability.

The analysis of the financial data over the five-year period reveals distinct trends in both reported and adjusted net income, as well as their corresponding profit margins.

Reported Net Income

The reported net income attributable to the company showed a fluctuating pattern. Starting at 1246 million USD in 2017, there was a slight decline in 2018 to 1187 million USD, followed by a more pronounced drop to 893 million USD in 2019. The figure then recovered moderately in 2020 to 958 million USD and saw a significant increase to 1334 million USD by the end of 2021, surpassing the initial 2017 level.

Adjusted Net Income

Adjusted net income, which factors in annual reported and deferred income tax adjustments, exhibited a similar but not identical trend. It rose sharply from 999 million USD in 2017 to 1320 million USD in 2018, before decreasing to 940 million USD in 2019. After a moderate increase to 1029 million USD in 2020, it rose again to 1072 million USD in 2021. Compared to reported net income, adjusted figures tend to be lower in the final year but showed a stronger peak in 2018.

Reported Net Profit Margin

The reported net profit margin followed a downward trajectory from 21.88% in 2017 to 20.38% in 2018, then plummeted sharply to 8.77% in 2019. This decline continued into 2020 with a further drop to 6.45%. In 2021 there was a slight recovery to 8.22%, but the margin remained well below the levels observed in earlier years.

Adjusted Net Profit Margin

Adjusted net profit margin also declined over the observed period. It started at 17.54% in 2017, increased notably to 22.67% in 2018, then dropped substantially to 9.23% in 2019. Subsequent years showed a continued reduction to 6.93% in 2020 and 6.61% in 2021. The adjusted margins were generally lower than reported margins in the later years, indicating that tax adjustments had a dampening effect on profitability ratios.

Overall, both reported and adjusted net income show volatility with significant decreases occurring in 2019, followed by partial recoveries. Profit margins, however, experienced a more sustained decline from 2018 onwards. Adjusted results indicate that tax-related items have a notable impact, particularly influencing profitability metrics in the latter part of the period.

The analysis of the adjusted and reported financial data over the five-year period reveals several noteworthy trends related to total assets and asset turnover ratios.

Total assets

Both reported and adjusted total assets exhibit a general increase from 2017 through 2018, rising from approximately $10.3 billion to over $11.2 billion. However, a significant jump is observed in 2019, where total assets surged dramatically to approximately $77.5 billion (reported) and $77.4 billion (adjusted). This substantial increase likely reflects a major acquisition, revaluation, or a change in accounting policy. Following this spike, total assets slightly declined in 2020 to about $74.6 billion and then showed a minor recovery in 2021, ending at approximately $76.2 billion. The close similarity between reported and adjusted totals across all years indicates that deferred income tax adjustments have minimal impact on the total asset figures.

Total asset turnover

The total asset turnover ratio, both reported and adjusted, shows a declining trend from 2017 to 2019. Starting at 0.55 in 2017 and slightly dipping to 0.52 in 2018, the ratio then sharply falls to 0.13 in 2019, coinciding with the substantial increase in total assets. This decline suggests that asset efficiency or revenue generation relative to asset base decreased significantly during this period. There is a modest recovery in 2020 and 2021, with turnover ratios rising to 0.20 and 0.21 respectively, indicating improvement in asset utilization though still considerably lower than the pre-2019 levels. The identical values for reported and adjusted turnover confirm that tax adjustments do not affect turnover calculations.

Over the five-year period from 2017 to 2021, total assets, both reported and adjusted, exhibited a significant increase from 2017 through 2019, followed by a stabilization phase with minor fluctuations thereafter. Reported total assets rose from approximately 10.3 billion US dollars in 2017 to a peak of over 77.5 billion US dollars in 2019, then slightly decreased to around 74.6 billion in 2020 before increasing marginally to approximately 76.2 billion by the end of 2021. The adjusted total assets displayed a similar pattern, following closely with reported figures while maintaining slightly lower values each year.

Shareholders’ equity, both reported and adjusted, showed a marked upward trend initially, with a substantial jump seen between 2018 and 2019. Reported shareholders’ equity increased from about 2.7 billion in 2017 to nearly 33.0 billion in 2019, then experienced a slight decline to around 30.9 billion by the end of 2021. Adjusted shareholders’ equity was consistently higher than reported equity across all periods and followed a parallel trend: rising from approximately 3.3 billion in 2017 to over 37.1 billion in 2019, before gradually decreasing each subsequent year to just above 35.0 billion in 2021.

Financial leverage ratios, both reported and adjusted, revealed a notable decrease over the period under review, implying a reduction in reliance on debt relative to equity. Reported financial leverage peaked at 4.91 in 2018, then decreased sharply to 2.35 in 2019 and remained relatively stable, ranging between 2.31 and 2.46 through 2021. Adjusted financial leverage mirrored this trajectory but at consistently lower values, starting at 3.15 in 2017, increasing to 3.72 in 2018, then declining to 2.09 in 2019, and hovering around 2.03 to 2.17 in the final years.

Overall, these observations suggest that during the period analyzed, there was a significant growth in the scale of assets and equity, particularly around 2019. This expansion was accompanied by a substantial improvement in the financial leverage ratios, indicating a stronger equity base relative to liabilities. The adjustment of figures for deferred income tax effects slightly increased equity and decreased financial leverage compared to reported data, reinforcing a more conservative assessment of financial risk.

The financial data reveals distinct trends over the five-year period with respect to both reported and adjusted figures.

Net Income

The reported net income attributable to the company shows fluctuations. It decreased from 1246 million USD in 2017 to 893 million USD in 2019, followed by a modest recovery to 1334 million USD in 2021. The adjusted net income shows a similar but less volatile pattern, peaking at 1320 million USD in 2018, then decreasing and stabilizing around 1072 million USD by 2021. This suggests some volatility in reported figures which is somewhat normalized in adjusted earnings.

Shareholders' Equity

Reported total shareholders' equity experienced a sharp increase from 2293 million USD in 2018 to nearly 33,000 million USD by 2019, and slightly declined afterward to approximately 31,000 million USD in 2021. Adjusted equity figures follow a similar trajectory but remain consistently higher than reported values, ending at roughly 35,000 million USD in 2021. This significant jump around 2019 might indicate a major restructuring or revaluation event affecting the equity base.

Return on Equity (ROE)

Returned on equity based on reported data was very high in 2017 and 2018, above 45%, sharply dropping to around 3% in the subsequent years. Adjusted ROE also follows a similar pattern with a decrease from above 30% in 2017-2018 to just above 3% by 2021. This decline suggests that despite large equity bases, profitability relative to equity has significantly diminished over time, possibly due to the sharp equity base increase.

Overall, the data indicates that while net income figures have seen some recovery after initial declines, the extraordinary increase in shareholders’ equity has diluted the returns on equity. The adjusted data provide a smoother perspective of incomes and equity, suggesting that adjustments moderate the volatility seen in reported values. The pronounced changes around 2019 highlight a significant financial event that reshaped the company’s capital structure, affecting profitability ratios subsequently. The low ROE in later years signals a need for focus on improving returns relative to the invested equity base.

The analysis of the annual financial data over the five-year period reveals several key trends across reported and adjusted figures for net income, total assets, and return on assets (ROA).

Net Income Trends

Reported net income showed a fluctuating pattern. Initially, there was a slight decrease from 1246 million USD in 2017 to 1187 million USD in 2018, followed by a more pronounced decline to 893 million USD in 2019. The net income then increased moderately to 958 million USD in 2020 and rose sharply to 1334 million USD in 2021, surpassing the initial 2017 figure.

Adjusted net income exhibited less volatility. It increased from 999 million USD in 2017 to 1320 million USD in 2018, then decreased to 940 million USD in 2019. However, it showed a recovery to 1029 million USD in 2020 and further growth to 1072 million USD in 2021. Despite the recovery, adjusted net income in 2021 remained below the peak reached in 2018.

Total Assets Trends

Total assets experienced a significant jump between 2018 and 2019, with reported assets increasing from 11,262 million USD to 77,539 million USD. This higher level was sustained in subsequent years with reported assets slightly declining in 2020 but rising again marginally in 2021. The adjusted total assets mirrored this pattern closely, indicating consistent accounting adjustments over the period.

Return on Assets (ROA) Trends

Reported ROA demonstrated a decline from a high of 12.11% in 2017 to just 1.15% in 2019, reflecting the sharp increase in asset base without commensurate income growth. The metric showed minor improvement in 2020 and 2021, reaching 1.75%. However, this is substantially lower than the levels seen in 2017 and 2018.

Adjusted ROA followed a somewhat similar trajectory but with differences in magnitude. It increased from 9.73% in 2017 to 11.74% in 2018, before plunging to 1.21% in 2019. A slight recovery occurred in 2020 with 1.38%, but this was followed by a slight decrease to 1.41% in 2021. These adjusted figures suggest the operational efficiency in generating returns on assets declined markedly after 2018 and stabilized at a much lower level.

In summary, the period under review was characterized by a substantial increase in total assets starting in 2019, accompanied by a decline in profitability ratios like ROA. While net income showed recovery toward the end of the period, the expanded asset base has kept profitability ratios low compared to earlier years. Adjusted data reflect similar trends, pointing to consistent effects of tax adjustments and capital structure on reported financial outcomes.