Fiserv Inc. (NASDAQ:FISV)

The analysis of the annual financial ratios reveals noteworthy trends in the company's revenue composition, cost structure, profitability, and other financial metrics over the period from 2017 to 2021.

Revenue Composition

The share of revenue derived from "Processing and services" showed a gradual decline, decreasing from 84.85% in 2017 to 82.01% in 2021. Conversely, the "Product" segment increased its contribution from 15.15% to 17.99% over the same period, indicating a modest shift toward product-related revenue streams.

Cost Structure

"Cost of processing and services" relative to revenue decreased steadily from -40.22% in 2017 to -37.5% in 2021, suggesting improved efficiency or cost management in service-related activities. Similarly, "Cost of product" fluctuated but generally remained around the 12.6%-13.3% range, ending slightly lower at -12.6% in 2021. The overall "Cost of revenue" as a percentage of revenue declined from -53.09% to -50.09%, implying an enhanced gross margin over time.

Profitability Measures

"Gross profit" showed an overall increasing trend, rising from 46.91% to 49.91%, reflecting the reductions in cost of revenue. However, "Selling, general and administrative" expenses as a percentage of revenue sharply rose from -20.19% in 2017 to a peak of -38.06% in 2020 before slightly decreasing to -35.81% in 2021. This significant increase suggests substantial investments or increased spend in operating expenses which compressed operating income.

"Operating income" experienced a notable decline from 26.9% in 2017 to 12.47% in 2020, with a modest recovery to 14.1% in 2021. This decline reflects the impact of elevated selling and administrative costs despite higher gross profit margins.

Financial Costs and Income

"Interest expense, net" rose from -3.07% in 2017 to a peak of around -4.77% in 2020 before easing to -4.27% in 2021, indicating increased financing costs or higher debt levels during the period. "Other income (expense)" remained relatively minor but positive toward the later years, improving from 0.02% in 2017 to 0.44% in 2021.

Income Before Taxes and Net Income

"Income from continuing operations before taxes and income from unconsolidated affiliates" followed a downward trend from 23.84% in 2017 to a low of 7.88% in 2020, subsequently recovering to 10.27% in 2021. The "Income tax provision" fluctuated, with significant increases in 2018 (-6.49%) but generally remained between -1.32% and -2.77% in other years.

"Income from continuing operations" and "Net income" mirrored similar trends, both decreasing sharply from above 20% in 2017 to below 9% by 2019 and 2020, before partially recovering in 2021 to around 8.65% and 8.22% respectively for net income attributable to the company. The decline suggests margin pressure possibly from operating expenses and interest costs, whereas slight recovery in the final year indicates some operational or financial improvement.

Additional Observations

"Gain on sale of businesses" showed irregular spikes in 2018 (3.9%) and 2020 (3.12%), contributing positively to operating income in those years. The "Income from investments in unconsolidated affiliates" was generally minor but showed some variability, peaking at 0.62% in 2021.

Net income attributable to noncontrolling interests remained negative in recent years, though relatively small in magnitude, slightly impacting the net profitability attributable to the parent entity.

In summary, the company exhibited a slight shift toward product revenue, improved gross profitability driven by reduced costs of revenue, but experienced significant increases in operating expenses and interest costs that compressed operating and net income margins. Some recovery signs appeared in 2021, though profitability remains substantially below levels observed in the earlier years of the period. The fluctuations in gains from asset sales also influenced profitability in certain years.