Q3 2019 Earnings Call
Welcome to the Pfizer 2019 third quarter earnings Conference call, all participants will be under listen only mode until the question and answer session began following the presentation. As a reminder, today's call is being recorded at this time I would now like to turn the call over to Peter Polian Senior Vice President of Investor Relations at buys.
Thank you.
Thank you Michelle and good afternoon, everyone.
With me today or do you have people keep our chairman Chief Executive Vice President <unk>, President and Chief operating Officer, Bob How our Chief Financial Officer.
Well I believe the supplemental presentation for the quarter are available on the Investor Relations section to fight sort of Dot com.
Oh the most today will include forward looking statements about among other matters expected operating and financial results strategic initiatives and expected benefits and synergies from our recent acquisition the first data.
Forward looking statements may differ materially from actual results and are subject to a number of risks and uncertainties.
You should refer to our earnings release for a discussion of these risk factors.
Please refer to our materials for today's call for an explanation of the non-GAAP financial measures discussed in this call along with a reconciliation of those measures to the nearest applicable GAAP measures.
Unless stated otherwise performance references made throughout this call or year over year comparisons and all references to internal revenue growth on a constant currency basis.
Also note that non-GAAP financial measures, including our earnings release and supplemental materials include the full quarter and year to date results for first data, which have been prepared by making certain adjustments to the sum of historical first data insights or GAAP financial information.
Additional historical combined financial information, please refer to the form 8-K, which we filed on until the third.
Hello.
Please mark your calendar for Investor day to be held on March 20 cents to New York City, We look forward to seeing for this important event.
Now I'll turn the call over to Jeff.
Thanks, Peter and good afternoon, everyone.
We're very pleased to be with you today as we share our first quarter of combined results on their insights and enthusiasm for the future of your company.
Financial performance is off to an excellent start following the July 29 close in the first and a transaction led by strong internal revenue growth.
Banding, adjusted operating margin and growing free cash flow.
Sure. If you work is progressing well in sales momentum continues to be strong.
Performance contributor to increasing our internal revenue growth guidance, just 6% for the year and adjusted EPS growth of 16% to 17%.
Setting us up or even better 2020.
Although we are a larger more dynamic enterprise, we remain fully committed to delivering upon the key tenants and shareholder value that of underpinned our performance for more than a dozen years my quality revenue growth operating margin expansion strong free cash flow and disciplined capital allocation are alive and well a new Pfizer.
Along those lines, we initiated our share repurchase program late in the third quarter under a tenbfive plan.
We are confident in our ability to both meet our debt repayment commitments and repurchase shares.
The integration of first data is top of mind as we focus on building a great company yesterday was day 100 of this transformational merger and we're really excited about the road ahead.
Energy as high teens are coming together and our integration activities are progressing well, creating success for our clients is number one on our integration agenda and foundational to the promise of this combination.
As I mentioned upfront, we're off to a great start financially with internal revenue growth in the quarter up more than 6% led by a very strong 10% NR GBS merchant business and adjusted earnings per share was up 17% to one dollar and two cents adjusted operating margin in the quarter was up 130.
Just a 29.8% and free cash flow was more than $800 million for the year to date internal revenue growth was also 6% with GBS up again, 10% for the period.
Adjusted earnings per share was up 16% to $2.87 and adjusted operating margin was up 100 basis points to 29.1%.
Free cash flow through September Thirtyth was 13% was up 13% to just over $2.3 billion and free cash flow conversion was excellent at 116%.
We continue to be intently focused on growing high quality free cash flow and allocating that capital in a way that optimizes value creation on both an overall and on a per share basis.
Before I turn the call the Frank update you on integration and synergy progress, let me share a few proof points on how the combination extends and enriches our strategic position.
Account processing is a critically important business, which also provides a strategic hub to further distribute a high quality solutions and a cost effect and a cost effective manner, such as our our new offerings around merchant services along those lines. We were pleased to sign another 14 core account processing clients in the quarter, including.
Six on DNA and assigned 41 clients year to date.
We will continue to invest in enabling our account processing clients to serve their customers in a real time digitally focused world.
Unlocking client value and expanding growth across our market, leading merchant acquiring business is one of our highest priorities. Our cloud based point of sale platform Clover crossed the 100 billion dollar threshold in annualized payment volume in the quarter, a more than 40% gain over last year.
Out on Clover services are growing rapidly and payment devices shipped is up 25% through September thirtyth.
We're also seeing significant growth opportunities across our e-commerce merchant business, which on top of strong sales grew transactions more than 30% in both the quarter and year to date.
Additionally, our integrated payments I SB partners expanded by more than 20% in the quarter, we're incredibly optimistic about the future growth potential in these digitally centric merchant businesses.
A key strategic focus is to extend our position as the largest merchant acquirer in the world. The combination of a highly advantage to bank merchant opportunity rapidly accelerating growth in digital commerce global distribution and the continued strength of our Clover platform.
Positions us to further expand market share in this important space.
The market continues to embrace payments innovation is the new norm, we believe our scale with more than $1 billion payment cards in force and leadership positions in areas such as car network electronic Bill payment aviation sale combine to create meaningful growth today and Optionality Optionality for tomorrow.
Last we haven't significant opportunity to mean meaningfully participate in global franchise growth.
Whether looking past the card payments in India, gaining acceptance share in Brazil, and Argentina, or enabling more E. Commerce in Europe , we are more holistically participating in the long tail of global growth.
Complement we've identified a series of meaningful revenue synergy opportunities outside the U.S. further leveraging the solution breath and processing scale of the combined company.
With that let me turn the call over to Frank.
Thanks, Jeff Good afternoon, everyone.
It's great to be here as part of the new fashion.
As we mentioned earlier, we are only 100 days intense transformational merger of two great companies and I am even more energized today as we dive into the business and see the wide range of opportunities ahead.
Let me first start by stating that the power of this new company has far greater reach and I imagine when we decided to put together.
Inclusion is derived from the many senior level client meetings, we've had and how well the value proposition comes together in the clients office.
We've established business units led by exceptional management teams comprised of leaders from both companies.
As you can imagine, Jeff and I carefully considered each of the leadership positions across our businesses and put together the team, which we believe will drive great results around the world.
As you May know I, along with this senior members of our team have had the first hand opportunity to work on some of the more transformational mergers in the financial services industry and we're utilizing those experiences to help ensure we executed extraordinarily well.
The teams engagement model and partnership is that's a very highest level I've ever seen and when a clear determination to build the great Global company for the long term benefit of clients associates and shareholders.
With two large and complex went too large and complex companies come together is essential to associates. The life of the company is highly engaged on two fronts the business as usual operation of the company and successful execution of the full.
Set of integration activities.
We are thrilled.
And how well the people of both companies have come together to focus on what matters.
We're pleased with our progress on revenue synergies and have confidence that we will at a minimum meet the $500 million target, including nearly a $100 million of synergy revenue next year.
Currently we have 78 work streams in process across the company focused on delivering additional client value.
In addition to near term value. We're also thinking about how the payment industry may evolve over the longer term and how we as an industry leader can use al unique combination of assets to drive sustainable profitable growth beyond this synergy work to date.
As we mentioned one of the most important revenue synergies is to better serve the account processing client base of the original size or through distributing high quality merchant acquiring solutions.
Enabling technologies, such as Clover to be distributed digitally and through the physical branch network of original advisor clients is a significant opportunity, which is literally being validated daily.
We have already signed more than 20 core account processing clients, what about half being competitive takeaways.
The competitive wins.
I have had assets ranging from 1 billion, just $6 billion and they are more than 200 financial institutions in the pipeline.
Enabling clients to enhance the relationship with their most important clients, while delivering much needed fee revenue is resonating as a very compelling value proposition.
Based on the market reaction, we now expect to exceed the 200 million dollar revenue synergy opportunity. We originally identified for this initiative.
We're also making excellent progress on network routing and card issuing revenue opportunities, which is extending existing card in network relationships, along with identifying ways to create incremental market differentiation the combination of star anyway.
Well further enhances our position as the third largest network in the U.S. was important issuer in merchant clients.
In addition, with more than 1 billion active credit and debit cards globally, we havent opportunity to innovate in new and unique ways.
We have identified a meaningful number of revenue synergies outside the U.S., which go beyond our original revenue thesis.
In addition to delivering merchant issuing services globally, we are seeing momentum in areas such as payments modernization core banking digital solutions and risk with important emphasis and providing hosted solutions throughout scale infrastructure throughout the world.
Yeah.
We have also identified numerous opportunities to provide additional solutions to clients it in which one or both.
The original firms has an influential relationship.
As I mentioned, we've had the pleasure to meet with a number of clients in each meeting there has been substantial discussion about health by served can deliver additional value as a result of the combination.
We have completed an in depth white space opportunity analysis for our largest clients and are very optimistic about what the future holds for delivering incremental client value and revenue growth.
Moving to cost synergies.
We're making excellent progress against our objective of at least $900 million over the first five years, which as you know does not include interest savings like revenue internal objective is to surpassed that goal in terms of both dollars in time to achieve.
Yeah.
Our initial focus has been to identify duplicate costs across the company with an emphasis on our corporate and technology functions.
Offer great start with high visibility and action plans in place to achieve our objective.
Goal is to streamline our overall cost structure, while delivering more compelling and even a higher quality solutions to our clients were also leveraging the global product development captive buys are built to extend the productivity of our resources while reduce.
Seeing overall cost.
One of the larger cost synergy opportunities design efficiency and effectiveness across out more than 4 billion dollar of annual vendor spend we are methodically meeting what else suppliers and engaging in productive conversations, which we believe will contribute meaningfully to us.
Synergy objectives.
We have created a strong focusing governance structure to ensure we achieve synergy objectives.
We have actions over $200 million of annualized savings against down 900 million dollar cost target importantly, we expect that level to grow every week, increasing the probability of outperformance over the period.
As you have heard we're highly confident and achieving our synergy targets and having additional focus on over achieving in terms of quantum and timing, we will supply a full update including any increases throughout targets and our March investor day.
We also are evaluating the best way to deploy the incremental 500 million dollar innovation investment pool to create market differentiation and drive additional revenue growth beyond synergies, we are evaluating a variety of opportunities in areas.
Such as digital Commerce card payments risk and fraud solutions and network innovation. We will also share more on this important initiative with you in March.
Let me also provide a quick update on our progress with the BAMS joint venture as we discussed on our July Thirtyth call. We're working with the bank collaboratively through a well defined contractual process to dissolve the JV in June 2020, and ensure we delivered.
Great service to our shared clients. We continue to believe that by serves and results will be accretive over the next few years as we leverage this significant scale within the company.
With that let me turn call over above to provide detail on our financial results.
Thank you Frank and good afternoon.
Let me start by calling your attention to four items included in our reported results and reflected in the form 8-K filed on October 31.
First internal revenue growth will be reported on a constant currency basis consistent with the first data methodology.
For clarity, we have not made any FX adjustments to EBITDA, which is different than how FTC reported nor to operating income or adjusted EPS.
Next first data previously added back stock based compensation in reporting its adjusted earnings metrics, we now conform to our practice of including stock based compensation in the adjusted income statement.
Third first stated previously reported adjusted revenue for its joint ventures using proportional consolidation.
Beginning with this quarter results for minority owned joint ventures will mirror gap and no longer be reflected in adjusted revenue and adjusted operating income.
Our share of the net income from these Jvs is reported as income from investments in unconsolidated affiliates.
We will continue to report BAMS using proportional consolidation as we believe that approach best reflects how we will report the results of this business upon just solution.
Finally, we're reporting our adjusted results across four segments.
First data, which reflects first is historic business segments.
Payments and financial which our original Fi serves two business segments and last we combine both companies corporate segments into a single item.
We will report our results in this fashion for the remainder of the year and expect to rollout new segment structure beginning in 2020.
We feel great about our performance for both the quarter and the first nine months of the year and are well positioned to achieve strong full year financial performance.
Adjusted revenue was up 5% to $3.6 billion in the quarter and 4% to $10.7 billion year today.
Internal revenue growth was a strong 6% in both the quarter in year to date, driven by all three business segments delivering higher growth through September thirtyth.
As expected revenue synergies were modest in the quarter and will accelerate over time.
Overall internal revenue growth performance through September Thirtyth slightly ahead of our expectations for the year.
Adjusted operating income increased 10% to $1.1 billion in the quarter and is up 8% to $3.1 billion through the first nine months of the year.
Adjusted operating margin in the quarter was 29.8% up 130 basis points versus the prior year.
As you know we had expected stronger margin performance in the second half of the year in the original Spicer business as we lap much of the prior year tax reinvestment.
Operating margin also benefited by increased revenue growth in some limited benefit from cost synergies, partially offset by the lot acquisition.
Year to date adjusted operating margin was up 100 basis points to 29.1% with each of the segments showing increases.
Given the July 29, close actual synergy benefits realized in the quarter were modest.
Revenue synergy action plans are on track to achieve our year, one target of nearly $100 million and we've already actions annualized run rate cost synergies of more than $200 million. We're highly confident that we will meet or exceed both the revenue and cost synergy targets.
Keep in mind that interest savings are not included in the $900 million cost synergy target.
The total of target cost synergies and expected interest savings is in excess of $1.1 billion annually.
Adjusted earnings per share was up 17% to $1.02 in the quarter and increased 16% to $2.87 year to date.
These results included a negative impact from foreign currency of two cents and eight cents per share for the third quarter in year to date, respectively.
Overall, we're very well positioned to achieve our 34th consecutive year of double digit adjusted EPS growth.
In the first data segment adjusted revenue was up 3% to $2.2 billion for the quarter end up 2% through September thirtyth to $6.4 billion.
These results for both periods include headwinds from last year's Q3 divestitures.
Segment internal revenue growth was a strong 7% in both the quarter end year to date and is up more than 100 basis points compared to last year.
This performance included excellent results in the former GBS segment recording 10% growth for both the quarter in your today.
These results also include 7% growth in the quarter for GBS, North America, and 6% growth for the year today.
The primary drivers of our strong growth or digital commerce ice be solutions, Clover and global merchant acquiring.
For example is fee revenues have grown more than 60% year to date, we've added more than 18000, new I SB merchants.
Overall contracted merchant locations globally, both digital and physical have expanded low double digits. This year.
In card issuer processing, we're seeing solid trends and global credit card accounts on file which grew mid single digits in the quarter.
This growth was driven primarily by the onboarding of new clients and growth in existing portfolios.
FTC it previously treated plastics, we sell revenue as a pass through item.
Given that original Spicer provides plastics production. This is now included as adjusted revenue.
This reporting change created a headwind in Q3 and becomes a bit more pronounced in the fourth quarter.
International growth continues to be a bright spot delivering high teens internal revenue growth in the quarter in your today.
And growth has come from a combination of new issuing and merchant business with strong payment macros in places such as Brazil and India.
The first data segment adjusted operating income increased 5% to $667 million in the quarter is up 4% to $1.9 billion through the first nine months of a year.
Adjusted operating margin in this segment was up 20 basis points to 30.7% in the quarter, driven primarily by strong revenue growth and cost containment offset by pressure from foreign currency.
Year to date adjusted operating margin was up 50 basis points to 30.3%.
As we enter 2020, we don't plan to separately report the former first data segment or sub segment growth rates as we provide new segments will supply the key financial and business metrics, which we believe best aligned with our strategic plans and expected financial results.
Moving to the payments segment, which is original Pfizer only adjusted revenue was up 11% in both the quarter in year to date to $861 million and $2.5 billion, respectively, including the benefit of the line acquisition.
Internal revenue growth was 6% in the quarter up more than 100 basis points sequentially and up 5% year today led primarily by strong performance in our card services electronic payments output solutions businesses.
Adjusted operating income for the payment segment grew 16% of $309 billion in the quarter and 11% $899 billion year today.
Adjusted operating margin in the quarter was 35.9% up 150 basis points over the prior year and adjusted operating margin for the first nine months was up 10 basis points to 35.3%.
Results in the quarter and your today benefited from additional revenue growth and the reduction of last year's tax funded investments, partially offset by the impact of the line acquisition, which anniversary that October 30 Onest.
Debit transactions grew high single digits in both the quarter and year to date Mobiliti ASP subscribers grew 14% in the quarter to 9 million in mobility business clients increased 18% as the U.S. continues to embrace digital banking services.
PDP transactions, which include both pop money Enzo continued to struggle so strong results doubling versus Q3 last year.
15% sequentially.
Well transactions alone nearly tripled in the quarter buoyed by the number of live clients nearly doubling sequentially.
We signed 100 Thirtys all clients in the quarter more than the first two quarters of the year combined and almost three times the number of signed in Q3 last year.
For the financial segment adjusted revenue was up 4% to $596 million for the quarter end up 1% to $1.8 billion year today, including the lending transaction, which anniversary at the end of Q1.
Internal revenue growth in this segment was 4% in the third quarter up more than 100 basis points sequentially and is 4% year to date led by our account and item processing businesses.
Adjusted operating income in the financial segment grew 5% to $196 million in the quarter and is up 1% of $598 million through the first nine months of the year.
Adjusted operating margin in the segment was up 20 basis points in the quarter to 32.9% up 10 basis points year to date to 33.3%.
The results in the quarter and year to date are stronger than they appear given a reduction in periodic revenue, which has been more than offset by the benefit of high quality recurring revenue growth and operational efficiency.
The adjusted corporate operating loss, which includes the combined corporate expenses of both original businesses was $93 million for the quarter in $314 million year to date.
We expect the fourth quarter corporate expenses to be generally consistent with out of Q3.
The adjusted effective tax rate was 22.2% for the quarter in his 20.8% for the first nine months of the year.
And we expect our fourth quarter tax rate to be 24% and a full year adjusted tax rate to be about 22%.
You May recall first data has a meaningful tax and a well which should create.
We continue to create a lower cash tax rate for the next several quarters.
Free cash flow was strong in the quarter and is up 13% $2.3 billion year today with free cash flow conversion of 116%.
As a result of our normal portfolio management process, we reached agreements to divest too small product lines for $133 million in the quarter. These businesses represent about $8 million of revenue per quarter and both closed in October .
We issued 286 million shares on July 29 to complete the first data transaction and in late September we began repurchasing shares inline with our longstanding capital deployment strategy.
We repurchased 341000 shares for about $35 million in the quarter and 2 million shares for approximately $156 million year today.
We have 24 million shares remaining authorized for repurchase at the end of the quarter.
We remain fully committed to returning to our historic leverage level over the next 18 to 24 months through a combination of debt repayment and strong EBITDA growth.
Total debt outstanding as of September Thirtyth, which is about 75% fixed was $22.5 billion and debt to EBITDA was 3.9 times.
With that let me call it turn the call back to Jeff. Thanks, Bob We begin our new Pfizer journey with a far larger opportunity to deliver value to the market combined sales performance was up 15% in the quarter and is up 8% year to date, we had a number of important wins in the quarter, such assigning the California, DMV and it's one.
180 locations for the Clover platform.
We also have larger competitive wins in the integrated payment space, such as Das platform, Smartservice Nm and MRI.
And we added all the north and all the south the global supermarket chain store with locations across 19 markets to our ecommerce solutions.
We were also pleased to expand our relationship with Golden one credit Union in the quarter, where the bundle of new value, including ATM managed services, we signed Western Alliance bank with more than $25 billion and assets and TDK bank with nearly $5 billion of assets to our dovetail payment hub.
And last DNA momentum continued in the quarter, signing six new clients and competitive processes, including landmark credit Union, Wisconsin's largest credit union with more than $4.2 billion in assets and from a credit union with about $1.3 billion in assets our sales pipeline remain.
Strong and importantly, the weighted pipeline of revenue synergies is approaching $100 million of annual revenue.
We expect the synergy pipeline and related sales to grow as the market experiences the new Pfizer.
For those tracking the original Pfizer integrated sales was up 46% in the quarter and 17% through September Thirtyth.
Operational effectiveness program performance remained on track with $11 million achieved in the quarter and $36 million of savings year to date.
Now on to guidance, we expect constant currency internal revenue growth of 6% for the year with the fourth quarter coming in around 5% due primarily to a slightly better than expected Q3, a tough prior year compare including lower periodic revenue in our financial segment and some purchase revenue adjustments we actually.
Adjusted earnings per share in a range of $3, a 98 cents to $4 in two cents for the year growth of 16% to 17%, which includes more than 300 basis points of negative impact from FX on our full year adjusted EPS growth rate.
We expect adjusted operating margins to expand by at least 100 basis points for the year and that free cash flow conversion will be approximately 115%.
Although we are in the midst of our 2020 planning we will provide a very preliminary view into our expected performance for a full clarity. This is not official guidance or outlook. Those data will be provided in our February call.
As of today, considering the strong performance of these of the existing business expected synergies and the current view into the continuing headwind from FX, We anticipate 2020 internal revenue growth of at least 7%.
And that adjusted earnings per share will grow plus or minus 25% over 29 teens actual performance.
This has been a monumental year for Pfizer, we were named a world's most admired company for the six year on a row celebrated our 30 Fiveth anniversary and most importantly, combined with first data to help achieve our aspiration of moving money and information in a way that moves of world.
While others have followed our lead we are even more confident today that our solution set global scale and significant investment capacity underpins that unparalleled opportunity for clients associates and shareholders.
Let us also thank our 44000 associates around the world for their commitment and enthusiasm to building, our new enterprise, while continuing to serve clients with excellence. Each of you working together are truly Pfizer out our best.
With that Michelle let's open the line for questions.
Thank you Sir.
At this time, we do have any questions you May press Star one please state your name when prompted.
Our first question comes from David Koning with Baird. You May go ahead Sir.
Hey, guys. Congrats incredible performance, thanks, Dave I appreciate it.
Yeah, maybe to start out I mean have guidance over 7% for next year, what seems like it's happening. Its first data has kind of gone from.
A few years ago, losing share to actually it seems like they're gaining share now in you guys kind of called out digital RSV Clover Global solutions, all that fast gross stuff is North America actually kind of in an acceleration mode and.
Maybe how big is is that really fast growth part now has that gotten to scale that it can accelerate accelerate the total North America growth, though.
So Dave there's a lot of questions that are in there.
We take the first part of it and then and then have Frank.
Thanks, Phil on the blanks, and perhaps Bob will have something to add to it as well.
I would say that that if you start kind of at a little bit more of a macro level, you'll remember when we got on the phone and in January 16th and announced the transaction that it was our belief that there was a mismatch between what was going on in the company and how investors, we're thinking about it and what.
We were seeing and what we are seeing was that Frank and the management team had really puts the company on the right on the right how that they were making fantastic progress and I'll, let Frank talk about that and that's a an incredible testament to what the team has done to have delivered 10% growth both in the quarter end the year to date.
But it was our belief that that technologies, such as Clover right with over $100 billion into the annualized GTV growing at 40%, which is actually an increase from the prior years' growth rate.
And then you think about integrated payments and I see and ecommerce growing 30% and transactions that.
These pockets were moving absolutely in the right direction, but don't forget there's still a big partner solutions business.
Theres lots of other pieces of the business that continue to just move into right direction. So I think we have a lot of room to continue to Ron.
We'll be focused on out ecommerce business signed 30, new logos. This year alone. So we're taking the right steps are moving forward.
I think we believe that it will continue to grow and also obviously, we have our international businesses that have been growing quite well Frank why don't you I think the only thing I would add is.
Technology base businesses.
Ill acquisitions going back in time to us buying clover fully integrating clover into the company, but letting it thrive as silicon Valley entity.
Then the acquisitions in the high as is the businesses, which.
Are beginning to really show up which were Clark connect and Blue Bay, and bringing that technology integrate in the greater company and bringing technology and on top of that to bring the best solutions that we thought technically we're in the market and then any comments and constant investment for us and you.
Can count on US having continued investment in all three of the is to continue a growth trajectory and those businesses annual international has been a star for us but.
That was something that we started out with very little market share and you see that as a strong double digit grower for us, but the technical business.
The partnership in this new company well just help this you know I mean, if you want to ask about North America, you hear us talking about the privileged position that Pfizer had what it's great core clients and the reason why we've been able to go in and I think.
Got to absorb that 20 when is in 100 day period of time, that's from startup discussion to signing and when you have 6 billion dollar institutions and competitive takeaways.
It's about them privileged position that by serve Ed with these clients and.
I think Jeff and I've thought about good ways to bring it together ways always that's a quiet.
Yes.
Well, great guys. Thanks, and I'll just ask a very short follow up I know free cash flow and buybacks are so important to you guys. What what do you think the Q4 share count is going to be just because it's it's confusing right now with partial quarter in Q3.
Yes, Dave it's Bob.
We bought we started buying back in late September as we've talked about will work some modest buyback on to that Tenbfive program. The way to think about if you look in our press release, there's a couple of payables and there were about 695 million shares overall as a way to think about it.
Great Great job, thanks, guys. Thanks to.
Thank you. Our next question comes from Lisa Ellis with Moffettnathanson.
Hi, good afternoon guys.
Hi, can you talk a little bit about as now you've got.
All you guys together merged entity about international a place where.
Legacy first data has had a lot of success.
Not and historically have focus area for five serves but as you are looking into sort of the investment priorities of the combined entity. What's the role of your international expansion what are the priority and geographies, how should we be be thinking about that.
Thanks Lisa.
I think first of all you I know that you watch the international growth of first data and it was very very targeted in countries that we believe head.
Good payment economies had lots of runway in.
Cash to cashless and our ability to bring our skill set and tools there.
There.
Great. Thanks also.
When we looked at the company.
We found that the ability to take both institutions split them together.
On.
Very very into Grady businesses in each country and in each region and then in talking to our clients. You know that is one of the favorite things like that do visit clients talk to them talk them about the solutions. So as we said before.
I think there's great opportunity for us to bring merchandise and issuing product into.
Old old Pfizer of clients and we think there's great opportunity to take many of the good products we have.
Everywhere from dovetail to the way, we could have hosted solutions.
For institutions, which we had great relationships with and I would say international.
If you went to where we originally started.
Some much brighter spot and the opportunity in totality and now regional heads have been off and running and doing a great job and integrate in this company Lisa I would only that we went when Frank and I and the teams we're going through the combination analysis and looking for.
Where were the big opportunities, we to some extent put international off to the side because we had in the original five serve such a small international presence and even though we had a fair amount of country diversity and maybe a larger amount of product diversity. We we didnt necessarily think we would have scale.
Ill and one of the things that we've been pleasantly surprised by is because of the the infrastructure or the scale that first data brought to the party, we're able to take our solutions post them for clients and run them and create recurring revenue.
And.
There's been a lot of energy if you're in if you're in a local jurisdiction you want products and we had a lot of products.
There are a lot of relationships and so we've got a lot more energy going back and forth and we will we will now because of the combined company. We have reasonable scale, we will certainly look to deploy capital outside the us where it makes sense strategically and for the rest of the benefit of the company.
Thank you and then maybe my follow up.
Lately related on E com, 30% transaction growth, obviously, a fantastic number can you give a sense for where in that extremely hot and hotly contested market you're winning is that chino should we be thinking. This is no multinational omni channel business platforms, where you're you know the backend.
Processor behind some at the Big platform players is that small business you I say get give us a sense for sort of where you're seeing those wins. Thank you.
Well you know.
There is.
Been a Jeff talked about the number a new logos and that that implications.
Large and accurate which are the large institutions.
I should think of them as.
Large.
Players who are brands that you aspire to have this business with so we've been very very fortunate to have have notched a bunch of wins of large institutions, who are heavy E com players.
And.
Think of it in that manner. I think also you know you can see us.
Having a larger attach rate and now I SV business and other other avenues, where where attaching more E com to our small business and medium size and I asked fees.
And yes, we do have a somewhat privileged position as being a processor for some large players also but I think when you look at the totality of what Jeff talked about in the winning space. It's been more at the front to shop not at the back in a shop, yes, it's really been quite impressive the the list of name.
Change set the the company has been able to bring into the stable over the last couple of years, including a number of important names. This year as Frank said to some extent aspiration all names.
In industries that we are aware of but there's also a fair amount of middle market.
Most of what what we're seeing right now is in the.
Isn't the omni pays space.
But but in that middle market. So we are we're making great progress there and we're building out a model, where we're delivering incremental services. So that we're able to create more value on a per transaction basis. So.
It's it's early we've had this conversation, but the momentum the momentum is I think far greater than certainly we understood, but but as important I think more than the the outside world is understood.
Terrific. Thank you thanks, Ken.
Thank you. Our next question comes from Darrin Peller with Wolfe Research you May go ahead.
Hey, Thanks, guys. Darren overall, just wanted to touch on a look if we wanted a bit more on the first data growth given the source of strength and upside versus prior rates. I mean again, you mentioned the strength in GBS continuing to trend well, if we could just break that down a little further on perhaps even in the U.S. as a partner solutions business the direct.
And this JV.
It seems like the partner solutions continues to really.
Holding their strong and then maybe just add onto that if you've seen any cross sells on maybe has has the kluver cross sell into the digital banking side.
We're just through your bank channel started yet how's that been going.
So let me, let me start and Frank will again.
And we'll will play off of each other on that to answer. Your latter question first we have seen exactly no revenue to date from the bank channel lots of NRG as Frank talked about 20 wins at 100 days in a large a large pipeline in lots of interest, which is particularly important now and it.
Time, where that fee revenue is increasingly important and we're obviously looking to help our clients so lots there.
We are making real progress in deeply integrating the clover technology into the digital solutions in which we we.
We control right, which our development shop, and so we don't have to deal with some of the some of the exhaustion as factors that can get in the way of.
Digital performance so from our perspective, that's all good but but again to reiterate that's not in the numbers at this stage, it's really an across the board in merchant obviously, the things that we'd like to talk about or the digital commerce technologies and the things that are.
Quote a little sexier unquote that maybe some of the others, but partner solutions continues to be incredibly important the whether it is whether it is our business consultants, who are out signing up merchants every day or or signing a new I SV provider or a new week.
Commerce solution. It all comes together and I think I think Bob in his prepared remarks talks about the fact that that merchant locations overall, our up double digit year over year and I think that really just talks with bank of what we're doing and how we're focused on on driving the business in.
Kind of one important vertical at a time.
All right. That's helpful. Just one quick follow ups on the Bill pay cross sell opportunity, we or checks are suggesting there is a pretty good amount of white space in some of your enterprise clients at first data still have you seen further evidence around that.
You heard Frank talk about talk about.
The number of meetings that we've had with clients and and.
Talking about the power of the influential relationships I mean, I think at this stage the best way to frame. It is we're having a number of conversations that I don't think either of the original businesses would be having without having done. This combination. So we're bullish about that but we also.
I don't want the card ahead of the horse, we need to keep moving the processes, along but again the conversations in the interest levels are quite high.
That's great to hear goes thank you.
Q.
Thank you. Our next question comes from Ramsey El Assal with Barclays. You May go ahead Sir.
Hi, guys. This is up into the CHMP Ramsey I wanted to ask a follow up on an earlier question on the share repurchases. So it's nice that you have the confidence to kind of start doing that immediately.
Just wondering what kind of pace should we expect while you're paying down debt should be kind of more the historical norm of quarterly repurchases or maybe a more muted until the debt pay down and kind of as a follow up to that given that that kind of confidence in your cash flow generation should we maybe expect to see incremental M&A, perhaps earlier than expected.
Yes, so I would say one of the things that was in our prepared remarks is to make sure that we pointed out that we're buying under a tenbfive plan and so.
Which means that we would expect to be regularly in the market I would say that we will not be in the market at the pace that we were app for we are absolutely committed to making sure that we need our.
Our leverage commitments to the agencies and we will for sure do that and that will come from a combination of cash flow generation debt repayment and growing EBITDA. So from that perspective, I think we will we will pace well, but the cash flow is strong and we feel good about that we also.
Had a couple of smaller divestitures in the quarter and so we'll be looking well be looking to create.
As much opportunities we can to.
To deploy capital capital as we have historically I would say that M&A itself is not particularly high priority.
Differentiating and winning in the market is and so where there are opportunities for us to deploy capital for M&A.
And and its meeting our normal disciplined capital allocation deployment. Then then we're fine.
But but again I think our number one priority is making sure that we meet our commitments from a leverage perspective, and then we take it from there.
Okay. Thanks, very much in Q.
Thank you David Togut from Evercore ISI you May go ahead Sir.
Thank you and congratulations on the new Pfizer Thanks, David.
You called out 46% integrated sales growth in the quarter, Jeff, which I believe is the highest integrated sales growth. We've seen at least for Pfizer's Standalone are there any major drivers to call out behind that is this a pickup in bank I T to ban specific solutions gaining more track.
Action.
Yes, it really has to do more with the level of investment that we have been making in our solution sets over the last few years and building products and having that product come to market and that product has been a combination of of internal builds as well as some small.
All M&A that we've done.
That is enhancing our overall value proposition specifically in some of the not surprisingly in the digital arenas so from that standpoint.
It is it is really just about products that we've built and and I don't know that I would I would count it to be around growth in bank. It spend but I do think it is the it talks to the importance of making sure you're building solutions and the places that matter.
Most for clients, it's also around areas like deposit transformation.
Risk fraud, the normal areas mobile digital as we talked about and then and then we believe wholeheartedly that the merchant solutions that we're going to bring the integrated solutions that Frank talked about through Clover, and others will even further enhance that.
Understood and then as a follow up.
The preliminary 2020 outlook can you give us any broad outlines in terms of.
What you're thinking about for first data organic versus payments and financial and then how you're thinking about the cadence.
Revenue and cost synergies flowing in 2020.
Sure.
Say that at this stage.
A couple of things number one this is not meant to be guidance and the more details that we give the more Bob will.
Not be happy with me. So I think we're going to keep it at a pretty high level. The second thing I would say is remember that we we intend to re segment the company and so when we give guidance, we'll be giving it across a new segmentation.
Total until I think again getting ahead of that wouldn't make sense at the higher level I can tell you that that we feel quite comfortable that the kinds of growth that is being delivered in the company is sustainable and so there's always going to have ranges around that.
Sustainability, but generally if you think about the former GBS segment of first data, 10% growth in the quarter, 10% growth for the first three quarters.
The us that feels like a level of sustainability around that and we think that each of our each of our segments will continue to grow you'll remember that it was important for us to look for how could we continually and sustainably step up internal revenue growth and so we'll look to do that.
And then the last piece is around the synergies right and synergies understand that that as you know synergies have to get sold and implemented there are some things that come on faster than others.
That's that's what I would say as we would expect that to be more backend loaded as some of the revenues come on but again, we'll have to see how that all looks when we give guidance in February .
Understood. Thank you very much thank you.
Thank you. Our next question comes from Brett Huff with Stephens incorporated.
Good evening guys. Congrats on some good results. Thanks, Brett.
Thank you for the preliminary goalpost around the 20 outlook.
One thing that we might I'd like to know is give us a sense of where there.
You can maybe do better than that where there were the kind of the tougher parts that you have to kind of performed better on it can you give us any you know just.
For instance is on the kind of upside downside drivers.
Sure.
Again, Brett remembering that we're not giving guidance will give you.
What kind of try to give it to you at the not the goalposts level that maybe at the stadium level.
So we had talked about the fact that that we expected revenue growth to be at least 7% and there there's a reasonable amount of variability.
As you start to move across across the 50 yard line of the 7% and that is how to synergies come on how quickly do they come on how to do sales go how to implementations go.
Probably the most important thing for us to lay out is as we sit here today.
A lot of things have to go right as always but everything doesn't have to go right and that we really thought a lot about what was going to be the right way for us to give this early visibility to 20 and so.
We feel like this is a good solid number and up Dolby ways to.
The outperformance and as Bob will remind me later, there will be ways for us to underperform, it, but but we do feel on balance that we are.
Pretty good place.
In terms of that up in terms of the 7% great. That's helpful. And then the follow up is just more drilling down a little bit into the first data segment.
You told us about the any GBS, which is really helpful. Any thoughts on the growth differential just qualitatively between the kind of the big jvs versus the more broad referral arrangements and kind of a longer tail.
<unk> Bank channel can you give us any sense, there on growth and maybe even profitability performance.
Yeah, it's Frank.
I think you got to think about.
You know what were doing hit.
Hey.
As.
Continued.
Investment and still getting better growth right and the Jvs are all as a good discussion to have but I think you gotta moved to the bigger discussion, which as you know how's ASV growth how long is that runway which is huge.
This this.
Investment, we made in Clover and the hundreds of people that we had develop at Elk that has us.
Delevering you know as you heard costs and 100 billion dollar.
The Mark and growing.
At 40%.
So I think it's all the elements of it.
And then what you heard us talking about an E com, so a little bit I'd move away from the dialogue about a JV or a bank channel and move more and yes, We love the Bank channel you hear us talk about.
20 wins and 100 days.
Through the privileged position that I serve Ed.
But I would I would not try to understand each one of those Oh I don't understand the macro trends of I SV E Com Clover and digital distribution, yes, I think breadth.
The thing that's important here is remember as we as we moved to more of a a GAAP methodology for recognizing the revenue we were able to on shroud. Some of the underlying performance in certainly in GBS in the indeed.
Subsegment, formerly known as GBS North America, we were able to on shroud that now there are contributions that come in and I would say that we have had contract growth contributions from the jvs that are better than they were last year I would also gas that that is the smallest of the.
Contributors and to Franks point, the other pieces of the business are are growing faster and will be faster growth vehicles, not because as Frank said the banks the bank channel and the Jvs are not important there are critically important we're going to do everything we can to grow them, but we think that that the seeds that have been play.
And that in first data for the last three or four years, whether it be clover or blue pay or car can act or a lot of original or internal development that it takes time for those products to be built and come to market and so that's real those are really the bigger dry.
Divers just to reiterate brings commentary great. Appreciate the detail guys. Congrats again, thank you.
Thank you. Our next question comes from Ashwin Shirvaikar City, you May go ahead Sir.
Hi.
Thanks, Bob.
Rationalizations on the good start to the combined journey here. Thank you.
Yeah. So the question I had is even off at the at least you went from start to finish was remarkable for the bank wins you mentioned.
Great you cannot get.
Granular on the on whats feeding that pace and urgency and.
Is it is it's kind of limit it to the.
Subset of clients you.
Prospects here speaking with can you can we make any broader set positions about bank Nike spending from there.
Yes, let me let me start Ashwin on that it's a couple of things I mean, when when Frank and I got together and we talked about this is there the one of the one of the the many points of Serendipity was.
Frank had believed that having a access to be able to get deep integration to a core processing system was really important.
And then.
We are the largest core processor in the in the U.S. and really in the world and so.
That the ability to dry integration different levels of integration and access to information.
Will allow banks to creating more compelling.
Integrated merchant experience for their customers and also because these are revenue sharing partnerships be able to create fee revenue and you know ashwin that fee revenue right. Now is is really important and so you've got a convergence where we love. The fact that we not only are we.
We.
We have these great relationships with clients, but we get the pay them.
And that we think that actually works quite well and it it speaks to the the 20 wins and 100 days I just think it speaks to the fact that.
As we had talked about historically, especially at the smaller end of the of the ranges that Frank was talking about you have banks. It really haven't paid a lot of attention to it and they see this is a great opportunity to go out and serve their customers and to create some additional fee revenue.
And and.
Frank I think I would say, it's going a little bit better than I anticipated.
Yeah, I mean also great start off takers.
Great and then the clarification I have is.
What portion of Btwenty 19 outlook. The these due to.
You know synergies for you at least within for you.
The components themselves does seem to be doing better at this point I.
I mean, the synergies Ashwin I mean, we the synergies are very low for this quarter there'll be something less than very low in the next quarter, but as you know we talked about the fact that we have.
We have action annualized run rate synergies of a couple of hundred million dollars, but the substantial majority that's going to pop in next year I would say that synergy the idea of synergies in our numbers for 19 have not had any meaningful impact on how we have set our guidance there are there and.
Important part of next year and I would say, that's probably the biggest single driver of of.
What some people consider synergies would be interest expense saves in our numbers vis-a-vis the prior the prior original companies.
Got it.
Good stuff. Thank you guys. Thank you.
Thank you Glenn Greene from Oppenheimer You May go ahead.
Thanks, Good afternoon, congrats on that could start I mean.
Very encouraging 2020 outlook.
Thank you.
I guess for first question it sounds like maybe I'm reading into this but it sounds like you're increasingly confident over 500 million revenue surging over you talked a bit about it but maybe the areas were specifically you see the upside opportunity relative to what you thought or.
Rental opportunities, which had a really fully appreciate it early on.
But gives you more cars that's about 500 ROI.
I mean.
You know this privileged position that we have what the banks.
Until you go visit them and actually can talk to them.
Not really sure how it's all going to turn out now we knew that we both had de Blasio financial institutions and they were a life blood.
But whether it would turn out this way.
Wasn't all that clear so we feel good about how that's going to come out and over the long haul the or at the Echo of money I'd say secondly, you heard us talk about international Thats, probably something that most people in a thoughtful and put the teams together that we.
Would be so bullish on and I don't think we initially you had it in our base case, so to speak only thought about it or maybe it's always saved some money but.
I think the revenue opportunity, there's pretty pretty large and then when you move to the to the spaces like credit businesses.
In putting these two together it becomes very clear.
I'd like to say the biggest proof point for US has been a client's office great years, there's no better things and Jeff and I have had the benefit of two in multiple client meetings together and then obviously, we do think separately, but is so clear the power of the franchise and we always come out with more opportunities and more.
Network will obviously like credit will be big for us output as a tremendous opportunity.
So 100 days in.
We feel we feel better than we did when we started on a journey and and Glenn We are I mean, I think you heard you heard we have good confidence in the 500 million.
And and we also we also think it's prudent for us to wait until our Investor day to really lay out.
In detail, how how we see it coming together and where we we may see opportunities to to do a little bit better.
Okay, and then just a follow up question will be.
Brought selling environment I'm going to hurt the 15% bookings growth for the quarter, but just from a context.
What you're saying at a high level across the businesses.
Your peers are obviously, some really good results too. So it's it's kind of curious so a lot of concerns about the macro economy, but.
There are a lot of copper so secretary not sitting at so I'm, just curious what you're saying.
Sure. So I would say that that if you think about you have to think about at least for us we.
For US original Pfizer people, we've had to open the aperture and and we're happy to do it.
We're not just serving primarily financial institutions anymore, we're serving really everyone who does.
Something in the world the payments Commerce money movement.
And Fintech and so from that standpoint, when you think about the entire ecosystem theres a lot going on and what's happening in financial institutions is financial institutions, our biosimilar span two areas in which it's most it where it is most visible to their customers and so whether.
Its digital sorry, whether its consumer or commercial buy things that are digital abilities to serve clients in a in an Amazon like way, that's really where you're seeing money go and then just money movement payment setting higher space is just.
Fraught with energy and innovation and everyone is looking to make sure that they're on the wave.
And because of the breadth of the company and the the investments that that we collectively have been making over the last few years I think we're we're fairly well positioned what we have to make sure that we continue to do is that we meet our commitments and deliver for our clients because that's really what they need most right now.
Okay. Thank you.
Thank you.
Thank you know our next question comes from Kartik Mehta from Northcoast Research you May go ahead.
Thanks, Good afternoon.
Yes, I think I know the answer the based on all your commentary for 2019 guidance and your outlook in 2020, but just wanted to get your thoughts is you have conversations with bags and interest rates are moving all over the place and they're getting pressure on their net interest margin.
Hi, I'm, assuming that's not having an impact on their spend.
At least for as you can see and that's the reason for your confidence in a 2020 is that.
Cut up there.
I would say I would say, it's probably too bold to say, it's not having any impact on their spend it is up but what we're seeing and we've seen this before institutions are making choices, perhaps their discretionary spend is going down or their spending last.
Yes on.
On older systems and more on newer systems again, where the institution meets the customer in the places that matter. Most so I do I do see that I do see that going on in the conversations are you know how do we do more and in times like this where you.
For a full scale provider you have opportunities to go in and win more business and so we're certainly hoping.
And building strategy around the fact that that we think the suite that we bring on balances.
The best in the market and so we're looking to Franks point about how we have client conversations and there's more interest in doing things. There's a lot of opportunity to see can you do things more efficiently and effectively.
As one larger enterprise and so that was one of the things Kartik that we liked about this transaction is is yeah. On one hand, there are some that say, it's best to be per pure play, we think being broad and the ability to put things together and integrate and new and innovative ways gives.
So a bit of it a bit of a market advantage.
And just one last question for you Frank as you will recall customers today versus a year ago is there for the change in the type of customers are using clover and as you see Cobra evolve over the next let's just say come out of Congress 12 to 18 months.
Is that change at all.
I think the breadth of Clover continues to get larger I think if you go back in time, we talked about dining solutions and delivering to restaurants. So al Gore asked the you know what out what our development teams are doing is continuing to build functionality that gives us more vertical there.
We've gone outside the U.S. you see us in Canada, you see us in Europe .
You should expect or any leases in Latin America.
You know we've been tremendously.
Vantage says we were strategic in Argentina, and Hello to capitalize on that change and Clover was part of that strategy. I'd. Also say is we continue to build out functionality with the combination of Ah ally SV solution Clover, the ability to bring the two together for a best in class.
Solution for merchants, who uses integrated software as what you'll see happened. So the answer the short answer is yes in the west was the description of al anywhere.
Thank you very much appreciated.
Thanks, Kartik and thank you everyone for joining us. This afternoon, we really appreciate your support if you have further questions. Please don't hesitate to contact our Investor relations team have agreement.
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