Q2 2020 Fiserv Inc Earnings Call

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Welcome to the fights over 2022nd quarter earnings Conference call. All participants will be no listen only mode until the question answer session begins following the presentation. As a reminder, today's call is being recorded at this time I will turn the call over to Peter Pulliam Senior Vice President of Investor Relations that Pfizer.

Thank you and good afternoon.

With me on the call today or Jeff Your bookings are executive Chairman, Frank There's ignore president and Chief Executive Officer, Bob How our Chief Financial Officer.

Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of Pfizer Dot com.

Our remarks today will include forward looking statements about among other matters the impact of the koeppen 19 pandemic on our business.

Expected operating and financial results strategic initiatives and expected benefits and synergies from the first data acquisition.

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 earnings release and supplemental materials 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 base.

Yes.

Also note that non-GAAP financial measures in our earnings release and supplemental materials include the three and six months ended June Thirtyth 2019 results for first data, which had been prepared by making certain adjustments to the sum of historical first data and Pfizer GAAP financial information.

Lastly, we're holding an investor day on December Eightth in New York City to share our strategic vision.

Well, we intend to host the event in person with appropriate protocols as circumstances allow will also prepared to broadcast the content for those who prefer that approach.

I look forward to seeing you at this important event.

Now I'll turn the call over to Jeff.

Thanks, Peter and good afternoon, everyone.

A lot has changed advisor since we announced Q1 results.

Coming off tremendous financial performance in January and February we hit the Cove at 19 Cliff in the second half of March which further worsened in April.

At our May 7th call, we shared our thesis that April would be the likely trough and we expected to see gradual improvement from there and that is exactly what has happened.

Each month revenue has improved sequentially from the lows of April and culminated with a return to internal revenue growth in July.

Clearly the results are not what any of us expected prior to the pandemic.

However, we're quite pleased with our overall performance the resilience and strength to produce nearly $900 million of free cash flow in the quarter.

And tremendous sales momentum, which reinforces our market leading value propositions and further positions us for accelerated growth.

We successfully completed the dissolution of the BAMS joint venture on July Onest as part of this we welcomed nearly 120000 direct clients to Pfizer and inked a new processing agreement with the bank as their provider for merchant services.

We are grateful to bank of America for their partnership and are excited about our future.

On July 29, we marked the one year anniversary of closing our historic merger.

We've made tremendous integration progress, while continuing to invest in our future.

We've also gained significant confidence and the size and scope of the opportunity and wrapped up a series of first year accomplishments, including generating $3.5 billion of free cash flow.

We allocated more than $1.7 billion to share repurchase well ahead of schedule and also repaid $1.1 billion of debt, we raised our cost synergy target by a third to $1.2 billion and increased our revenue synergy goal by 20% to $600 million.

And of that and the first 12 months Weve action $750 million of cost synergies and $160 million of revenue synergies.

Interest expense has been reduced by nearly $290 million annually.

Which when combined with synergies action is more than $1.1 billion of run rate pre tax earnings in the first 12 months of what was originally set as a five year journey.

Sales as measured in annual contract value grew 15% over the prior year supporting the power of our combined value proposition.

Overall these proof points are representative of our commitment to delivering on the promise of Pfizer and the clients office.

Aren't seeing the power of the best associate team in the industry and delivering sustained above market returns for our shareholders.

And last we Effectuated, a seamless CEO transition to Frank on July Onest.

Seamless because Frank and I've been working closely together since the transaction was announced as we are today and seamless because Frank continues to bring his leadership and commitment to deliver superior results against our proven Pfizer of shareholder value creation strategies.

As both an advocate and large shareholder I assure you that the company is and fantastic hands with Frank at the Hell with that let me turn the call over to our new CEO.

Thanks, Jeff and good afternoon, everyone. Let me start by thanking Jeff for his tremendous partnerships. Since we started talking about merging two great companies almost two years ago and working closely together the last 18 months on the integration.

I'm excited to lead this great company, which Jeff has led brilliantly for the last 15 years.

While we all of us have been navigating the global pandemic Pfizer has faced those challenges with a clear mandate of serving our clients one excellence, while keeping our associates safe and healthy the great progress we've made on those fronts is manifesting.

And accelerated integration improving results in much stronger than anticipated sales.

Importantly revenue has shown sequential improvement each month since April.

In June we saw just 1% decline in internal revenue.

And we returned to internal revenue growth in the month of July.

As Jeff mentioned, we've made great progress in the first year actually paying over $1.1 billion of incremental pre tax earnings as new Pfizer.

And we're highly confident of the additional value ahead. In addition to our financial accomplishments I am thrilled with how our value proposition is coming together in the clients office.

We closed a number of directly yields in the second quarter with sales up a very strong 38% over the prior year and 20% year to date.

Our excellent momentum continued into July with two important competitive takeaways in our credit card processing business.

We were selected to provide issuer processing solutions by Atlantic has holdings and Genesys financial services, both leading providers of consumer credit solutions and the each on their own would rank among the top 25 largest clark.

Portfolios in the us based on active accounts.

Larger issue is choose advisor for a variety of reasons, including our highly configurable processing platform breadth of integrated digital solutions and a client centric approach, which both both states that both of these important clients to go live.

With that market, leading solutions next year.

The resilience and diversity of our revenue was evident in our second quarter as we navigated a very difficult macro environment and generally delivered results above internal expectations across most key performance measures.

Internal revenue declined 7% in the quarter and is down only 2%. So the first half of the year.

This performance is a strong testament to the great work by al people to deliver value for clients, regardless of the difficulty in the end market.

Adjusted earnings per share in the quarter was down 4% to 93 cents driven primarily by coven weakness.

Adjusted EPS through June Thirtyth is up 6% to $1.92 cents on excellent cost and revenue synergy performance and this trend and scale and breadth of al business.

Importantly, we generated nearly $900 million of free cash flow in the quarter of 23% over their comparable quarter end up 13% to $1.7 billion through June thirtyth.

Consistent with our capital allocation strategy, we repurchased 5.7 million shares for $550 million in the quarter.

And for the year to date have repurchased 14.3 million shares for $1.4 billion.

In dealing with these uncharted waters, we have put alloy energy in focus on sustainable actions such as cost synergy acceleration that we believe will make us stronger and more profitable for the long term.

We delivered $155 million of cost synergies in the second quarter results alone and now expect to book at least $550 million of cost synergy savings in 2020.

Weve action nearly $700 million about 1.2 billion dollar target through the end of the second quarter and $750 million through the end of July.

Revenue synergies are progressing equally well with continued strong performance in network innovation Bank merchant and cross selling our market leading solutions across the company.

For example, we were able to add our DNA account processing solution for a new clients Digital bank, where we are initially awarded credit processing revenue synergies sales in annual contract value will more than $50 million in the second Inc.

Good.

We saw continued strength in our bank merchant synergy program, even with the CLO Covance slowdown, adding 42, new bank merchant clients in the quarter and nearly 70% or competitive takeaways.

We we signed more than 160 banks and credit Union means and now first full year.

And have a very strong pipeline of nearly 400 institutions over.

Overall, we had action a $130 million in annualized revenue synergies through June entering a great position to achieve 600 million dollar revenue synergy girl.

We signed 17, new core account processing clients and the corner.

Nine on DNA, including northwest Federal credit Union, one of the largest credit unions in Virginia with $3.4 billion and assets.

And United Federal credit Union with $2.9 billion and assets.

Another important highlight was south state bank and existing Pfizer Premier account processing client, which recently merged with Centerstate Bank and selected by serves core platform and a number of additional solutions for their nearly for there.

Newly combined 30 billion dollar institution.

Even in these challenging times al leading solutions continue to win in the market.

Our industry, leading digital electronic payment solutions, such as mobility card valet architect transfer now in Zale have us incredibly well positioned support to support our clients in the digital transformation, which we believe is.

Further accelerated by the pandemic.

One excellent proof points on now digital momentum within a recent competitive win with northwest Bank, a long term vies serve clients, who expanded Alexander's thing relationship to establish us as their strategic digital partner northwest and in a number of new.

Digital solutions led by architect our single digital platform as well as a number of other customer centric solutions, which will enable them to offer a more innovative integrated solution for their clients.

And now card issuing business, we signed a important renewal with PNC extending out long term partnership with the seventh largest bank in the U.S. for both credit and debit processing.

Bank of Baroda, one of India's lot, leading public sector banks awarded us their credit card processing in the quarter.

When we went live we will provide card processing services for four of the top six issuers in India.

Prior to the onset of cobot merchant business that displayed it's emerging strength recording high single digit internal revenue growth through all of 2019 and further accelerating to low double digits in the first two months of this year even.

And then the pandemic our merchant business has performed very well relative to the market and we believe is even better positioned going forward that strength is attributable to a number of factors, including the size and scale of our distribution network.

Graphic reach diversity in diverse industry coverage, how clover, Pat platform and rapidly growing and leading digital technologies, including E Commerce and I asked me.

Clover gross payment volume is recovering well from the weakness experienced earlier in the quarter with GDV up 24% in June and was up 32% in July GPV for the quarter was 23.4.

Billion dollars or more than $90 billion annualized simply stated outflows were strategy is to grow the number of clients using our platform as it as important to extend the breadth of services offered to these clients.

Were creating deeper client relationships through solutions, such as virtual terminal and online ordering that were rolled out in Q2 and are seeing solid early adoption rates.

We are pleased to see our digital merchant acquiring platforms riding the growing wave of digital transactions across a variety of industries and geographies.

We are seeing accelerated sales momentum in ecommerce solutions, adding 15, new clients in the quarter 86 year to date.

144 over the last 12 months.

As the Pandemics, whereas the need for innovation, we're seeing our investments and Omnichannel merchant capabilities, such as order ahead to pick up in store gain even more traction.

As a leader in this space, we provide omnichannel solutions to nine of the top 15, QSR as including Mcdonald's Chick Fil, a taco Bell and Dunkin' Donuts.

In Q2 alone these QSR transactions more than doubled to greater than 50 million per month.

Given the demand we are expanding these capabilities into more verticals, such as grocery as well as other geographic markets around the world.

Our integrated payments continue to perform well expanding our number of partners by more than 20% in the quarter in spite of Covance.

Al is the revenue was up double digits in the quarter.

We remain focused on driving additional differentiation to capture additional market share in this space.

Overall, we're very pleased with our first half performance in this challenging time, the combination of integration benefits the payoff from targeted investments and delivering new emit innovation that clients needs is translating to a significant sales and marketing.

Momentum, which will expect well both support growth today and well into the future.

With that let me pass the discussion to Bob for more detail on the financial results.

Thank you Frank and good afternoon, everyone.

We turned in a relatively strong performance in the face of but most of us impact cope with 19 head on business and consumer activity around the world displaying the resilience and strength of our business.

Total company internal revenue declined 7% in the quarter driven by significant impact of lower transactional volume associated with the global pandemic.

Importantly, as Fritz mentioned earlier, we saw internal revenue steadily improve as the quarter progressed with June internal revenue down just 1%.

The monthly improvements continued into July with company internal revenue growth turning positive for the first time since February.

Your today internal revenue has declined just 2% due to the strength of the business and better than anticipated progress in extra revenue synergies, which were $38 million in the quarter in our $65 million year to date.

We now expect to be above the midpoint of our 2020 revenue synergy estimate of $75 million to $100 million.

Although not the category a formal guidance or outlook based on what we can see today. We estimate that are internal revenue is likely to be in the range of plus or minus flat for the year.

Second quarter, adjusted operating income decreased 14% to $927 million, which includes a two percentage point negative impact from dispositions and decreased 7% to $1.9 billion through June thirtyth.

Adjusted operating margin of 28.8% in the quarter declined 90 basis points compared to the prior year, but improved 100 basis points sequentially.

Adjusted operating margin through June Thirtyth declined 50 basis points to 28.3%.

As anticipated adjusted operating margin for both the quarter in the year, which severely pressured by the cold weather related decline in revenue and the associated expenses timing of brand assessments in prior year dispositions, partially offset by $155 million of expense Energy's achieved in the quarter.

Second quarter adjusted earnings per share declined 4% to 93 cents compared to 97 cents in the prior year as adjusted for the investment services transactions that closed in Q1.

Adjusted earnings per share through June Thirtyth has increased 6% to $1.92 cents setting the stage to achieve our 30 fiveth consecutive year of double digit adjusted earnings per share growth.

Free cash flow in the quarter was excellent of 23% to $895 million in up 13% to $1.7 billion year today.

Free cash flow conversion for the quarter was a stellar 142% and it's 126% year today.

This performance was driven by strong working capital timing of settlement activity in our merchant business and lower capital spending for the combined company.

Our impressive free cash flow is the result of our resilient business mission critical solutions and significant transaction synergies.

We expect free cash flow for the second half of the year to remain strong as cost synergies continue to ramp and we further capitalize on opportunities to drive efficiency across the company.

Looking into the segments internal revenue in the merchant acceptance segment, which has been the most impacted by the pandemic declined 15% for the quarter and is down 5% through June thirtyth.

As the World has begun to gradually reopened we've seen improving transaction and volume metrics, leading to improving revenue performance.

Facts, we closed the quarter with acceptance internal revenue down just 2% in June and in July we turned positive growth.

As you've heard we are seeing improving business trends in the segment.

Over GPV has improved steadily from April through July and Clover units shipped or back to positive territory, ending June up 9% year over year.

Total ecommerce transactions were up 26% in the quarter and Omnichannel transactions gain even more seem.

Some of the key deals in the quarter includes sale. It becomes solutions tour in store card processing for California, DMV, along with E Com solutions for six new regional grocers, including two more in the top 10.

Among the number of wins globally, we added both card present in card not present solutions for Mcdonald's in Germany, and Omni channel solutions to Burger King in the UK.

Adjusted operating income in the acceptance segment decreased 47% to $223 million in the quarter on an adjusted revenue decline of just over $300 million and adjusted operating margin declined 950 basis points to 19.1% year.

Year to date adjusted operating income was $506 million and operating margin was down 700 basis points to 20.2%.

A combination of sharp kobin revenue decline and associated expenses negatively impacted second quarter margin by nearly 800 basis points.

The timing of network assessment fees in the quarter, which is expected to reverse in the second half of the year was almost 300 basis point headwind.

These two factors alone, which sort of roughly 1100 basis points of negative margin impact more than offset the substantial and sustained positive impact of cost synergy actions in both the second quarter and here today.

You'll also recall that Q2 is the anniversary of the BAMS deferred revenue item. So we will no longer be a headwind in the second half of the year.

We expect acceptance segment adjusted operating margin to improve significantly over the remainder of the year to a level above last year's Prequaled. Good results with the majority of the gain coming in Q3.

This improvement is expected to be driven by improving merchant volumes and revenue.

Cost synergy actions ramping over the remainder of the year in the reversal the network assessment timing headwind.

We now expect acceptance segment adjusted operating margin to be up sequentially at least 800 basis points to more than 28% for the second half of the year.

As Jeff mentioned the BAMS. This solution was successfully completed as of July Onest, we've realigned our cost structure as expected, which will reduce our expenses run rate below the proportional level within the joint venture.

Importantly, the dissolution moves a significant amount of scale and the resulting revenue to our small business middle market and enterprise client books.

As a result, the size of our direct E. Commerce digitally oriented revenue has grown meaningfully and should lead to future growth and expansion given the macro characteristics of these attractive markets.

The Fintech segment internal revenue declined 1% for the quarter as growth in high quality recurring processing revenue was offset by lower periodic revenue such as license and termination fees largely due to the pandemic.

Year to date internal revenue was in line with prior year.

Revenue in this segment tends to be quite resilient due in large part to the mission critical nature of the solutions and is much less susceptible to variation due to macroeconomic impacts.

In addition to the 17, new core account processing wins in the quarter, we're seeing even more demand for a broad array of digital solutions.

Mobiliti ASP subscribers increased 6% in the quarter to more than 9.3 million and architect our single digital platform had growth of 56% to 3 million users.

Adjusted operating income was up a very strong 14% in the quarter to $252 million. There is up 8% year to date to $456 million.

Adjusted operating margin was up significantly in the quarter, increasing 520 basis points to 35.4% on a combination of cost synergies and operational effectiveness offset somewhat by lower periodic revenue.

Year to date adjusted operating margin was up 280 basis points as we deliver client value across a scale business with increasing efficiency and effectiveness.

The payments in network segment internal revenue declined by 3% in the quarter.

Cobot impacts pressure, a global credit issuer processing prepaid and biller businesses.

Were partially offset by growth in card services and output solutions in part benefiting from revenue synergies.

Internal revenue through June Thirtyth is comparable to the prior year.

Revenue in this segment tends to be driven by transactions indoor accounts and tends to be fairly resilient in the typical recessionary periods, but this pandemic has been different.

For example, debit oriented transactions, which have historically been very resilient were impacted much more than prior recessionary periods and have solidly improved consistent with the reopenings since the trough in early April.

Debit transactions were down low single digits in the quarter improving from down 20% early in April to being up mid single digits in the second half of June and through July.

Conversely, we are seeing strong growth and solutions such as the concept con transfers in PDP, which is up nearly double the prior years quarter.

And up 20% sequentially.

The number of clients live on Xcel has further accelerated increasing more than five fold compared to a year ago and is up 31% sequentially.

We continue our bullishness on the role of electronic money movement and sells specifically as a pandemic pressures legacy ways of moving money.

Adjusted operating income for the segment improved 1% to $558 million in the quarter and is up 5% to $1.1 billion through June thirtyth.

Adjusted operating margin was up a very strong 220 basis points to 42% in the quarter and is up 250 basis points to 41.6% year today.

The positive impact of revenue synergies operational efficiency and strong cost synergy performance is driving current results with continuing runway for future expansion.

The adjusted corporate operating loss in the quarter improved 5% to $106 million in Q2, and a 7% better to $200 million. Your today, primarily due to cost synergies.

The adjusted effective tax rate in the quarter improved to 20.5% primarily due to the benefit of geographic mix of earnings and discrete tax items.

Our adjusted effective tax rate is 19% through June Thirtyth, and we now expect or full year adjusted effective tax rate to be just below 22% inline with the prior year in modestly better than previously expected.

We continue to allocate capital to build shareholder value repurchasing 5.7 million shares for $550 million in the quarter and 14.3 million shares for $1.4 billion year today.

As you will recall, we began repurchasing shares much earlier than originally anticipated given the strength of free cash flow, even while meeting our debt commitments.

As of June Thirtyth, we at 670 million shares outstanding and about 7.5 million shares remaining authorized for repurchase.

We repaid $100 million of debt in the quarter in total debt outstanding which is now 85% fixed rate.

Amounted to $21.9 billion.

Debt to adjusted EBITDA was 3.9 times as at June Thirtyth.

And we remain committed to achieving our leverage target by the second half of 2021.

We expect to repay more than $1.5 billion in 2020, and therefore, we'll allocate a large part percentage of our free cash flow debt repayment for the balance of the year.

Finally, let me call your attention to our Q2 earnings slides available Investor Relations section of our web site.

89 provides a summary of the financial integration milestones we've achieved in the first year as a combined company some of which Jeff highlighted in his remarks.

Even in the face this global pandemic, we've taken actions that have locked in more than 1.1 billion of run rate pre tax earnings well ahead of original objectives and have much more opportunity ahead.

Well, we are pleased with the integration performance today, we remain committed to unlocking the potential we have inphi serve to deliver even more differentiated value for our clients as well as you are shareholders.

With that let me call turn the call back to Frank.

Thanks, Bob.

We believe one of the most important aspects of the transformational acquisition first data was the commitment to allocate an incremental $500 million to support innovation.

This commitment is unique to vice chair and.

And we expect this program to create differentiated value for clients opportunity for our associates, an incremental growth for our shareholders will provide a detailed update on our priorities haven't progress at our December Investor day.

Based on our strong performance and sales momentum in the first half the year, coupled with the trends we're seeing in our end markets. We are providing new 2020 financial outlook for adjusted earnings per share to grow at least 10% over last years level adjusted for.

Divestitures or at least $4.33 per share for the full year.

Our 2020 outlook does not contemplate a sweeping second wave of shell to orders or other circumstances, which creates significant economic distress in the second half of the year.

We are pleased with our financial performance in the midst of pandemic uncertainty.

Well returned to positive internal growth in July and expect to achieve out 30, fiveth consecutive year of double digit adjusted earnings per share growth.

The combination of market momentum along with the $1.1 billion of actions, we have already taken give us increased confidence in delivering strong results in 21 and beyond.

Diversity and inclusion have long been core principles of our award winning people platform.

At the same time were addressing the significant societal changes, which we believe we'll have a lasting impact on both life and business as we know that.

There are listening and acting upon what we're learning we are confident we will build a stronger and even more highly committed team.

Back in June we launched our back to business program.

Which supports minority and black on small businesses in the areas that have been hardest hit by the pandemic and social unrest.

Working directly with local chambers of Commerce, we've committed at least $10 million in grants along without best talent to help these businesses succeed and thrive.

We are on the ground and Brooklyn, and Queens and will also expand to other markets such as Atlanta, Chicago Miami in Oakland, We have already brought business coaching and payment solutions to hundreds of businesses and expect to help multiples and more as that broke.

Graham expands.

Last let me think are more than 40000 talented associates around the world for their commitment to encourage each day as we stand together to deliver value for clients, our colleagues and use shareholders.

With that let's open the line up for questions.

Thank you we would now like to open the phone lines for questions. If he would like to ask a question you May press star one on your phone if he would like to withdraw your question Press Star to our first question is from David Togut from Evercore ISI. Your line is open.

Thank you are good to hear your voices, Jeff Frank and Bob.

Encouraging to see the return to internal growth in the merchant acceptance business in July.

Could you talk about the sustainability of that organic growth continuing I, specifically for merchant in the back half of the year and any thoughts you have on underlying drivers.

I would be helpful.

Yes, so we feel very strong about that sustainable growth what you hear us talk about if you look at that business in total.

We think investments that we've made over time have really.

Hey, it off you hear us talk about the wins, we have an E com. So thats a tailwinds for us you'll look at the double digit growth, we talked about and analyze fee business, you'll get the GPV running through Clover right now that we've talked about and the growth of it and then you know we have.

I have talked about the 162 bank merchant synergy sales, which actually have no economics, and our numbers yet, but you should expect that to continue and thats, a very very integrated solution that premise that we would bring together core processing clients.

And bank merchant and help them grow that business for those for their institutions and then I think if you think about the diversity of our client base you hear us talk about what went on and those omnichannel transactions for for the QSR as where we have a leading position.

And then you also think about the geographic diversity that we have a which which really we think is somewhat unparalleled. So I'm client diversey our geographic diversity.

And then now integrated solutions, we think we have the broadest invest solution set in the industry and you know with all of that we see very very strong opportunity is you know the trough was be but to be back to IR GE and the type of GPV, we're talking about.

Clover, a really really gives us high confidence about the future.

Great and just a quick follow up if I could reinstating. The 2020 guide is very encouraging could you talk through.

You know dimensioning of expectations for Q3 versus Q4.

Yeah, Dave It's Bob just real quick back on your other question to a point out that the returned to growth was beyond our merchant business total company returned to growth. So we feel quite good above the progressive improvement we saw throughout the quarter and in fact to your second question that leads us to to get have confidence.

To give the guidance of at least 10% EPS growth in particular will see nice improvement design mentioned in my prepared remarks in our merchant margin.

The majority of that 800 basis points improvement second half over first half the sequential improvement will come in third quarter. So we'll see a nice pickup from one of our largest segments in the business and as revenue comes back in those other two businesses at some nice scale opportunities. So.

We're looking forward to really overall, having a strong second half.

Got it just a quick final question on Virgin Atlantic since that seems to be in the news quite a bit can you didn't mention your financial exposure. The Virgin Atlantic is they go through their bankruptcy proceedings.

I can't give you a.

An overall number but I can tell you absolutely that we've been working closely with them like all of our client partners.

In terms of supporting them as they restructure their business as one of their creditors and the.

Finally, the chapter 15 filing you saw on the yesterday saw yesterday.

Was part of that overall process, but bottom line is we feel we're in good shape I don't see any issue.

We continue to process for them and I feel comfortable position overall.

Understood Thanks very much.

Thank you next you have Dave Koning from Baird. Your line is open.

Yeah, Hey, guys great job.

Thanks, David.

I guess.

My first question a little bit like David's question too how sustainable are the growth in the other two segments. It seems like if the total company returned to growth in merchant did it seems like the other two probably did two in July and maybe along with that how big was a periodic impact in the financial pack business I know that's the.

Highly sustainable and highly recurring business.

Maybe just so we can understand if that grew in Q2 on a core basis.

Yes so.

I think when you're looking to sales numbers were talking about and how they companies coming together.

It's it's beyond the expectations, we had we always viewed that way.

We had this opportunity to come together and then clients office have you think about.

So we are we talking about we've had more than 340 total synergies sales and then we also just have the general growth. There heard you hear about the architect businesses up 56%. So in in the totality of what were.

Doing here, we actually believe you know that this company has.

Very good growth in the second half relative to the trough that we saw and so I think there you should feel that it's all all elements of the company will be growing you heard us talking about those credit wins and we had one prior to that any E com wins, so across the board.

And then in terms of your question about the periodic revenue.

The fin Tech segment would have grown had we not as a headwind from periodic revenue call. It really high single digit headwind.

And some of that was absolutely driven by what we think is cobot impact, particularly in the license side of that.

Gotcha now that that's helpful and I guess my follow up with the BAMS JV.

Being disassembled now how is it are you going to start including those revenues back in in your revenue or you're going to continue to exclude them. The way just kind of understand the accounting behind that going forward.

Yes, so from a standpoint first of all there in our numbers. They are not included in our growth rate or internal revenue growth rate.

The.

Adjustment that we started making is the dissolution took effect, we essentially will follow our standard practice for acquisitions and divestitures and excluded for one year forward and then pulled back in.

Gotcha, great well, thanks, and great job.

Thanks.

Thank you next we have Darrin Peller from Wolfe Research Your line is open.

Alright, thanks, guys.

Hit on the you know some of the digital areas that you're growing so well in like Clover up 32% you mentioned Colm I think you said over 20 or 26%.

But when you combine that with on the digital banking can you talk to us about maybe if we could just hit on all the areas that you think are really performing well given the pandemic maybe accelerated.

And where you come out on the other side of this what are the area year business that you are taking share and as a result.

And then maybe just talk a little more about clover for a minute because the growth rate there, 32% with I think in the 90 billion annualized GPV.

It was obviously a strong numbers so just I'm curious to hear what the strategy there is.

You can sustain those kinds of growth rates.

Well I think first of all if you look across the businesses and as we go across all of it we have had a deep Benton digital we've invested heavily in digital and that's why you see us when those type of deals like Atlanta Kiss and Genesys because of that you see architects really.

A winning in the market in some ways should see us being selected by by many as their digital provider right and so we believe the sustainability is high relative to it would they in some cases acceleration will occur given the amount of investment we've put into it.

I think in we think about it in global in nature to will yield.

Have a lot going on in Latin America, where you'll see some classic innovative solutions, where we take all of our capabilities and bring it to it to the client I.

I think give you a look at the.

No in during this pandemic we have.

That fit into it so you don't see us.

Doing anything other than adding resources and the areas like Clover and I SV annualize that whole integrated solution come together only adding resources in our credit processing group.

And and you know not pulling back on anything we use the synergy opportunity to save save money and that accelerations come through well, but you know we consider clover to have more growth opportunity. Then you see right now even even at that set of numbers year heard and.

We think our core banking platform as a as does our card processing and then if you think about what we're going to do it the potential of this ecosystem as we bring in sale and now other mobility assets eligibility for the clients benefit is going to be.

Very very strong in you know those one of things, Jeff and I talked about when we started in why we're planning to 500 million and to innovation and ultimately to be able to continue that sustained drive darrin.

Okay. That's that's really helpful. I just want to actually ask one follow up on the capital allocation strategy. The company just I know during the pandemic. There's a lot of considerations, but you know you bought back some thought this quarter looking forward, obviously, especially with a transition from Jeff you Frank.

Should we consider 2021 22 school years, where the legacy strategy for Pfizer both.

Capital allocation unsure about buyback in similar so.

Yes, I want I want to limit it to 21 and 22, maybe is what I'd say as you know whether things I signed up here in one or the great things I loved about what how Jeff had brilliantly led the company was the capital allocation strategy and you know I think we owe it to our shares.

Holders to continue to put them as our first priority in every dollar we spend and so I'll Oh, I can say I tried and true strategy to just.

Oh through I mean, 100% and I don't own thing into 21 issue or a 22 issue that is tried and true forever.

You know Eric.

Thank you next we have Matt O'neill from Goldman Sachs. Your line is open.

Yeah, Hi, Thank you guys for taking my or my question.

I asked just another question about bias Ptcs I figured fared assay as well I.

I think there is an understanding that coming out of the pandemic the secular acceleration on things like electronification of payments as well understood. However, a part of the thesis that that I think is equally compelling areas that the new found a desire from your bank customers to potentially incrementally.

We outsource to modernize their their digital and mobile footprint, and possibly reallocating investment dollars away from things like branches or ATM or otherwise and so.

Would you said, there's a new found enthusiasm from your customer base for a lot of the incremental services that you're able to provide and you know that pipeline is maybe as robust as I've ever along those lines.

No I think.

Pandemics accelerated everything people thought about digital.

Maybe maybe what people thought would take five years old take two years or less than that I mean, you watched us build capability and digital much faster than maybe what we would've thought it would have taken before and how clients are Ah are fully engaged and so I think I think speed matters.

And clients are completely committed to being digital first and we're committed to delivering digital first for them.

Thanks, Frank and just as a quick follow up quick clarification, I believe what I heard on the capital allocation front.

For the remainder of the year with a focus on debt pay down.

Which is certainly reasonable but can you just confirm that that's correct and that presumably one once the leverage gets down to the targeted range.

Next year or that you know that the share repurchases all really kick in in earnest.

Yes.

Matt I would say.

We've demonstrated an ability to to do both.

We've done that over the years, we've done that since the merger when we first announced the transaction we suspended share repurchase ending the deal closing, we make commitments on our ability to de lever.

We're well down that path at the same time repurchased $1.4 billion insurers on while paying down some that to get to our targeted leverage mid next year there'll be some debt pay down absolutely and I mentioned that in my opening remarks, we'll also see EBITDA growth that helps create that deleveraging point so.

You should absolutely.

Expect us to continue to.

Allocate capital both in terms of investing in our business and then free cash flow is split between M&A activity when appropriate, but all through the eyes of a share repurchase and that de levering. We've got a really nice glide path to achieve what we set out to achieve by second half next year.

And share repurchase has been part of this transaction sense and we'll continue to be going forward.

Very fair Thank you very much.

Thank you next we have Ramsey El Assal from Barclays. Your line is open.

Hi, Thanks, so much for taking my questions today.

Wanted to ask a little bit about the about the Bam JV dissolution and I guess first can you sort of dimensionalize, the magnitude and kind of cadence of the comp expense savings coming out of that is that it can true I think I heard you mentioned that it was a contributor to the.

The large increase in margins and merchant next quarter and then also just in terms of the merchant you selected that JV are there any is there is a time with bank of America, and or the pandemic, creating any additional kind of like attrition or retention concerns around those merchants.

No you know I I'd go back to.

If you go back to last July only talked about how this will perform and where we are today, we feel great about our partnership with the bank, we feel great about probably.

One of the largest.

This solution as you've seen in any industry with zero friction.

Then expanding you know and processing agreement for five years beyond our current processing for them and the bank has just been a great partner through it and we feel as good as we do did ever so I just.

Start with that and you know we they go ultimately both parties end up with a very very strong good situation.

But you know ultimately we do see cost take out and we do see growth opportunity.

As we talked about maybe better than when we talked about last July.

Bob take you through a couple of more deeper details, but I I would start at the highest level that this dissolution was usually successful for both institutions.

Just just to add Ramsey to your specific question I did point out that as of July 1st with the solution.

We did.

We do see our overall expenses below the level of proportionate share that we had.

Back when the JV was in place and so we will see a lift in margins because of that in the second half of this year.

Not all that is yet behind us, but a big chunk of it is with the the effectiveness of this solution in July one.

Okay and the second part of the question was just around any type of attrition characteristics around the merchants that youve basically pulled from the JV.

Whether there's anything that changes the equate in terms of not having the bank of America connection or maybe the pandemic or or anything like that are these merchants is expected to performance on that metric very similar to your other the rest of your book effectively yes, no. We feel very good about at all we feel very good about.

I certainly expect them to.

Experienced similar characteristics the rest of our client base.

Okay, Alright, perfect I'll leave it there appreciate it thanks so much.

Thanks Ramsey.

Thank you next you have pinching long from JP Morgan Your line is open.

Hi, Thanks, hoping to hear me myself service is really bad where I'm at the just a follow up on Randy's question. The BAMS merchant anything because share in terms of type of merchant or.

It's the geographic mix of that I'm, just curious how that piece is different than maybe some of the other JV.

Merchants, because I still think the market somewhat under appreciates the mix of what you have inside those jvs.

Well I mean, if you look at it.

You know there are some fabulous names extra is the fact that matter as many of those names or contributed by the original company.

And we took goes back and they're just Fabulous household institutional names that we lose sales. So good about as did the bank itself.

And then the geographic dispersion they would be exactly what it you remember as was a U.S. business.

That was really the fundamentally what it was and at the SMB level you know, there's a large clover, there's a large pools were based on both sides.

So remember these are large clover consumers that are generate generate very very good returns and who we actually believe we will do more with as.

We go forward as we bring out even even the functions you heard like virtual terminal and order ahead and other other capabilities. So I'd say a great geographic this versus the great reach from small the tall some of the largest vessel named Joel here and many of them.

Our long standing deep relationships with the predecessor company.

No intention I'd say overall, we're quite pleased with how that overall selection process went.

We're very happy with a 120000 merchants. So we picked up and also remember we're still the processor for bank of America as clients going forward, Yes, yes caught that with the five year extension got it and then just my quick follow up just I know.

I'll share a lot more at Investor day, I don't want to Hum.

Preview that too much but just the 500 million I'm curious how much of that could we expect to allocate towards maybe modernizing some of the platforms. I know, there's a lot of discussion around modern versus traditional or older platforms and I'm. Just curious if that's going to be part of the roadmap Cfive hundred million yes.

Yes, we haven't we haven't thought of the 500 million that manner, we actually have been doing that over the past year in a very deep and aggressive manner and been usually successful added another 500 million, we're really talking about next generation opportunity.

Is whether it be indeed or whether it be in fraud, whether a ban decisioning. So you should expect us to modernize the place away from the 500 million as in your run rate today.

Got it okay. That's good to know, thanks, and Jeff hope to see that person.

Me too thanks.

Hey, Matt well [laughter].

Our first thank you next week Ashwin Shirvaikar from Citi. Your line is open.

Thank you Oh, Hi, Jeff Hi, Thanks, Hi, Bob a good can hear from you and a good job in these circumstances, including free cash flow in sales.

I was.

So wondering if you could shed in commence.

Incremental color on sort of.

The Q1 versus full Q.

You know sort of by segment are there any specific PD already called one time impacts to watch out for.

You.

Great that you're not.

Expecting any parents of did ask Mike you mentioned, but you know you incorporating the had so perhaps plateau of graco performance up and down.

I mean any incremental color with that.

Yeah, Ashwin I would say off the top like that there is no really big one timer, so to speak or or items in the second half that would color Q3 versus Q4.

I would expect to continue to see kind of the monthly progress that we've seen through the second quarter. It into two into July August gets a little bit better September gets a little bit better October November and.

Hopefully maybe by the end of year, we get back to whatever normal used to be I can't remember what that looks like so long ago, but.

But we still have progress to go.

At this point, we're kinda counting on or expecting relatively steady progress through the balance of the year, so growth a little bit stronger in fourth quarter, but as we see the volume come back in Q3 as I mentioned.

Cartons to bump pretty nicely in third quarter.

Got it a and then ill follow up question is on Bill payment, where do you guys, obviously have sort of the heating franchise.

Talk a little bit about the impact of the crisis on on on that segment, given a lot of people find it difficult to pay bills and whatnot.

What are you seeing in that segment, what's the.

While yume dependency of you know maybe stimulus or anything like that that one Mike.

One might expect Dave.

Yeah, I would I would treat it like it was a very.

A very small impact not a large impact.

And stimulus has a little effect, but you know.

Those those clients and we haven't you know a fantastic franchise, there and without financial institutions also those those clients are pretty have been very very durable during this process.

I would say ashwin that one of things, we saw particularly stimulus coming in.

Moving to sell.

We saw some nice lift with that some real growth come through and sustain that wasn't the one time sort of a thing.

And as you heard US talk Xcel has been quite positive both in terms of.

Number of transactions number of client signing up number clients going live that continues to be a very nice driver for us and our payment segment.

Got it. Thank you guys in December and maybe hopefully even in November.

Thanks.

Thanks thing. Thank you next we have ranking from Deutsche Bank. Your line is open.

Hi, guys just wanted to get a clarification on.

On the margins and acceptance you know the magnitude of the drop I think was kind of surprising and below expectations or at least our expectations, but you know I'm almost equally surprised that the bounced back in the margins being that quick so I get the network assessments, plus and minus there, but just thinking about.

Volume and and and what that means for margin does that explain a lot of it and how much your synergies involved here I'm on this bounce back in the margin as well.

Yes so.

Brian The the network network assessment fee as I mentioned 300 basis points overall volume being down 15% in business. That's got some good size fixed costs.

Really does impact quite substantially and as those volumes come back.

You'll see that lift return the advantage on the network assessment fees is not only does the headwinds subside, but actually becomes a tailwind and so you see a nice recovery there and then the last item.

That kind of as a rig or as a change.

First have to second half is the BAMS deferred revenue.

The headwind ceases because with that last Q2 of last year. So you don't have the compare in Q3 in terms of synergies will continue to generate cost synergies that that segment has seen nice progress like the entire company and that will continue into the second half a year, but I would definitely point to the network assessment fees.

Timing and as well as just overall volume being real part of it.

Got it and then just on the other segments or synergies driving some of the massive improvement, we're seeing in fintech and payments as well.

More so in the payments, but yes, all three of our second plus the corporate expenses.

Our seeing some real benefit where we are driving cost out of our technology largely through our vendor like discussions you see the benefit across all three of the business segments.

Our payments segment is the area, where the businesses overlap the most and so you get the more natural takeout other than the corporate functions in that segment of Fintech definitely seeing some benefit on the technology side they've also been.

Quite a successful in what we used to call operational effectiveness or general productivity and taking costs out of that business.

Okay great.

It's on the execution so the key Brian I think is.

These are permanent cost so.

This is cost synergy this is not temporary reactions in response to co but that will naturally snap back you have an artist announced for loeser employee pay cuts. A this is our effort to drive synergies a little bit faster than maybe we would have otherwise maybe not but definitely are permanent cost about that one.

Now back.

With those costs back in the business.

Got it helpful. Thanks, guys.

Thank you next year, Lisa Ellis from not Moffettnathanson. Your line is open.

Hi, good afternoon, thanks for squeezing the and I was hoping to get a little bit more color on the 38% increase in sales in the quarter, 20% a year to date can you just talk a little bit about where you're seeing that uptick in demand through the pandemic and you know how how sustainable are more secular.

That versus some temporary thanks related and that was just a little bit more color. There. Thank you.

Yeah, I think first of all where they're 38% sustainable you can be quite clear that you know the year to date number has large sustainability to it and in you know when Jeff and I put the companies together one of the phrases weighted.

Views is how we would come together in the clients office and were seeing it in multiple ways and remember that 38% does a included those competitive takeaways like Atlantic is certain can assist those are July numbers.

And you know.

We talked about the 15 million of synergy wins in the quarter.

Each across the board, it's a full demand the suite I mean, you know we this digital nature that people would like from US is very strong and that's why we talk about architect and how we're delivering that you know I think you'll continue to see us This bank merchant.

Really has yet to turn into anything in our opinion l., yet, although you would see that in 21, but I mean, the sustainability in the durability of L. sales about sales efforts are very very high.

Okay, and then my follow up.

Just to circle back again to the Clover number because I think that was pretty fantastic number up 32% in July 24%. In June can you that must mean that you've got a whole bunch of new new merchants coming onto the club or in the middle of the pandemic is that right is it the right interpretation of that and and kind of how and why and.

Where and what for what segments or through what channels are they are they coming in like what's driving that.

Yeah, I think first of all if you think about it we always had a growth you know this has continued to grow and you know now we have virtual terminal out there we have order ahead out there.

So we dealt with bill when we're bringing E com into Clover, when we're bringing virtual terminal one were brain order ahead, yes, we are selling more merchants also but I want you to think also about how the acceptance levels of clover are much higher than where we were.

I had a different point in time, so it's more merchants more functionality and more desire for the product by clients I think thats, how I think about it and lease I'd just add though one of their data point them. We mentioned was unit shipments were up 9% in June. So we are getting more units out there that are hoping that.

Okay, great. Thank you thanks, guys.

Thank you next we have Vasu govil from KBW. Your line is open.

Thank you very much for taking my question I think Bob touched on in for just a second but maybe if you could drop a little bit more about your appetite for M&A in the near term and what type of assets would be most interesting deals here.

So.

Well first of all we fail, we feel very very good absolutely put these two companies together and how it's all coming together.

Both in the clients office any now ability to invest and build outsell. You know you hear a lot about things that we've built you know in terms of capabilities right and look at everything we're gonna do is going to be again show.

Repurchase because of al capability, so will there be a moment, where there may be something that makes sense, but we feel that on hand is completely flowing capability and we have a deep belief in our technology prowess and the ability to build things and scaling up and it from it.

This way things like Clover and things like architect what we're doing what sell so but if you wanted to go to backdrop. The backdrop is you know sell through the lens against share repurchase shares repurchase.

Got it and just a quick follow up really good good metrics on E Commerce until were in omni channel types in Houston.

Wondering if you could give us some color on how big these pieces of the business our today as it presented at the door.

Hmm first of all E com business has been driving a and winning and taking market share away.

And when you look across the company, we always thought you know that a it was a large it was it was a fair amount.

You know when you look at what were doing omni channel, that's new that's new deal, but were creating new total addressable market with it. It wasn't like that was that all those order ahead capabilities for QSR is existed before when you think about $50 million.

Transaction interesting Annabel.

A tremendous growth engine that we're going to leverage across the world and across multiple verticals. As order ahead has become a way of life for me.

So I think when you think about it or you know these are these are pretty strong growth engines for us for a long time to create shareholder value for a long time, where were you know we've already built it and we've already demonstrated how paralysis. Yeah bottom line is they're good and growing every day.

Okay and might be a topic of conversation for you at Investor day coming up in December.

Great. Thank you.

Thank you and our last question is from Jason Kupferberg from Bank of America. Your line is open.

Hey, Hey, guys I appreciate the opportunity here.

So I just want to come back into comment around the internal revenue growth turning positive in July, but I'm guessing that's maybe a low single digit off and so if that's the case. It sounds like you really don't need to see acceleration off those july levels to get to that rough target and flat for the full year am I thinking about that right.

So Jason.

I mentioned this earlier I think we do as we said we are positive yes, it's relatively small positive and we expect that to continue to step up into August September October into the balance of the year and Ah That's certainly what we've seen over the last.

Three months now back in the depth of April successfully every every month in fact every week is pretty much been a nice steady improvement, we'll see whether that continues.

The cost synergy actions and getting some revenue growth over our fixed costs.

Thanks.

Right right I guess, yeah, I guess the point I was trying to make it almost seems like you don't meet see the acceleration off July levels to still got to the neighborhood of flat and if you do see that you would probably be up a little bit because for the year, if I've got them out right there.

I would expect to see a bit of acceleration or continued increase in order to get to that flat plus or minus that I've talked about in my comments.

Okay got it and I, just one clarification to wrap up.

I think frankly, you had mentioned that the year to date bookings growth is sustainable so just to put a finer point on that does that mean, it's something in the neighborhood of 20% is in your line of sight for the second after the year.

Yeah.

Yeah, I mean, you heard us talking about some you know good wins a in July.

And now I expect us to.

Yeah.

No one else it could very strong pipeline.

Very very very very receptive client demands I mean, our clients have commented to us at the highest level relative to how we're serving them during this pandemic.

Oh, okay.

Okay, well great I appreciate the comments.

Great.

Okay, well, a I'd like to thank everybody for joining us. This afternoon. We appreciate your support if you have any further questions. Please don't hesitate to contact our Investor Relations team and you have a great evening. Thanks.

Thank you all are participating in today's conference you may disconnect at this time.

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[music].

Welcome to the fighter of 2022nd quarter Earnings Conference call. All participants will be no listen only mode until the question answer session begins following the presentation. As a reminder, today's call is being recorded at this time I will turn the call over to Peter Polian Senior Vice President of Investor Relations that Pfizer.

Thank you and good afternoon.

With me on the call today would you have to bulky our executive Chairman, Frank Physic Nano, our president and Chief Executive Officer, Bob How our Chief Financial Officer.

Earnings releases supplemental materials for the quarter are available on the Investor Relations section of five sort of dot com.

Our remarks today will include forward looking statements about among other matters the impact of the koeppen 19 pandemic on our business.

Expected operating and financial results strategic initiatives and expected benefits and synergies from the first data acquisition.

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 that these risk factors.

Please refer to our earnings release, the supplemental materials 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.

Yes.

Also note that non-GAAP financial measures in our earnings release and supplemental materials include the three and six months ended June Thirtyth 2019 results first data, which had been prepared by making certain adjustments to the sum of historical first data in Spicer GAAP financial information.

Lastly, we are holding an investor day on December eight to New York City to share our strategic vision.

Well, we intend to host the event in person with appropriate protocols as circumstances allow well also prepared to broadcast the content, but those who prefer that approach.

Look forward to seeing you at this important event.

Now I'll turn the call over to Jeff.

Thanks, Peter and good afternoon, everyone.

A lot has changed advice or since we announced Q1 results.

Coming off tremendous financial performance in January and February we hit the Cobot 19 cliff in the second half of March which further worsened in April.

At our May 7th call, we shared our thesis that April would be the likely trial and we expected to see gradual improvement from there and that is exactly what has happened.

Each month revenue has improved sequentially from the lows of April and culminated with a return to internal revenue growth in July.

Clearly the results are not what any of us expected prior to the pandemic.

However, we're quite pleased with our overall performance the resilience and strength to produce nearly $900 million of free cash flow in the quarter.

Tremendous sales momentum, which reinforces our market leading value propositions and further positions us for accelerated growth.

We successfully completed the dissolution of the BAMS joint venture on July Onest as part of this we welcomed nearly 120000 direct clients to Pfizer and inked a new processing agreement what the bank as their provider for merchant services, we are grateful to bank of America.

For their partnership and are excited about our future.

On July 29, we marked the one year anniversary of closing our historic merger.

We've made tremendous integration progress, while continuing to invest in our future.

We've also gained significant confidence and the size and scope of the opportunity and wrapped up a series of first your accomplishments, including generating $3.5 billion of free cash flow.

We allocated more than $1.7 billion to share repurchase well ahead of schedule and also repaid $1.1 billion of death, we raised our cost synergy target by a third to $1.2 billion and increased our revenue synergy goal by 20% to $600 million.

And of that and the first 12 months Weve action $750 million of cost synergies and $160 million of revenue surgeries.

Interest expense has been reduced by nearly $290 million annually.

Which when combined with synergies action is more than $1.1 billion of run rate pre tax earnings in the first 12 months of what was originally set has a five year journey.

Sales as measured in annual contract value grew 15% over the prior year supporting the power of our combined value proposition.

Overall these proof points are representative of our commitment to delivering on the promise of Pfizer and the clients office.

And are seeing the power of the best associate team and the industry and delivering sustained above market returns for our shareholders.

And last we Effectuated, a seamless CEO transition to Frank on July Onest.

Seamless because Frank and I've been working closely together since the transaction was announced as we are today and seamless because Frank continues to bring his leadership and commitment to deliver superior results against our proven Pfizer shareholder value creation strategies.

As both an advocate and large shareholder I assure you that the company is and fantastic hands with Frank at the helm with that let me turn the call over to our new CEO.

Thanks, Jeff and good afternoon, everyone.

Let me start by thanking Jeff for his tremendous partnership since we started talking about merging two great companies almost two years ago and working closely together the last 18 months on the integration.

I'm excited to lead this great company, which Jeff has led brilliantly for the last 15 years.

While we all of us have been navigating the global pandemic Pfizer has faced those challenges with a clear mandate of serving our clients what excellence, while keeping our associates safe and healthy the great progress we've made on those fronts is manifesting.

In accelerated integration.

Improving results in much stronger than anticipated sales importantly revenue has shown sequential improvement each month since April ball.

In June we saw just 1% decline in internal revenue.

And we returned to internal revenue growth in the month of July.

As Jeff mentioned, we've made great progress in the first year actually paying over $1.1 billion of incremental pretax earnings as new Pfizer.

And we are highly confident of the additional value ahead. In addition to our financial accomplishments I am thrilled with how our value proposition is coming together in the clients office.

We closed a number of terrific yields in the second quarter with sales up a very strong 38% over the prior year and 20% year to date.

Our excellent momentum continued into July with two important competitive takeaways in our credit card processing business.

We were selected to provide issuer processing solutions by Atlantic has holdings and Genesis financial services, both the leading providers of consumer credit solutions and each on their own would rank among the top 25 largest card.

Portfolios in the U.S. based on active accounts.

Larger issue is choose Pfizer for a variety of reasons, including our highly configurable processing platform breadth of integrated digital solutions and a client centric approach, which both both expect both of these important clients to go live.

With that market, leading solutions next year.

The resilience in Diversey about revenue was evident in our second quarter as we navigated a very difficult macro environment and generally delivered results above internal expectations across most key performance measures.

Internal revenue declined 7% in the quarter and is down only 2%. So the first half of the year.

This performance is a strong testament to the great work by al people to deliver value for clients, regardless of the difficulty in the end market.

Adjusted earnings per share in the quarter was down 4% 10, 93 cents driven primarily by Kobin weakness.

Adjusted he asked through June Thirtyth is up 6% to $1.92 cents on excellent cost and revenue synergy performance and the strength and scale and breadth of L. business.

Importantly, we generated nearly $900 million of free cash flow in the quarter up 23% over their comparable quarter end up 13% to $1.7 billion through June thirtyth.

Consistent with our capital allocation strategy, we repurchased 5.7 million shares for $550 million in the quarter.

Ended the year to date have repurchased 14.3 million shares for $1.4 billion.

In dealing with these uncharted waters, we have put alloy energy and focus on sustainable actions such as cost synergy acceleration that we believe will make us stronger and more profitable for the long term.

We delivered $155 million of cost synergies in the second quarter results alone and now expect to book at least $550 million of cost synergy savings in 2020.

Weve action nearly $700 million about 1.2 billion dollar target through the end of the second quarter and $750 million through the end of July.

Revenue synergies are progressing equally well with continued strong performance in network innovation Bank merchant and cross selling our market leading solutions across the company.

For example, we were able to add our DNA account processing solution for a new clients Digital bank, where we were initially awarded credit processing revenue synergies sales in annual contract value will more than $15 million in the second call.

Good.

We saw continued strength in our bank merchant synergy program, even with the CLO Covance slowdown, adding 42, new bank merchant clients in the quarter and nearly 70% or competitive takeaways.

We we signed more than 160 banks and credit Union mens and now first full year.

And have a very strong pipeline of nearly 400 institutions over.

Overall, we had actioned $130 million in annualized revenue synergies through June entering a great position to achieve 600 million dollar revenue synergy girl.

We signed 17, new core account processing clients and the corner.

Nine nine DNA, including northwest Federal credit Union, one of the largest credit unions in Virginia with $3.4 billion and assets.

And United Federal credit Union with $2.9 billion and assets.

Another important highlight was south state bank and existing Pfizer of Premier account processing client, which recently merged with Centerstate Bank and selected by serves core platform and a number of additional solutions for their nearly for there.

Newly combined 38 billion dollar institution.

Even in these challenging times al leading solutions continue to win in the market.

Our industry, leading digital electronic payment solutions, such as mobility card valet architect transfer now in Zale have us incredibly well positioned support to support our clients in the digital transformation, which we believe is.

Further accelerated by the pandemic.

One excellent proof point on now digital momentum within a recent competitive win what north West Bank, a long term vice serve clients, who expanded Alexander thing relationship to establish us as their strategic digital partner northwest and in a number of new.

Digital solutions led by architect our single digital platform as well as a number of other customer centric solutions, which will enable them to offer a more innovative and integrated solution for their clients.

And now card issuing business, we signed a important renewal with PNC extending out long term partnership with the seventh largest bank in the U.S. for both credit and debit processing.

Bank of Baroda, one of India's a lot, leaving public sector banks awarded us their credit card processing in the quarter.

Why don't live we will provide card processing services for four of the top six issuers in India.

Prior to the onset of cobot merchant business that displayed it's emerging strength recording high single digit internal revenue growth through all of 2019 and further accelerating so low double digits in the first two months of this year even.

And then the pandemic our merchant business has performed very well relative to the market and we believe is even better positioned going forward that strength is attributable to a number of factors, including the size and scale about distribution network.

Graphic reach diversity in diverse industry coverage, how clover, Pat platform and rapidly growing and leading digital technologies, including E Commerce and I asked me.

Clover gross payment volume is recovering well from the weakness experienced earlier in the quarter, which he be up 24% in June and was up 32% in July.

GDV for the quarter was $23.4 billion or more than $90 billion annualized simply stated outflow over strategy is to grow the number of clients using our platform as it as important to extend the breadth.

Of services offered to these clients.

Were creating deeper client relationships through solutions, such as virtual terminal and online ordering that were rolled out in Q2 and are seeing solid early adoption rates.

We are pleased to see our digital merchant acquiring platforms riding the growing wave of digital transactions across a variety of industries and geographies.

We are seeing accelerated sales momentum in ecommerce solutions, adding 50, new clients in the quarter.

86 year to date and a 144 over the last 12 months.

As the Pandemics, whereas the need for innovation, we're seeing our investments in omni channel merchant capabilities, such as order ahead to pick up in store gain even more traction.

As a leader in this space, we provide omni channel solutions 10, nine of the top 15, QSR as including Mcdonald's Chick Fil, a taco Bell and Dunkin' Donuts in Q2 alone. These QSR transactions more than doubled to greater than 50 million per month.

Given the demand we are expanding these capabilities into more verticals, such as grocery as well as other geographic markets around the world.

Now integrated payments continue to perform well expanding our number of partners by more than 20% in the quarter in spite of cobot, how I as the revenue was up double digits in the quarter.

We remain focused on driving additional differentiation to capture additional market share in this space.

Overall, we're very pleased to it out first half performance in this challenging time, the combination of integration benefits the payoff from targeted investments and delivering new emit innovation that clients needs is translating to significant sales and marketing.

Momentum, which we will expect well both support growth today and well into the future.

With that let me pass the discussion to Bob for more detail on the financial results.

Thank you Frank and good afternoon, everyone.

We turned in a relatively strong performance in the face of its most of us impact cope with 19 head on business and consumer activity around the world displaying the resilience and strength of our business.

Total company internal revenue declined 7% in the quarter driven by a significant impact of lower transactional volume associated with the global pandemic.

Importantly, as Frank mentioned earlier, we saw internal revenue steadily improve as the quarter progressed with June internal revenue down just 1%.

The monthly improvements continued into July with company internal revenue growth turning positive for the first time since February.

Your today internal revenue has declined just 2% due to the strength of the business and better than anticipated progress on extra revenue synergies, which were $38 million in the quarter in or $65 million year to date.

We now expect to be above the midpoint of our 2020 revenue synergy estimate of $75 million to $100 million.

Although not the category a formal guidance or outlook based on what we can see today. We estimate that are internal revenue is likely to be in the range of plus or minus flat for the year.

Second quarter, adjusted operating income decreased 14% to $927 million, which includes a two percentage point negative impact from dispositions and decreased 7% to $1.9 billion through June thirtyth.

Adjusted operating margin of 28.8% in the quarter declined 90 basis points compared to the prior year, but improved 100 basis points sequentially.

Adjusted operating margin through June Thirtyth declined 50 basis points to 28.3%.

As anticipated adjusted operating margin for both the quarter end, the year, which severely pressured by the coveted related decline in revenue and the associated expenses timing of brand assessments in prior year dispositions, partially offset by $155 million of expense synergies achieved in the quarter.

Second quarter adjusted earnings per share declined 4% to 93 cents compared to 97 cents in the prior year as adjusted for the investment services transaction that closed in Q1.

Adjusted earnings per share through June Thirtyth has increased 6% to $1.92 cents setting the stage to achieve our 35th consecutive year of double digit adjusted earnings per share growth.

Free cash flow in the quarter was excellent up 23% to $895 million.

13% to $1.7 billion year today.

Cash flow conversion for the quarter was there still are 142% and it's 126% year today.

This performance was driven by strong working capital timing of settlement activity in our merchant business and lower capital spending for the combined company.

Our impressive free cash flow is the result of our resilient business mission critical solutions and significant transaction synergies.

We expect free cash flow for the second half of the year to remain strong as cost synergies continue to ramp and we further capitalize on opportunities to drive efficiency across the company.

Looking into the segments internal revenue in the merchant acceptance segment, which has been the most impacted by the pandemic declined 15% for the quarter and is down 5% through June thirtyth.

As the World has begun to gradually reopened we've seen improving transaction volume metrics, leading to improving revenue performance.

In fact, we closed the quarter with acceptance internal revenue down just 2% in June and July returned to positive growth.

As you've heard we're seeing improving business trends in the segment Clover GPV has improved steadily from April through July and Clover units shipped or back in positive territory, ending June up 9% year over year.

Total ecommerce transactions were up 26% in the quarter and omni channel transactions gain even more steam.

Some of the key deals in the quarter includes sale it become solutions tours in store card processing for California, DMV, along with E Com solutions for six new regional grocers, including two more in the top 10.

Among a number of when globally. We added both card present in card not present solutions for Mcdonald's in Germany, and Omni channel solutions to Burger King in the UK.

Adjusted operating income in the acceptance segment decreased 47% to $223 million in the quarter on an adjusted revenue decline of just over $300 million and adjusted operating margin declined 950 basis points to 19.1%.

Year to date adjusted operating income was $506 million, an operating margin was down 700 basis points to 20.2%.

A combination of sharp kobin revenue decline and associated expenses negatively impact the second quarter margin by nearly 800 basis points.

The timing of network assessment fees in the quarter, which is expected to reverse in the second half of the year was almost 300 basis point headwind.

These two factors alone, which totaled roughly 1100 basis points of negative margin impact more than offsets a substantial and sustained positive impact of cost synergy actions in both the second quarter and your today.

You also recall that Q2 is the anniversary of the BAMS deferred revenue item. So we'll no longer be a headwind in the second half of the year.

We expect acceptance segment adjusted operating margins to improve significantly over the remainder of the year to a level above last year's Prequaled. Good results with the majority of the gain coming in Q3.

This improvement is expected to be driven by improving merchant volumes and revenue cost synergy actions ramping over the remainder of the year in the reversal the network assessment timing headwind.

We now expect acceptance segment adjusted operating margin to be up sequentially at least 800 basis points to more than 28% for the second half of the year.

As Jeff mentioned, the BAMS dissolution was successfully completed as of July Onest, we've realigned our cost structure as expected, which will reduce our expenses run rate below the proportional level within the joint venture.

Importantly, the dissolution moves a significant amount of scale and the resulting revenue to our small business middle market, an enterprise client books.

As a result, the size of our direct E. Commerce digitally oriented revenue has grown meaningfully and should lead to future growth and expansion given the macro characteristics of these attractive markets.

The Fintech segment internal revenue declined 1% for the quarter as growth in high quality recurring processing revenue was offset by lower periodic revenue such as license and termination fees largely due to the pandemic.

Year to date internal revenue was in line with prior year.

Revenue in this segment tends to be quite resilient due in large part to the mission critical nature of the solutions and is much less susceptible to variation due to macroeconomic impacts.

In addition to the 17, new core account processing wins in the quarter, we're seeing even more demand for a broad array of digital solutions.

Mobiliti ASP subscribers increased 6% in the quarter to more than 9.3 million an architect our single digital platform had growth of 56% to 3 million users.

Adjusted operating income was up a very strong 14% in the quarter to $252 million. There is up 8% year to date to $456 million.

Adjusted operating margin was up significantly in the quarter, increasing 520 basis points to 35.4% on a combination of cost synergies and operational effectiveness offset somewhat by lower periodic revenue.

Year to date adjusted operating margin was up 280 basis points as we deliver client value across a scale business with increasing efficiency and effectiveness.

The payments in network segment internal revenue declined by 3% in the quarter.

I hope it impacts pressure, a global credit issuer processing prepaid and biller businesses were partially offset by growth in card services and output solutions in part benefiting from revenue synergies.

Internal revenue through June Thirtyth is comparable to the prior year.

Revenue in this segment tends to be driven by transactions indoor accounts and tends to be fairly resilient in the typical recessionary periods, but this pandemic has been different.

For example, debit oriented transactions, which have historically been very resilient were impacted much more than prior recessionary periods and have solidly improved consistent with the reopenings since the trough in early April.

Debit transactions were down low single digits in the quarter improving from down 20% early in April to being up mid single digits in the second half of June and through July.

Conversely, we are seeing strong growth and solutions such as the concept con transfers in PDP, which is up nearly double the prior years quarter.

And up 20% sequentially.

The number of clients live on cell has further accelerated increasing more than five fold compared to a year ago and is up 31% sequentially.

We continue our bullishness on the role of electronic money movement and sell specifically as a pandemic pressures legacy ways of moving money.

Adjusted operating income for the segment improved 1% of $558 million in the quarter and is a 5% to $1.1 billion through June thirtyth.

Adjusted operating margin was up a very strong 220 basis points to 42% in the quarter and is up 250 basis points to 41.6% year today.

The positive impact of revenue synergies operational efficiency and strong cost synergy performance is driving current results with continuing runway for future expansion.

The adjusted corporate operating loss in the quarter improved 5% to $106 million in Q2, and a 7% better to $200 million. Your today, primarily due to cost synergies.

The adjusted effective tax rate in the quarter improved to 20.5% primarily due to the benefit of geographic mix of earnings in discrete tax items.

Our adjusted effective tax rate is 19% through June Thirtyth, and we now expect or full year adjusted effective tax rate to be just below 22% inline with the prior year in modestly better than previously expected.

We continue to allocate capital to build shareholder value repurchasing 5.7 million shares for $550 million in the quarter and 14.3 million shares for $1.4 billion. Your today.

As you will recall, we began repurchasing shares much earlier than originally anticipated given the strength of free cash flow, even while meeting our debt commitments.

As of June Thirtyth, we at 670 million shares outstanding and about 7.5 million shares remaining authorized for repurchase.

We paid $100 million of debt in the quarter in total debt outstanding which is now 85% fixed rate.

Amounted to $21.9 billion.

Debt to adjusted EBITDA was 3.9 times as at June Thirtyth.

And we remain committed to achieving our leverage target by the second half of 2021.

We expect to repay more than $1.5 billion in 2020, and therefore, we'll allocate a large part percentage of our free cash flow debt repayment for the balance of the year.

Finally, let me call your attention to our Q2 earnings slides available Investor Relations section of our website.

Nine provides a summary of the financial integration milestones we've achieved in the first year as combined company some of which Jeff highlighted in his remarks.

Even in the face this global pandemic, we've taken actions that have locked in more than 1.1 billion of run rate pre tax earnings well ahead of original objectives and have much more opportunity ahead.

Well, we are pleased with the integration performance today, we remain committed to unlocking the potential we haven't pfizer to deliver even more differentiated value for our clients as well as you are shareholders.

With that let me call turn the call back to Frank.

Thanks, Bob.

We believe one of the most important aspects of the transformational acquisition first data was the commitment to allocate an incremental $500 million to support innovation.

This commitment is unique to vice chair and we expect this program to create differentiated value for clients opportunity for our associates and incremental growth for our shareholders will provide a detailed update on our priorities haven't progress at our December Investor day.

Based on our strong performance in sales momentum in the first half a year coupled with the trends. We're seeing in now end markets. We are providing new 2020 financial outlook for adjusted earnings per share to grow at least 10% over last years level.

Adjusted for divestitures or at least $4.33 per share for the full year.

Now 2020 outlook does not contemplate a sweeping second wave of shell to orders or other circumstances, which creates significant economic distress in the second half of the year.

We are pleased with our financial performance in the midst of pandemic uncertainty.

Were returned to positive internal growth in July and expect to achieve out 30, fiveth consecutive year of double digit adjusted earnings per share growth.

The combination of market momentum along with the $1.1 billion of actions, we have already taken give us increased confidence in delivering strong results in 21 and beyond.

Diversity and inclusion have long been core principles of our award winning people platform.

At the same time were addressing the significant societal changes, which we believe we'll have a lasting impact on both life and business as we know what.

There are listening and acting upon what we're learning we are confident we will build a stronger and even more highly committed team.

Back in June we launched our back to business program.

Which supports minority in black on small businesses in the areas that have been hardest hit by the pandemic and social unrest.

Working directly with local chambers of Commerce, we've committed at least $10 million in grants along without best talent to help these businesses succeed and thrive.

We are on the ground in Brooklyn, and Queens and will also expand to other markets such as Atlanta, Chicago Miami in Oakland, We have already brought business coaching and payment solutions to hundreds of businesses and expect to help multiples more as that broke.

Graham expands.

Last let me think I'm more than 40000 talented associates around the world for their commitment encourage each day as we stand together to deliver value for clients our colleagues and you have shareholders.

With that let's open the line up for questions.

Thank you we would now like to open the phone lines for questions. If he would like to ask a question you May press star one on your phone if he would like to withdraw your question Press Star to our first question is from David Togut from Evercore ISI. Your line is open.

Thank you a good to hear your voices, Jeff Frank and Bob.

The.

Encouraging to see the return to internal growth in the merchant acceptance business in July I could you talk about the sustainability of that organic growth continuing I specifically for merchant in the back half of the year and any thoughts you have on underlying drivers.

You know would be helpful.

Yes, so we feel very strong about that sustainable growth.

What you hear US talk about if you look at that business in total.

We think investments that we've made over time have really.

Hey, it off you hear us talk about the wins, we have an E com. So thats a tailwinds for us you'll look at the double digit growth, we talked about and analyze each business, you'll get the GPV running through Clover right now that we've talked about and the growth of it and then you know we have.

I have talked about the 162 bank merchant synergy sales, which actually have no economics and now numbers, yet, but you should expect that to continue and that's a very very integrated solution that premise that we would bring together core processing clients.

Some bank merchant and help them grow that business for the for their institutions and then I think if you think about the diversity of our client base you hear US talk about what went on and those omni channel transactions for for the QSR as where we have a leading position.

And then you also think about the geographic diversity that we have a which which really we think is somewhat unparalleled. So I'm client diversey our geographic diversity.

And then now integrated solutions, we think we have the broadest invest solution set in the industry and you know with all of that we see very very strong opportunity is you know the trough was he but to be back to IR GE and the type of GPV, we talking about.

Clover, a really really gives us high confidence about the future.

Great and just a quick follow up if I could reinstating. The 2020 guide is very encouraging could you talk through.

Mentioning of expectations for Q3 versus Q4.

Yeah, Dave It's Bob just real quick back on your other question to a point out that the returned to growth was beyond our merchant business total company returned to growth. So we feel quite good about the progressive improvement we saw throughout the quarter and in fact to your second question that leads us to to get have confidence.

To give the guidance of at least 10% EPS growth in particular will see nice improvement as I mentioned in my prepared remarks, and our merchant margin.

The majority of that 800 basis points improvement second half over first half the sequential improvement will come in third quarter. So we'll see a nice pickup from one of our largest segments in the business and as revenue comes back in those other two businesses have some most scale opportunity so.

We're looking forward to really overall, having a strong second half.

Got it just a quick final question on Virgin Atlantic since that seems to be in the news quite a bit could you didn't mention your financial exposure to Virgin Atlantic as they go through their bankruptcy proceedings.

I can't give give a.

An overall number but I can tell you absolutely that we've been working closely with them like all of our client partners.

In terms of supporting them as they restructure their business as one of their creditors and the.

Finally, the chapter 15 filing you saw on the yesterday saw yesterday.

As part of that overall process, but bottom line is we feel we're in good shape I don't see any issue.

We continue to process for them and feel comfortable better position overall understood. Thanks very much.

Thank you next day of Dave Koning from Baird. Your line is open.

Yeah, Hi, it's great job.

Thanks, David.

Yeah, I guess my first question a little bit like David's question too how sustainable are the growth in in the other two segments. It seems like if the total company returned to growth in merchant did it seems like the other two probably did too and in July and maybe along with that how big was a periodic impact in the financial Tech.

I know that's the.

The highly sustainable and highly recurring business, maybe just so we can understand if that grew in Q2 on a core basis.

Yes so.

I think when you look at the sales numbers were talking about and how they companies coming together.

It's it's beyond the expectations. We had we always viewed that we had this opportunity to come together and then clients on December you think about you know we are we talking about we've had more than 340 total synergies sales and then we also.

So just have the general growth you heard you hear about the architect businesses up 56%. So in in the totality of what were doing here. We actually believe you know that this company has.

You know very good growth in the second half relative to the trough that we saw and so I think there you should feel that it's all all elements of the company will be growing you heard us talking about those credit wins and we had one just prior to that any E com wins, so across the board.

And in terms of your question about the periodic revenue.

The fin Tech segment would have grown had we not as a headwind from periodic revenue call. It really high single digit headwind.

And some of that was absolutely driven by what we think is cobot impact, particularly in the license idle that.

Gotcha now that that's helpful and I guess my follow up with the BAMS JV.

Being disassembled now how is it are you going to start including those revenues back in your revenue or you're going to continue to exclude them. The way just kind of understand the accounting behind that going forward.

Yes, so from a standpoint first of all there in our numbers. They are not included in our growth rate or internal revenue growth rate.

The.

Adjustment that we started making is the dissolution took effect, we essentially will follow our standard practice for acquisitions and divestitures and excluded for one year forward and then pulled back and.

Gotcha, great well, thanks, and great job.

Right.

Thank you next we have Darrin Peller from Wolfe Research Your line is open.

Alright. Thanks, guys you know we hit on the you know some of the digital areas that you're growing so well in like Clover up 32% you mentioned Colm I think you said over 20 or 26%.

But when you combine that with omni digital banking can you talk to us about maybe if we could just hit on all the areas that you think or that are really performing well given the pandemic maybe accelerated.

And where you come out on the other side of this what are the area. Your business that you are taking share and as a result.

And then maybe just talk a little more about clover from it because the growth rate there, 32% with I think in the 90 billing annualized GPV.

It was obviously a strong numbers. So just so I'm curious to hear what the strategy there is.

Can sustain those kinds of growth rates.

Well you know I think first of all if you look across the businesses and as we go across all of it you know we have had a deep Benton digital we've invested heavily in digital and that's why you see us when those type of deals like Atlanta Kiss and Genesis because of that you see architects really.

Winning in the market in some ways you see us being selected by by many as their digital provider right and so we believe the sustainability is high relative to it we they in some cases acceleration will occur given the amount of investment we've put into it.

I think in we think about it in global in nature to will yield you know we have a lot going on in Latin America, where you'll see some classic innovative solutions, where we take all of our capabilities and bring it to it to the client.

I think if you look at the <unk> you know in during this pandemic we have.

Yeah it into it so you don't see us.

Doing anything other than adding resources in the areas like Clover, and I SV annualize that whole integrated solution come together only adding resources in our credit processing group.

And and you know not pulling back on anything we use the synergy opportunity to save save money and that accelerations come through well, but you know we consider clover to have more growth opportunity. Then you see right now even even at that set of numbers you heard and we think.

Our core banking platform as a as does our El card processing and then if you think about what we're going to do with the potential of this ecosystem as we bring in sale and now other mobility assets al ability for the clients benefit is going to be very very.

The strong and you know those one of things, Jeff and I talked about when we started on why we're planning to 500 million and to innovation and ultimately to be able to continue that sustained drive darrin.

Okay. That's that's really helpful. I just want to actually ask one follow up on the capital allocation strategy. The company just I know you know during the pandemic, there's a lot of considerations, but you bought back some stock this quarter looking forward, obviously, especially with the transition from Jeff you Frank.

Should we consider 2021 22 school years were the legacy strategy for Pfizer or both.

Capital allocation unsure about buyback in similar so.

Yeah, I want I want to limit it to 21 and 22, maybe is what I'd say as you know well things I signed up here in one or the great things I loved about what how Jeff had brilliantly led the company was the capital allocation strategy and you know I think we owe it to us.

There is to continue to put them as our first priority in every dollar we spend and so I'll Oh I can say that tried and true strategy to just flow through I mean, 100% and I don't own thing. It's a 21 issue or a 22 issue that's tried and true forever.

Correct.

Thank you next we have Matt O'neill from Goldman Sachs. Your line is open.

Yeah, Hi, Thank you guys for taking my or my question.

I asked a similar question about bias I previously so I figured fared assay as well yeah. I think there is you know and understanding that coming out of the pandemic either do the secular acceleration on things like Electronification of payments is well understood. However.

Part of the thesis that that I think is equally compelling areas that the new found a desire from your bank customers to potentially incrementally outsource to modernize their their digital and mobile footprint and possibly reallocating investment dollars away from things like branches or ATM druthers.

And so.

Would you said, there's a new found enthusiasm from your customer base for a lot of the incremental services that you're able to provide and you know that pipeline is maybe as robust as ever along those lines.

No I think the Pandemics accelerated everything people thought about digital.

Maybe maybe what people thought would take five years will take two years or less than that I mean, you watched us build capability and digital much faster than maybe we would've thought it would have taken before and how clients are Ah are fully engaged and so I think I think speed matters.

In clients are completely committed to being digital first and we're committed to deliver in digital first for them.

Thanks, Frank and just as a quick follow up claim clarification I believe what I heard on the capital allocation front.

For the remainder of the year with a focus on debt pay down which is certainly reasonable but can you just confirmed that that that's correct and that presumably one once the leverage gets down to the targeted range.

Next year or that you know that the share repurchases all really kicking in earnest.

Yes.

Matt I would say, we've demonstrated an ability to to do both.

We've done that over the years, we've done that since the merger when we first announced the transaction we suspended share repurchase ending the deal closing, we make commitments on our ability to de lever.

We're well down that path at the same time repurchased $1.4 billion insurers well paying down some debt to get to our targeted leverage mid next year there'll be some debt paydown, absolutely and I I mentioned that in my opening remarks, we'll also see EBITDA growth that helps create that de leveraging point so.

You should absolutely.

Expect us to continue to allocate capital both in terms of investing in our business and then free cash flow is split between M&A activity when appropriate, but all through the eyes of a share repurchase and that de levering. We've got a really nice like that to achieve what we set out to achieve.

By second half next year and share repurchase has been part of the transaction sense and we'll continue to be going forward.

That's very fair. Thank you very much.

Thank you next we have Ramsey El Assal from Barclays. Your line is open.

Hi, Thanks, so much for taking my question today.

I wanted to ask a little bit about the about the BAMS JV dissolution and I guess first can you sort of dimensionalize, the magnitude and kind of cadence of the comp expense savings coming out of that is that it can true I think I heard you mentioned that it was a contributor to the you know the large increase in margins and merchant.

This quarter and then also just in terms of the merchant you selected that JV are there any is there is a time with bank of America, and or the pandemic, creating any additional kind of like attrition or retention concerns around those merchants.

No you know I go back to a.

If you.

Go back to last July only talked about how this will perform and where we are today, we feel great about a partnership with the bank, we feel great about probably one of the largest.

This solution as you've seen in any industry with zero friction.

Then expanding you know of processing agreement for five years beyond.

Current processing for them and the bank is just to integrate portion or through it and we feel as good as we do did ever so I just start with that and you know we they go ultimately both parties and up with a very very strong goods.

Situation.

But you know ultimately we do see cost take out and we do see growth opportunity.

As we talked about maybe better than when we talked about last July.

Bob ticket to a couple of more deeper details, but I would start at the highest level that this this solution was usually successful for both institutions.

Just to add Ramsey to your specific question I did point out that as of July 1st with the dissolution completed.

We do see our overall expenses below the level of proportionate share that we had.

When the JV was in place and so we will see a lift in margins because of that in the second half of this year.

Not all that is behind us, but a big chunk of it is with the the effectiveness of dissolution enjoy one.

Okay and the second part of the question was just around any type of attrition characteristics around the merchants that youve basically pulled from the JV, whether there's anything that changes the equate in terms of not having to bank of America connection or maybe the pandemic or or anything like that are these merchants is expected to performance on that metric very similar to your your there.

The rest of your book effectively yeah, no we feel very good about at all we feel very good about.

I certainly expect them to.

Experienced similar characteristics the rest of our client base.

Okay, Alright, perfect I'll leave it there appreciate it thanks so much.

Thanks Ramsey.

Thank you next you have pinching long from JP Morgan Your line is open.

Hi, Thanks, hoping you hear me myself services really bad where I'm at the just a follow up on Randy's question. The BAMS merchant anything to share in terms of type of merchant or.

You know, it's the geographic mix of that I'm, just curious how that piece is different than maybe some of your other JV.

Merchants, because I still think the market somewhat under appreciates the mix of what you have inside those jvs.

Well I mean, if you look at it.

Now there are some fabulous names extra is the fact that matter as many of those names or contributed by the original company.

When we took those back and they're just Fabulous household institutional names that we still so good about as did the bank itself and then the geographic dispersion they would be exactly what it you remember as was a U.S. business.

That was really the fundamental it was and at the SMB level you know, there's a large clover there was a large clover based on both sides.

So remember you know this these are large clover consumers that are generating generate very very good returns and who we actually believe we will do more with as.

We go forward as we bring out even even the functions you heard like virtual terminal and order ahead and other other capabilities. So I'd say, a great geographic disbursed city, great reach from small the tall some of the largest investment named Joel here and many of them.

Our long standing deep relationships with the predecessor company.

No intention I'd say overall, we're quite pleased with how the overall selection process went.

We're very happy with a 120000 merchants. So you picked up and also remember we're still the process or for the bank of America clients going forward, Yes, yes caught that with the five year extension got it and then just my quick follow up just I know.

I'll share a lot more at Investor day, I don't want to him.

You preview that too much but just the 500 million I'm curious how much of that could we expect to allocate towards maybe modernizing some of the platforms. I know, there's a lot of discussion around modern versus traditional or older platforms and I'm. Just curious about is going to be part of the roadmap.

3 million.

Yes, we haven't we haven't thought of the 500 million that manner, we actually have been doing that over the past year in a very deep and aggressive manner and been usually successful added on that 500 million, we're really talking about next generation opportunity.

It is whether it be indeed or whether it be in fraud, whether a ban decisioning. So you should expect us to modernize the place away from the 500 million. It's in your run rate today.

Got it okay. That's good to know thanks, Jeff hope to see that person.

Me too thanks.

Hey, Matt well [laughter].

Our first thank you next we have Ashwin Shirvaikar from Citi. Your line is open.

Thank you, Oh, Hi, Jeff Hi, Ah, Thanks, Hi, Bob a good can hear from you and a good dalbeattie circumstances, including free cash flow in sales.

I was wondering if he could shed implemented.

Incremental color on sort of the CQ worse is for Q.

You know sort of by segment are there any specific PD Audi code, one time impacts to watch out for.

You.

Great that you're not.

Expecting any appearance of did ask like we mentioned, but you know you incorporating the had so perhaps plateau of graco performance up and down.

I mean any incremental color with that.

Yeah, Ashwin I would say off the top Mike that there's no really big one timer, so to speak or or items in the second half that would color Q3 versus Q4.

I would expect to continue to see kind of the monthly progress that we've seen through the second quarter into two into July August gets a little bit better September gets a little bit better October November and.

Hopefully maybe by the end of the year, we get back to whatever normal used to be I can't remember what that looks like so long ago, but.

But we still have progress to go.

At this point, we're kinda counting on or expecting relatively steady progress through the balance of the year, so growth a little bit stronger in fourth quarter, but as we see the volume come back in Q3 as I mentioned.

The boss pretty nicely in third quarter.

Got it a and then ill follow up question is on Bill payment, where do you guys, obviously have sort of needing franchise.

Talk a little bit about the impact of the crisis on on on that segment, given you know people find it difficult to pay bills and and whatnot.

What are you seeing in that segment, what's the.

While the own dependency of any stimulus or anything like that that one Mike.

What might expect Dave.

Yeah, I would I would treat it like it was a very.

A very small impact not a large impact.

And stimulus as a little effect, but you know.

Those those clients and we haven't you know a fantastic franchise, there and without financial institutions also those those clients are pretty have been very very durable during this process.

I would say ashwin that one of things, we saw particularly stimulus coming in.

Movement in Brazil.

We saw some nice lift with that some real growth come through and sustained but wasn't the one time sort of thing.

And as you heard US talk Xcel has been quite positive both in terms of.

Number of transactions number of client signing up number clients going live that continues to be a very nice driver for us and our payment segment.

Got it. Thank you guys in December and maybe hopefully even in November.

Thanks.

Thanks thing. Thank you next we have ranking from Deutsche Bank. Your line is open.

Hi, guys just wanted to get a clarification on.

On the margins and acceptance.

The magnitude of the drop I think was kind of surprising and below expectations or at least our expectations, but you know I'm almost equally surprised that the bounced back in the margins being that quick so I get the network assessments, plus and minus there, but just thinking about volume and and what that means.

And for margin does that explain a lot of it and how much your synergies involved here I'm on this bounce back in the margin as well.

Yes so.

Brian the the.

Network assessment fee as I've mentioned 300 basis points overall volume being down 15% in business. That's got some good size fixed costs.

Really does impact quite substantially and as those volumes come back.

You'll see that lift we turn the advantage on the network assessment fees is not only does the headwinds so but actually becomes a tailwind and so you see a nice recovery there and then the last item.

That kind of as a rig or as a change.

First have to second half is the BAMS deferred revenue.

The headwind ceases because with that last Q2 of last year. So you don't have the comparing Q3 in terms of synergies will continue to generate cost synergies that segment has seen nice progress like the entire company and that will continue into the second half of the year, but I would definitely point to the network assessment fees.

Timing and as well as just overall volume being real part of it.

Got it and then just on the other segments or synergies driving some of the massive improvement, we're seeing in fintech and payments as well.

More so in the payments, but yes, all three of our second plus the corporate expenses.

Our seeing some real benefit where we are driving cost out of our technology largely through our vendor like discussions you see the benefit across all three of the business segments.

Our payments segment is the area.