Q3 2020 Fiserv Inc Earnings Call

October 27, 2020

[music] welcome to the fight through 2023rd quarter Earnings Conference call, all participants will be in a low.

Listen only mode until the question and answer session that 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 at Pfizer you may begin.

Thank you Andy and good afternoon, everyone.

With me on the call today are Jeff you, both for executive Chairman, Frank the signal or President and Chief Executive Officer and.

And Bob Hau or Chief Financial Officer Bernie.

Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of <unk> dot com or <unk>.

Works today will include forward looking statements about amongst other matters the impact of the COVID-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.

If you refer to our earnings release for a discussion of these risk factors.

Please refer to our earnings release and supplemental materials for today's call for an explanation of the non-GAAP financial measures discussed in this call along with a reconciliation of those measures to the nearest applicable GAAP measures unless.

Unless stated otherwise performance references made throughout this call are year over year comparisons and all references to internal revenue growth on a constant currency basis.

Also note that the 2019 non-GAAP financial measures in our earnings release and supplemental materials have been prepared by making certain adjustments to the sum of historical first data and Spicer GAAP financial information for periods prior to the acquisition date.

Lastly, a reminder, that we're holding an investor day on December eight.

Given the current environment and to ensure the health and safety of attendees. We've made the difficult decision to host the event virtually looks.

We look forward to sharing our strategic vision with you at this important event that will share the details of a broadcast on the Investor Relations section of our website.

Now I'll turn the call over to Jeff.

Thanks, Peter and good afternoon, everyone.

As you can see we delivered excellent results this quarter and once again are setting the standard for performance in these difficult and uncertain times. Our strong performance is a testament to the collective power of the more than 40005 serve associates around the world who are committed to serving clients with passion and excellence.

Your company has stepped up beautifully as well down the path to achieving the promise of the transformational combination of Fiveseven first data, which closed only 15 months ago, we have the strongest solutions significant synergies market momentum and a $500 million incremental commits.

Meant to innovation, which have come together to propel a market leading results and these unprecedented times.

The strength of our business has been front and center in the midst of global economic turmoil. The model has proven far more resilient than many anticipated as we fully expect to achieve our 30 fiveth consecutive year of double digit adjusted earnings per share growth at our position for far stronger performance for years to come.

I've been privileged to lead this company for nearly 15 years and Im proud of what the team has done to create a platform for future success.

I can tell you unequivocally that where we sit today is the best we have ever been positioned to deliver sustained growth and value for our clients associates and you our shareholders Frank.

Frank and the entire leadership team are the right people at the right time to convert the opportunity ahead into our collective reality, we look forward to sharing much more with you on December eightth.

With that let me turn the call over to Frank.

Thanks, Jeff and good afternoon, everyone.

Today, when I say, thanks to Jeff is that differentiate from partnership is also for the 15 years of great leadership and strategic vision for five Sir.

It also represents a thank you from all the constituents our associates, our clients and our shareholders.

Today is Jeff last earnings call, but as landmark leadership of this great Company will last forever. Once again, thank you Jeff.

When jeopardize that back in late 2018, one of the benefits we saw in the merger would be the potential power and resiliency of the combined business.

And the advantages we could expect in the event of a challenging economic environment.

Neither one of us contemplated a global pandemic and the resulting economic implications with base in 2020.

And yet.

For the first nine months of the year.

One of the worst economic downturns in the past century.

We've grown our adjusted EPS by double digits.

Sustained internal revenue.

We expanded our adjusted operating margin and generated very significant free cash flow.

For the quarter, our internal revenue growth was 3%.

Led by our merchant acceptance segment of a very strong 6% adjusted operating margin political and other was up 310 basis points and more than 400 basis points sequentially.

Adjusted earnings per share in the quarter increased 19% and is now up 11% through September thirtyth.

Free cash flow was again excellent coming in at $939 million in the quarter and totaled $2.6 billion year to date.

Over the trailing 12 months, we've generated $3.6 billion of free cash flow to put that in perspective. This is equal to the pro forma combined free cash flow, which included the full run rate value of synergies delivered nearly four.

Four years earlier than expected.

Our ability to both increase accelerate synergies along with the overall strength of the business has combined to deliver these outstanding results.

After a terrific second quarter sales were strong again in the third quarter up 27% with great results in our credit processing merchant acquiring and output solutions businesses.

Sales year to date are up 23% and the pipeline remains strong going into Q4.

Our sales teams have transitioned to the current reality of selling in a virtual environment any enhance value preposition of them or the merger is resonating incredibly well where it matters. The most.

In the client's office.

As you saw we kicked off Q4 by signing a long term agreement with alliance data the fourth largest card issuer in the U.S. by accounts to outsource processing for their co branded and private label card programs.

This important partnership further valor dates the differentiated value that we're delivering to changing credit is showing landscape across our broad suite of innovative technology solutions.

Little leadership and commitment to client partnership it.

It is an absolute privilege to serve alliance data and we look forward to working together for many years to come.

As you heard last quarter, we signed Genesys financial and Atlantic Hes Holdings in July both top 25 issuers that combined with alliance data is a clear sign of the very strong momentum in our credit issuer business in the U.S.

Globally, leading vision platform also continues to win around the world side.

Signing Federal Bank in India Bank of Queensland in Australia, and UPT see Valley in Mexico.

Integration continues to go very well.

Although we will provide a full update at Investor Day, Let me briefly update you on our synergy results, which are well ahead of original expectations.

September Thirtyth, we've already Actioned $875 million about $1.2 billion cost synergy target importantly, we expect to enter 2021 with a run rate of more than $800 million of AG.

Ill TNL savings comparatively you will recall that we had originally targeted a total of $900 million over a five year period.

We've also action more than $185 million in annualized revenue synergies through September and fully expect to achieve over six times over our $600 million goal.

Our network solutions have driven a meaningful percentage of our early success as we lay the groundwork for additional revenue growth over the next several years the combination of XL and storing networks makes us the clear number three debit network and.

Connected to our other market, leading solutions should unlock new areas of growth and innovation for many years.

Another about top synergy opportunities is to deliver a world class credit processing services to our core account processing clients.

In the quarter, we reported that Golden one credit Union, the seventh largest credit union in the U.S. went live with the cards payments bundle, including credit and debit processing Danzig network and ATM managed services, which provides its members.

Consistent and integrated card holder experience.

Our bank merchant synergy program also continues to make strong progress.

In October we sign out 200 financial institutions since the merger.

In the third quarter, we added 35, new bank merchant clients, bringing the total to more than 130, new clients. This year with about 60% of those as competitive takeaways.

We have increased the pipeline to more than 500 financial institutions for one of the most important opportunities for the combined company.

We are privileged to have both the direct import and our distribution model frowned merchant solutions, which allows us to cover the sales landscape across all business types and sizes.

Next month Horizon will begin marketing, our new album merchant solutions to its large portfolio of SMB customers utilizing an exclusive clover products terminal integrated with Verizon wireless technology.

We also expanded our strategic partnership with Paychex, a leading provider of human capital management solutions, including payroll services to more than 680000 businesses in the U.S. to deliver merchant capabilities to their base of clients.

Yes.

This partnership is a perfect complement to Clover and full services are widely used by Smbs.

We continue to see stellar results throughout Clover platform with gross payment volume in the quarter of 30% to $33 billion.

Momentum continues to be excellent in the digital enabled segments of our merchant business, which includes E Commerce and high SV solutions, We added 42, new global E com clients in the quarter and 128 year to date before.

Are you, 1% increase over the prior year.

Additionally, we signed more than 130, new Ais fees. So far this year. It has seen a nearly 40% increase in new active merchants through L. is the channel.

Global ecommerce transactions were up about 25% both in the quarter and year to date.

Our E Commerce solutions have continued to grow with the signet significant focus on our direct business. We will provide you with important insight into the size scale and reach of our digital acquiring business at our Investor Day, which we believe will provide.

An important context on both our direct and overall position in the current market structure.

We renewed a number of key client relationships in the quarter with household names, who value the breadth and depth of our solutions across both physical and digital presence, including Cosco Dunkin' and mcdonalds.

We continue to expand the number of regulatory relationships, we have in our account processing businesses across financial institutions of all sizes.

And are seeing strong success with financial institutions with assets greater than $1 billion de Novo bags and then next we signed 12, new core account processing clients in the quarter, bringing the total the total to 41 for the year.

Putting 20 on DNA.

We have signed six de Novo banks this year, including signing first women's bank to our premier platform in the corner corridor.

We're particularly proud of this new relationship as first women's Bank is a commercial bank with a primary strategic focus on lending to women owned businesses.

Lastly, even in these challenging times, we continue to invest for growth, including deploying some of the $500 million innovation commitment we made as part of our combination.

We have already delivered solutions in areas such as advanced card fraud did.

Digital disbursements and several unique innovations to support a touchless shopping experience across our digital merchant solutions, we look forward to sharing more on this important topic at our Investor day with.

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 very strong performance in the quarter, even as COVID-19 continued to pressure the global economy, demonstrating the strength and resilience of our business.

Total company internal revenue growth was a strong 3% in the quarter with merchant acceptance, leading the way at 6%.

Year to date internal revenue was flat with the prior year pressured by multiple impacts of the COVID-19 on our business, partially offset by better than anticipated growth from revenue synergies, which were $49 million in the quarter and $114 million year to date.

We now expect about $150 million growth from revenue synergies for the full year up from nearly 100 million previously expected.

During our last call we shared the trends we were seeing at that time, including strong sequential improvement in transactions each month through the second quarter and into July from the April low.

Since August we've seen transaction growth rates generally stabilized at or around July levels.

The current run rate of growth is aligned with our full year expectations for this challenging macroeconomic environment.

Although we aren't providing formal internal revenue guidance, we continue to estimate internal revenue to be plus or minus flat for the full year barring any incremental large scale economic slowdown.

Third quarter adjusted operating income was up a very strong 9% to $1.2 billion.

Year to date, adjusted operating income decreased by 2% to $3.1 billion in pet.

Acted by divestitures and the negative impact from Kogut, partially offset by strong synergy performance.

Adjusted operating margin increased 310 basis points to 32.9% in the quarter on the strength of $184 million of incremental cost synergies and absolute performance across each of our segments.

Consistent with our comments last quarter Q3, adjusted operating margin improved 410 basis points sequentially.

Adjusted operating margin increased 80 basis points to 29.9% through September thirtyth, driven by the strength of our business and excellent synergy execution, which we dramatically accelerated to help mitigate the impact of the pandemic.

Our cost actions are largely focused on synergy acceleration and not on actions that deliver short term benefits, which would bounce back in subsequent years.

We expect that our margin improvements are sustainable and should continue into the future.

Third quarter adjusted earnings per share was up 19% to $1.20 cents compared to one dollar and one cents in the prior year as adjusted for the investment services transaction that closed in Q1.

Adjusted earnings per share through September Thirtyth has increased 11% to $3.12 give.

Given where we are today, we fully expect to achieve double digit adjusted EPS growth for the 35th consecutive year.

As you heard free cash flow in the quarter was excellent up 12% to $939 million up 13% to $2.6 billion year to date free.

Free cash flow conversion for the quarter was 115% and is a strong 122% year to date.

Looking into the segments internal revenue growth in the merchant acceptance segment was a strong 6% for the quarter.

Our results were bolstered by strong performance from our flexible Clover platform, our global suite of E Commerce, and Omni channel solutions, and our leading suite of IP solutions.

Corporate gross payment volume grew 30% to $33 billion in the quarter and more than $130 billion annualized.

An active merchant hole with increased nearly 10% sequentially.

Well the growth rate has not fully recovered to pre cobot levels. It is impressive given the economic environment in considering the covert tends to serve small and medium sized merchants, which are later in the recovery cycle.

We continue to expand extend the breadth of services to covert merchants with innovative solutions that enhance convenience like scan to order, which was launched recently to allow consumers to scan a QR code to order and pay directly from their table.

Our integrated payments or Ais B business is performing very well with adjusted revenue growth of nearly 50% in the quarter and is approaching pre cobot growth rates.

Our differentiated solutions for both eyes fees and their merchants are driving excellent results and we expect this business to be a strong grower for many years.

Adjusted operating income in the acceptance segment increased 8% to $425 million in the quarter.

Adjusted operating margin was up 180 basis points in the quarter to 29.2%.

Year to date adjusted operating income was $931 million and adjusted operating margin was down 370 basis points to 23.5% due to the revenue impact of cope.

On our second quarter earnings call I shared our expectations that this segment margin would improve significantly in the second half of 2020 by more than 800 basis points sequentially with the majority of that benefit expected to come in Q3.

The adjusted operating margin in the quarter was up over a 1000 basis points, primarily driven by improved revenue, including the timing reversal of the network assessment fees compared to the first half of the year, which will not be as pronounced in the fourth quarter.

Adjusted operating margin improvement was also driven by continued progress in cost synergies and BAMS cost benefits.

The Fintech segment saw internal revenue in line with the prior year's quarters as growth in high quality recurring revenue was offset by much lower periodic revenue and specifically termination fees was created about 300 basis points of headwind to our internal revenue growth in the quarter.

Importantly processing revenue was up 5% in the quarter, which demonstrates the scale and leverage in the business.

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

We continue to see strong demand for our broad array of digital solutions total mobile subscribers across our leading digital platforms mobility and architect grew 15% in the quarter to more than 11 million users.

Despite the pandemic, we implemented more clients on architect than in any previous quarter, which should help bolster growth into 2021.

Adjusted operating income was up a very strong 19% in the quarter, the $265 million and is up 11% year to date the $721 million.

Adjusted operating margin increased 600 basis points in the quarter, the 36.4% on a combination of growth and processing revenue operational effectiveness benefits and cost synergies.

Year to date adjusted operating margin was up 390 basis points to 33.4%.

We continue to deliver client value across this highly scaled business with increasing efficiency and effectiveness, partially offset by the decline in periodic revenue.

We're also pleased with the synergy benefits, which are positively impacting segment performance in areas, such as technology infrastructure and procurement.

The payments and network segment internal revenue growth was 1% in the quarter and up four percentage points sequentially growth.

Growth in our card services and open solutions businesses, including the benefit of revenue synergies was partially offset by growth cobot, driven weakness in our prepaid credit processing and biller businesses globally.

Internal revenue through September Thirtyth is in line with prior year.

The revenue improvements we saw throughout the second quarter continued into the third quarter, we were especially pleased to see a normalization in our debit business in the quarter as transaction growth was back to mid single digits in the quarter and up significantly over the second quarter.

We continue to see excellent transaction growth in solutions, such as accounts account transfers and PDP, which again were nearly doubled compared to the prior year's quarter and up 21% sequentially.

The number of clients live on Zelle grew more than four fold compared to a year ago and.

And we expect to see meaningful growth across our electronic money movement solutions as consumers move money no more real time world.

Adjusted operating income for the segment was strong up 8% to $608 million in the quarter and is up 6% to $1.7 billion through September thirtyth.

Adjusted operating margin was up 310 basis points to 43.5% in the quarter and was up 280 basis points to 42.3% year to date.

The positive impact of revenue synergies operational efficiency and cost synergy performance is driving our strong bottom line performance.

The adjusted corporate operating loss was $117 million in the third quarter with the year over year and sequential increase in the quarter, driven primarily by timing of variable compensation and incremental corporate expenses.

The adjusted effective tax rate in the quarter increased as expected to about 23% compared to 22% in prior year period.

Our adjusted effective tax rate through September Thirtyth is 20.5% and we continue to expect our full year adjusted effective tax rate to be generally in line with the prior year.

As we shared last quarter, our capital allocation focus for the second half of the year is debt repayment. After repurchasing 14 million shares for $1.4 billion in the first half of the year we.

We repaid $769 million of debt in the quarter $1 billion year to date and expect to pay down at least $1.5 billion for the full year.

Total debt outstanding was $21.3 billion at September Thirtyth and debt to adjusted EBITDA dropped to 3.7 times.

We are well on track to achieve our leverage target in the second half of 2021 on the basis of both strong adjusted EBITDA growth and debt repayment.

We remain fully committed to our long standing capital strategy, which includes maintaining a strong balance sheet organic investment in innovation high value acquisitions, and most important share repurchase remains our primary benchmark for capital deployment.

With that let me turn the call back to Frank for our financial outlook for the rest of the year.

Thanks, Bob.

As I mentioned, we saw a solid rebound off the trough of April into early August as season that consistent level of performance through last week.

Looking at the business environment, our client conversations continue to be quite encouraging and generally centered on helping them grow their business, reducing their operating costs and better serving their customers right in the wheelhouse of what we do.

As we had discussed on the last quarterly call I'll back to business program to help might already and specifically black Black owned small businesses is in full force as we advance our nationwide objective distributing at least $10 million state grants to qualifying businesses we.

I continue to see increased interest in all things digital.

Whether it is around E commerce more card use at point of sale touchless payments, including digital wallets or accelerating he payments, we are well positioned to provide the capability, our merchants financial institutions and business clients need.

As you have heard we are pleased with our results to date.

Given the current economic backdrop, and our strong financial performance, we are raising our 2020 financial outlook for adjusted earnings per share.

We now expect full year adjusted EPS growth of at least 11% up.

From the prior guidance of at least 10% over last years adjusted level of $3.95.

For at least $4.37 per share for the full year.

As we stated previously outlook does not contemplate the second wave of shell to orders or other circumstances, which creates significant incremental economic duress in the last two months of the year.

But our strong financial performance for both the quarter and year to date as we navigate these unprecedented times.

Our business it show, an incredible strength and resilience leading to while we fully expect we'll be out 35th consecutive year of double digit adjusted earnings per share growth along with the foundation for even stronger results in 2021.

Last let me thank our more than 40000 talented associates around the world for their commitment to encourage as we stand together to deliver value for our clients our colleagues and you our shareholders with that operator, let's open the line for.

Questions.

Thank you we would now like to open the phone lines for questions. If he would like to ask a question. Please press star one on your phone.

If you would like to withdraw your question. Please press star two.

Our first question comes from Dave Koning from Baird. Your line is open.

Yeah, Hey, guys remarkable quarter great job.

Thanks, Dave.

In his first yeah, yeah in nice Star Frank.

First of all maybe.

As we kind of look at Q4. It seems like you have easier comps last periodic revenue headwinds I would imagine across payments and syntax and then merchant it seems like the the months have gotten better in the card industry kind of in September October is there any reason kind of judging where we are today, where we wouldn't see acceleration.

In Q4 really across the segments.

Yes, Dave a couple of things you point out there.

One as we indicated in our prepared remarks upfront, we saw very nice improvement off the bottoms. The low back in April through July and then saw some leveling off.

In the August September and even through October at this point.

And our expectation right now is for that.

Continue obviously, a lot going on in the world a fair amount of potential variability in that from a pure.

Periodic revenue standpoint, we actually do anticipate continued headwind into our fourth quarter. Both from the standpoint of terminations and licensing revenue accommodation of periodic revenue will be more pronounced in the Fintech segment, but also we're seeing some of that in the payment segment.

Okay, great. Thanks, and then just one follow up when we think about margins in acceptance.

Q3 was really strong was there some catch up kind of that.

That assessment fees kind of catch up that would make margins go down sequentially.

And then into next year is is the baseline level of kind of that 28, 29% from which to grow or should we think about the full 2019 is the baseline from which to grow margins next year.

So the.

Brand assessment fees, we expected to rebound meaningfully in the second half of the year. After we come off the difficult second quarter, we saw that absolutely come through in the third quarter and we expected that to do a bunch more meaningfully in the third quarter a bit more.

Sure.

To come to us in the fourth quarter so sequentially.

You'll see less of a ramp that we did that we got the benefit of in third quarter into.

In terms of kind of on a go we.

Margin I'm not quite ready to give you a guidance for 2021, but I will tell you that in the merchant segment and quite frankly across the company. We feel very good about the cost actions we've taken.

Be permanent improvement and as we get revenue growth across a very skilled business. We think these margin improvements can hold.

Into the future.

Great. Thanks, guys nice job.

Thanks.

Thank you next we'll take the question from 10, Jeanne Wong from JP Morgan Your line is open.

Yeah. Thanks, so much really solid results and.

We like the new sales growth discussion there I'm curious if.

Would you agree that card processing sales activity overall is it is up and if so I mean, just can you share maybe why I don't know if you're seeing more off cycle deals or just clients looking to modernize their their systems and maybe just the two.

To add on to that just the pricing for some of the newer deals like the ones data I mean anything in any call outs on month. Thank you.

Yeah I mean.

We've had these.

Three big wins and in a general year, having one of them.

I would probably be a big deal.

I think.

You know, we we spent a lot of time.

Building out our product set.

And it's it's you know I mean adss was as bigger deals you're going to find a you know you take.

By account size the fourth largest.

Ross.

Processor issuer. So my my view on all of this is.

We have a great technical staff, we had tremendous around this.

We've we've demonstrated a world class based system, and then a bunch of digital around it and.

It's very appealing to a larger issuers right now and I think you know hds was a very competitive process, but you know those are very very long.

Long term valuable relationships that we cherish and you.

You know I think about them as having long term organic growth capabilities and the ability to given what we have inside our house, yes, great great ability to fit within the platforms, we run so competitive processes.

Fortunate in the wins, you know really three top 25 issuers, along the fourth largest issuer.

And.

I think it has a lot to do with the investments we made in the business and our ilmenite will focus on the client.

Okay, No that's great in the notes.

Three deals there's a lot that's why I want to ask a question. So just my quick follow up just on the acceptance.

Your back the tracking.

Tracking the visa Mastercard volume here I'm, just like you said it would so I don't know Frank and team how would you rank sort of the drivers that have sort of guidance you gotten you to this at this point is that net merchant additions is it better.

You know sales activity net of attrition you know that is a clover I know I speak is a big contributor I don't know if there's a way to just rank what sort of gotten you back to this point, where you're seeing sort of good good performance benchmarking wise. Thank you Yeah, I think I think one way to think about it is you know we grew 10% in 2019.

So we actually had industry leading position we came into January and Bad then we were low double digits.

And then you know a.

Will that hit and we hit to the trial, but when you look at the breadth of our clients from the SNB is to the largest global enterprises that diversity. Both of client side is in the vertical nature of our clients were not over it.

Index to any one piece.

And then we have a tremendous geographical geographic diversity. So you put those and then you put clover growing at 30% and we all recognize all smbs aren't in businesses and as Bob has said you know probably more late cycle. So we feel very good and the Clover platform.

Has gained tremendous investment anyway, the E com business, which is our own direct business that we're winning those deals in and that stack that we built up.

Really is resonating the global presence of it and the omni channel presence us, having both physical and electronic capability like E com, giving that omni channel is really resonated in the client's office and I think have distribution is unparalleled.

Al did you think about even signing up 200, new bank merchants since that deal will be great. The great vision Champ head around this core processing integrating with bank merchant is showing up in the client's office in a tremendous way and then you got to horizon.

Paychex double locks. So we're a partner of choice and you know okay. We're not at the growth rate we were three total bid.

But we are achieving the growth we are because of the massive scale distribution and multi channel capability and being a partner of choice and so I think it showed up all three quarters of this year just relative to market conditions I hope that answers it.

For you.

I was glad to hear it appreciate it Frank and the true up all the best again thanks.

Thank you. Our next question comes from Tim <unk> from Credit Suisse. Your line is open.

Thank you for taking the question. My question is around the E Commerce business and fully appreciate that you mentioned, we will dig into this a little bit more at the Investor day, but the business did quite well in the recent Forrester wave report, placing really just behind stripe and audio inward were listed as the leaders and really allow.

Long side World pay you guys were both named strong performers. They gave you a high scores in global acquiring and payouts and disbursement and a little bit weaker in as an architecture and updates and release cadence I was just hoping you could dig into that ranking a little bit more and talk about the strengths and weaknesses in some of the things maybe to an end.

Prove.

Some of the areas that weren't as strong, but with an overall really strong showing.

Yes. Thank you I mean look it or I guess, the best way to think about what is the competitive wins, we have and you know we still are building technology will be below that forever, where it or eating all is on it and we're using the power of our data and information and.

All the other assets, we have inside the house I think the best way for us to cover it all is at Investor Day, where we walk you through the full stack give you a full look at really where we sit in the market structure and understand really how strong E com.

Product is that we had on why we're winning the business that we're winning.

So I think that would do it the most justice.

But you know we don't give we go head to head every day and.

You know we win more than we lose by a lot.

Alright, great. Thank you and a quick follow up and I apologize if I missed it but the 300 basis point headwind to margins in the acceptance segment last quarter from the timing of the assessment sees when that was a I assume reverse to a tailwind in Q3 did you put a number on what that boost was to margins in Q3.

I'm assuming to your point, we should see a little bit less of that boost in Q4.

Yes, we didnt actually size it in the opening remarks.

I would say, we probably picked up.

About two thirds of that in the us in the third quarter.

Okay really helpful. Okay, So roughly 200 basis points or so.

Alright. Thank you so much I appreciate you taking the questions.

Thank you.

Thank you next we have David Togut from Evercore ISI. Your line is open.

Thank you in the fourth quarter and 2021 would you expect the gap between the mid single digit debit transaction growth.

And the 1% revenue growth in payment and network segment to start to close.

Oh.

I I.

I wouldn't necessarily think about it that way.

But if I think about you know remember that has multiple businesses anyway right. So you also have businesses right. This moment that are affected by foot traffic you get the prepaids like give you about telecheck businesses and you.

Have elements of RPL that affected that are negatively affected by co that if you look at sequentially, you know that business improved 400 basis points.

It's still I think you know we we believe.

That business is very strong we love the network, we talked about you know all the characteristics of a number three network.

So I would think about that yeah, we're gonna grow more and you know I think we're going to talk you know that's why when we get to Investor Day will take you through 21 and medium term outlook and we feel very very strong about the payments segment and all the innovation, we have going on in the payments segment and.

While clients on both the merchant and the issuer side are so motivated by it.

Got it okay looking at the 12 core wins in Q3 and that followed 17 core wins in Q2 for what percentage of those wins was payment capability a significant component.

You know of the decision for the client.

Yeah, I think I think the clients you're looking at the holistic nature now the integrated nature you know when we we've moved to which was always there, but even driving wave of ROIC further how we deliver an integrated bundle and how the integrated one.

I will make it easier for clients to service their clients and in fact, how we serve our client better. So they really they really are completely integrated it'd be very odd not to see that right now given the fact that no. One else offers the modern core when you have debit credit merchant solutions and the digital suite.

The digital products a huge in this in this offering.

Got it quick final question on Zelle.

Just going forward since Pfizer was an early innovator in the P to P. Space do you see is now becoming more of an ecosystem over time, you know as we've seen let's say with venmo and Kashyap.

100% I mean look it.

Well, we have a very long tail of opportunity in sale and then how we bring sale into the ecosystem and giving the assets within this company, how we utilize them across the payments spectrum, you know and I think you'll see are so many things that investor day and see.

How do we put this together without bank partners to deliver them best in class payment capability.

Thank you all the best to you Jeff.

Thank you that's Jeff I ask that for him a lot.

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

Yeah, Hi, thanks, everybody for taking my questions.

I was just curious when we think about the extremely impressive piece of cost synergy realization to date since the close of the deal.

Yeah, I understand that you've already increased the target. Once you were were quickly closing in on the original target that was sort of slated for five years. After you guys pointed out less than I think even a year and a half into the deal. So yes.

How do we think about that going forward are there are there longer term.

You know incremental cost saves to be realized in the business visa the data center consolidation you know incremental technology.

Et cetera.

Or would that that quantifiable synergy target you know base of 1.2.

So somewhat of an upper bound before getting back to more normalized level of operating margin expansion. Following the complete integration of the businesses and understand I may be jumping the gun a bit on investor day, So I apologize in advance.

That's okay. That's good.

You know Investor day would be part of the answer but you know look good. We at 1.2, you know at 1.2 billion of which was action date 75. So you know when you heard us talk about.

The effect of synergies on a BNL next year I think what you could go back to is think about both these companies.

Premerger were very good at operational effectiveness and there will be a moment you know where we will continue to drive operational effectiveness.

And it will it's part of the DNA, whether it's the weather cheese and you know artificial intelligence, whether its use an RFP. A you know we continue to bring AI in through many of our service element and both companies had dimensions of it and we've had the benefit of Rainbow.

Together I mean, the standard work of closing data centers, and consolidating which we've done more than 20. So are you know that will wind down and synergy, but we will always drive and operational effectiveness program and you can count on us talking about that as a regular way.

Life Lv through engine, we have a deeply that we are.

Able to improve service and improve quality, while in fact being more efficient and that that I think it resonates in our client's office they feel it and it's a way that will run a company going forward.

Thanks, that's very helpful I'll jump back in queue.

Thank you. Our next question is from Darrin Peller from Wolfe Research. Your line is open.

Hey, Thanks, guys, who you know the the topline result on Mercent was clearly stronger than expected you know.

I guess just from a fintech side to be clear when we back out its fair to back out 300 basis points from term right. So that would have been a 3% growth rate you guys have all these wins coming on from new new business in DNA and some other platforms.

You could just talk through the tax positioning in that segment as we get asked about about a fair amount. If you really see Pfizer taking share from or given all the digital banking initiatives and would these wins at bookings when could we see that actually show further acceleration from the.

I guess normalized 3% run rate.

Yeah, I mean I.

I mean you.

You got you got the issue of the periodic revenue. So we don't have to go through that again, you know, but I do think what you see us is winning in the client's office and you know I think a good way to think about it is you know we had a third party consultants that have I ask them out and basically say you know.

If you look at where we said you know we have 40% share and in in you know the.

The you know in the mid to lower end of the market right, which we are very very.

Good day and committed to now Weve had bigger wins you know just boarded you know.

And why CV, which is a huge client, but I think you know we view ourselves over the long haul as being a market share gain or and I think the company was a market share gain or is it market share gainer in many segments. So I think and I want to go back to how we are winning.

We're winning close of the bundle we're building because of the integrated solution, we're winning posted a digital assets that come along with it you heard Bob talking about the amount of architect.

Installs, we did in the amount of hard detect wins, we're having which all drive ultimately future revenue growth for us. So I think I think you're going to see a lot over the next few years, you'll see a lot on investor day of why they these businesses are so strong.

All right. Thanks, and then just quickly on the the merchant side, but then obviously surprise books up 6% and I know you touched on Cobra 30, an income of 25% can you just touch on international had about doing maybe you know if there's anything on integrated payments you can comment on and really bring the bigger question is if you are seeing on the top of the funnel.

Filled with new business is enough to offset the kinds of attrition that some might be seeing this kind of market I guess in other words, if you're taking market share from the banks or anyone else. Despite some of the pandemic headwinds.

Okay. Yeah, I mean, you know look at.

International has a lot of countries and that and every country is different. So you know I don't I don't ever think about international I always think about regions and that's how we run it and then down to the countries and you know different countries have different lockdown situations.

But we are winning in the market outside the U.S.

And we have you know strong growth in many cases in innovation.

Both in the electronic space and in physical space and then if you look at Clover and you look at E. Com. What you see is that they have had tremendous investments in their technology, we've had big changes in go to more.

Good strategy fundamentally in the client's office, we're running a very direct business now across the enterprise.

And we are taking share.

Alright, thanks, guys.

Thank you next we have Ashwin Shirvaikar from Citi. Your line is open.

Thanks.

Hey, Jeff Thanks, Bob Congratulations on the quarter good to hear from on a few.

Says Peter not to have any left out I guess, it's been a pleasure hope to stay in touch My My first question is with regards to when we look at Fintech what are your bank clients.

Telling you about their ability to incrementally invest in their business in other words as as they pay back faster towards digital offerings.

What you get from the digital offerings. You know he is that going to be incrementally enough to have you accelerate meaningfully worst is today.

Traditional stuff that you might have done like you know the other stuff that you might get done and there's two parts to it as well as the sales part of it which you talked about but also the the amps. We have mixed feedback about the pace of signed contracts actually ramping so if you could comment on that as well.

You know I can tell you what are what I hear once or twice a day or a bank CEO or somebody who runs a retail revenue.

Constitution.

Digital transformations C.

Is one of the most important things that are going on and so I think from a market structure standpoint, we feel that our digital assets and out or coming together and the client's office and transform and run and bringing all the other bringing.

Debit capability, bringing a credit capabilities I mean, one of the great synergies that Jeff and I knew we had was the capability of bringing credit to smaller institutions and we're seeing it happen you know we're converting them every week. So I think it's <unk>.

Digital transformation on all products is bigger than just the core and intact, but how do they integrate together and to me.

I don't think this is a bell bank.

Thanks, deciding how much they're going to spend its banks figuring out with us how much they could transform how they operate with their clients, which is way more valuable for them to growing compete then it is the cost of.

What they need to pay to us and that's how they say Oh. This is no longer a luxury the digital transformation as a way of life and so I think we are in a fabulous position I've clients feel good about it we have the resource availability we show the fab.

Well as conversion implementation machine and I think you know all my all my interactions with people and financial institutions, which I find every day.

Is there a highly motivated to motivated to get as much as digital opportunity and that's when I think about when you think about long term growth and camtek.

The secret to equip glad I know this is an area that we were actually investing in and digital matters payments risk or capabilities to bring to those financial institutions and often took space and we continue to bring additional products and services and that's helping us.

A windows cores as well as when visual.

Users you heard us talk about.

Got it and then you talked to you talked about your.

Revenue and the economic assumptions so in the in the near term for for Q.

What about the cost assumptions at what pace that you're bringing cost back in you know the.

The cost that you took out incrementally.

Just like many other companies.

Have you taken a shot yeah and determining how many of those good what percent of those costs are what dollar value of those costs have sort of now indeed permanent buckets of course is temporary that to come back.

Yeah, absolutely and I made comments about this so upfront.

The cost the margin improvement that we're seeing this year, including the 300 basis point expansion that we had in the third quarter is absolutely driven by permanent cost. So it's one of the things that we actually talked about a year ago. When we frequently got the question of how you will you performed in a.

Economic downturn never anticipating that it would be driven by a pandemic and shop and 2020 and what we said was look you know if we're headed for an economic downturn in the near term. We will have at the time 900 million now $1.2 billion worth of cost synergies and we've.

Been working since the beginning of the year, particularly as endemic and we saw the economic downturn coming.

To accelerate those cost synergies and in fact back in mid March is when we announced the increase from 900, the $1.2 billion. So the cost actions that we're taking our permanent cost actions. They are not in reaction to the coal. Good dynamic that you are seeing from a number of places so we're not.

Doing a pay cuts or furloughs or things like that that naturally come back into the business. When the economy comes back. That's why we believe the margin improvement is sustainable and we have a future opportunity ahead of us as we continue to drive our cost synergies and then move to operational effectiveness into the future.

Got it thank you.

Thank you and our final question comes from Dan Dolev from Mizuho. Your line is open.

Hey, Thanks for taking my question, so really nice results in except and Im definitely edmar expectation frankly, I know this is something that might be for the.

Analyst day, but can you maybe give us a very broad sense of sort of the run rates organic run rates by segment heading into next year. You know for those are the three segments, even even ballpark numbers just to help us model would be great.

Yeah I mean.

Look we are probably I don't know Uh huh, it's good to talk to you then thanks, thanks for being on the call.

You know, we're probably like I don't know, how many days out probably.

And that's probably about five six weeks five six weeks and will you know like it we're going to we're going to Investor day, we're going to take it through the <unk>.

Inside and now every business the strength of our E com business right how about segments operate while technology prowess is so strong why we went in the client's office were in talk to you about you know a long established capital allocation strategy with share repurchases as primary benchmark.

The capital lead placement. So so I mean, it's not I apologize because you know how oh, well I think you guys, but there. This is the time to do segment you know guidance.

If I may.

But I'll answer your other question Alan.

Yeah, I actually had another question really quick one are we did some work on the you know the build the attrition can you maybe give us a very quick update on how it's trending I think last quarter about the majority of the decline was due to Colgate and then you know about $10 billion of that adjustment was due to.

They how is that trending now in terms of that 20 million or so decline year over year in the B abate adjustment in terms of the split.

<unk>.

Yes, I think you know if you hold given jobs, which is a little hard.

Not to say these days, we find our attrition rate to be fundamentally.

And they outperform against the industry right now given the stack of back a technology that we're providing for clients. So you know we feel really really strong about what we're doing in the client's office and the product set and mistaking I saw that clients.

Got it well great quarter. Thanks, guys. Appreciate it good to talk to Dan I'll see you.

Thank you.

And I would like to take this moment to thank everyone.

For joining the call I do look forward to a us having a great virtual investor day, where you are.

And Bob and I were tremendously forward I'd like one more time to you know I mean, Jesse bouquets village and running this company and I think you. All then you know fourq had to follow him and I'm fortunate to follow those footsteps. So you guys have a fabulous Fabulous night. Thank you.

Thank you all for participating in today's conference you may disconnect your line and enjoy the rest of your day.

[music].

Welcome to the fire service 2023rd quarter earnings Conference call, all participants will be in a listen only mode until the question and 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 Polio Senior Vice President of Investor Relations at Pfizer you may begin.

Thank you ladies and good afternoon, everyone.

With me on the call today are Jeff your bookings are executive chairman.

The signal or President and Chief Executive Officer.

Bob how are chief financial Officer Bernie.

Our earnings release and supplemental materials for the quarter are available in the Investor Relations section of <unk> Dot com.

Works today will include forward looking statements about among other matters the impact of the COVID-19 pandemic on our business.

That's good 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.

If you refer to our earnings release for a discussion of these risk factors.

Unless stated otherwise performance references made throughout this call are year over year comparisons and all references to internal revenue growth on a constant currency basis.

Also note that the 2019 non-GAAP financial measures in our earnings release and supplemental materials have been prepared by making certain adjustments to the some of the historical first data and Spicer GAAP financial information prepared prior to the acquisition date.

Lastly, a reminder, that we're holding an investor day on December eight.

Given the current environment and to ensure the health and safety of attendees. We've made the difficult decision to host the event virtually look forward to sharing our strategic vision with you at this important event that will share the details of a broadcast on the Investor Relations section of our website.

Now I'll turn the call over to Jeff.

Thanks, Peter and good afternoon, everyone as.

Your company has stepped up beautifully as well down the path to achieving the promise of the transformational combination of Bice urban first data, which closed only 15 months ago.

We have the strongest solutions significant synergies market momentum and a $500 million incremental commitment to innovation, which have come together to propel a market leading results and these unprecedented times.

The strength of our business has been front and center in the midst of global economic turmoil.

The model has proven far more resilient than many anticipated as we fully expect to achieve our 30 fiveth consecutive year of double digit adjusted earnings per share growth and our position for far stronger performance for years to come.

I've been privileged to lead this company for nearly 15 years and Im proud of what the team has done to create a platform for future success.

I can tell you unequivocally that where we sit today is the best we have ever been positioned to deliver sustained growth and value for our clients.

Associates and you our shareholders.

With that let me turn the call over to Frank.

Thanks, Jeff and good.

Afternoon, everyone.

Today, when I say, thanks to Jeff.

As for the French Ingram partnership.

It is also for the 15 years of Great leadership and strategic vision for five Sir.

It also represents a thank you from all the constituents our associates our clients.

Holders.

Today is Jeff last earnings call, but as landmark leadership of this great company will last forever once again thanks.

Thanks, Jeff.

When jeopardize that back in late 2018, one of the benefits we saw in the merger would be the potential power and resiliency of the combined business and.

And the advantages we could expect in the event of a challenging economic environment.

Neither one of us contemplated a global pandemic and the resulting economic implications we have faced in 2020.

And yet.

For the first nine months of the year.

One of the worst economic downturns in the past century.

We've grown our adjusted EPS by double digits.

Justin internal revenue.

We expanded our adjusted operating margin and generated very significant free cash flow.

For the quarter internal revenue growth was 3%.

Led by our merchant acceptance segment of the very strong 6% adjusted operating margin political order was up 310 basis points and more than 400 basis points sequentially.

Adjusted earnings per share in the quarter increased 19% and is now 11% through September thirtyth.

Free cash flow was again excellent coming in at $939 million in the quarter and totaled $2.6 billion year to date.

Over the trailing 12 months, we've generated $3.6 billion of free cash flow.

Data perspective, this is equal to the pro forma combined free cash flow, which included the full run rate value synergies delivered nearly four years earlier than expected.

Our ability to both increase an accelerated synergies along with the overall strength of the business has combined to deliver these outstanding results.

After a terrific second quarter sales were strong again in the third quarter, 27% with great results in our credit processing merchant acquiring and output solutions businesses.

Sales year to date are up 23% and the pipeline remains strong going into Q4.

Our sales teams have transitioned to the current reality of selling in a virtual environment any enhance value preposition of NIM or the merger is resonating incredibly well where it matters the most.

In the client's office.

As you saw we kicked off Q4 by signing a long term agreement with alliance data.

Fourth largest card issuer in the U.S. by accounts.

Outsource processing for their co branded and private label card programs.

This important partnership further validates the differentiated value that we're delivering to changing credit issuing landscape across our broad suite of innovative technology solutions.

Leadership and commitment to client partnership.

As an absolute privilege to serve alliance data and we look forward to working together for many years to come.

As you heard last quarter, we signed Genesys financial and Atlantic is holdings in July volatile top 25 issuers that combined with alliance data is a clear sign of the very strong momentum in our crude.

To ensure business in the U.S.

Globally, leading vision platform also continues to win around the world.

Signing federal Bank in India Bank.

Bank of Queensland in Australia, and ups see valley in Mexico.

Integration continues to go very well.

We will provide a full update at Investor Day, Let me briefly update you on our synergy results, which are well ahead of original expectations.

Bruce September Thirtyth, we've already Actioned $875 million about $1.2 billion cost synergy target.

Importantly, we expect to enter 2021 with a run rate of more than $800 million of annual TNL savings comparatively you will recall that we had originally targeted a total of $900 million over a five year period.

Yes.

We've also actions more than $185 million in annualized revenue synergies through September and fully expect to achieve over 600 over our $600 million goal.

Our network solutions have driven a meaningful percentage of our early success as we lay the groundwork for additional revenue growth over the next several years the combination of excel in store networks makes us the clear number three debit network endpoint.

Connected to our other market, leading solutions should unlock new areas of growth and innovation for many years.

Another about top synergy opportunities is to deliver a world class credit processing services.

Core account processing clients.

In the quarter, we were pleased that Golden one credit Union, the seven largest credit union in the U.S. went live with the cards payments bundle, including credit and debit processing debit network and ATM managed services, which provides its members.

The consistent and integrated card holder experience.

Our bank merchant synergy program also continues to make strong progress.

In October we signed 200 financial institutions since the merger.

In the third quarter, we added 35, new bank merchant clients, bringing the total to more than 130, new clients. This year, what about 60% of those as competitive takeaways.

We have increased the pipeline for more than 500 financial institutions for one of the most important opportunities for the combined company.

We are privileged to have both the direct import and our distribution model from merchant solutions, which allows us to cover the sales landscape across all business types and sizes.

Next month Horizon will begin marketing, our new merchant solutions to its large portfolio of SMB customers.

Utilizing and exclusive Clover terminal integrated wasn't varieties in wireless technology.

We also expanded our strategic partnership with Paychex, a leading provider of human capital management solutions, including payroll services to more than 680000 businesses in the us to deliver merchant capabilities to their base of clients.

[music].

This partnership is a perfect complement to Clover as both services are widely used by SMB.

We continue to see stellar results throughout Clover platform with gross payment volume in the quarter of 30% to $33 billion.

Momentum continues to be excellent in the digital enabled segments.

Merchant business, which includes E commerce and high SV solutions, we added 42, new global E com clients in the quarter.

Hundred 28 years of.

41% increase over the prior year.

Additionally, we signed more than a 130, new Ais fees so far this year.

It has seen a nearly 40% increase in new active merchants throughout high as the channel.

Globally Commerce transactions were up about 25%, but within the quarter and year to date.

Our ecommerce solutions have continued to grow with this significant focus on our direct business. We will provide you with important insight into the size scale and reach of our digital acquiring business at our Investor Day, which we believe will review.

An important context on both our direct and overall position in the current market structure.

We renewed a number of key client relationships during the quarter with household names who value the breadth and depth of our solutions across both physical and digital presence, including Cosco Dunkin' and mcdonalds.

We continue to expand the number of regulatory relationships, we have in our account processing businesses across financial institutions of all sizes.

And are seeing strong success when financial institutions with assets greater than $1 billion de Novo Bank and then next we signed 12, new core account processing clients in the quarter, bringing the total the total to 41 for the year.

Moving 20 on DNA.

We have signed six de Novo bank this year, including signing versus womens bank to a premier platform in the corner quarter.

We're taking will inquire out of this new relationship as first women's Bank is a commercial bank with a primary strategic focus on lending to women owned businesses.

Lastly, even in these challenging times, we continue to invest for growth, including deploying some of the $500 million innovation commitment we made as part of our combination.

We have already delivered solutions in areas such as advanced card fraud did.

Digital disbursements and several unique innovations to support a touch less shopping experience across our digital merchant solutions, we look forward to sharing more on this important topic at our Investor day with.

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

Thank you Frank and good afternoon, everyone.

We turned in a very strong performance in the quarter, even as COVID-19 continued to pressure the global economy, demonstrating the strength and resilience of our business.

Total company internal revenue growth was a strong 3% in the quarter with merchant acceptance, leading the way of 6%.

We now expect about $150 million growth from revenue synergies for the full year up from nearly 100 million previously expected.

During our last call we shared the trends we were seeing at that time, including strong sequential improvement in transactions each month through the second quarter and into July from the April low.

Since August we've seen transaction growth rates generally stabilized at or around July levels.

The current run rate of growth is aligned with our full year expectations for this challenging macroeconomic environment.

Third quarter adjusted operating income was up a very strong 9% to $1.2 billion.

Year to date, adjusted operating income decreased by 2% to $3.1 billion.

Acted by divestitures and the negative impact from Kogut, partially offset by strong synergy performance.

Adjusted operating margin increased 310 basis points to 32.9% in the quarter on the strength of $184 million of incremental cost synergies and excellent performance across each of our segments.

Consistent with our comments last quarter Q3, adjusted operating margins improved 410 basis points sequentially.

Our cost actions are largely focused on synergy acceleration and not on actions that deliver short term benefits, which would bounce back in subsequent years.

We expect that our margin improvements are sustainable and should continue into the future.

Third quarter adjusted earnings per share was up 19% to $1.20 cents compared to one dollar and one cents in the prior year as adjusted for the investment services transaction that closed in Q1.

Adjusted earnings per share through September Thirtyth has increased 11% to $3.12 give.

Given where we are today, we fully expect to achieve double digit adjusted EPS growth for the 35th consecutive year.

As you heard free cash flow in the quarter was excellent up 12% to $939 million up there.

13% to $2.6 billion year to date.

Free cash flow conversion for the quarter was 115% and is a strong 122% year to date.

Looking into the segments internal revenue growth in the merchant acceptance segment was a strong 6% for the quarter.

Our results were bolstered by strong performance from our flexible Clover platform.

Global suite of E Commerce, and omni channel solutions, and our leading suite of bias be solutions.

Corporate gross payment volume grew 30% to $33 billion in the quarter and more than $130 billion annualized.

In active merchant outlets increased nearly 10% sequentially.

Well the growth rate has not fully recovered to pre cobot levels. It is impressive given the economic environment and considering that covert tends to serve small and medium sized merchants, which are later in the recovery cycle.

We continue to expand and extend the breadth of services to covert merchants with innovative solutions that enhance convenience like scan to order, which was launched recently to allow consumers to scan acute barcode to order and pay directly from their table.

Our integrated payments or IC business is performing very well with adjusted revenue growth of nearly 50% in the quarter and is approaching pre cobot growth rates.

Our differentiated solutions for both eyes fees and their merchants are driving excellent results and we expect this business to be a strong grower for many years.

Adjusted operating income in the acceptance segment increased 8% to $425 million in the quarter.

Adjusted operating margin was up 180 basis points in the quarter to 29.2%.

Year to date adjusted operating income was $931 million and adjusted operating margin was down 370 basis points to 23.5% due to the revenue impact of code.

The adjusted operating margin in the quarter was up over a 1000 basis points, primarily driven by improved revenue, including the timing reversal of the network assessment fees compared to the first half of year, which will not be as pronounced in the fourth quarter.

Adjusted operating margin improvement was also driven by continued progress in cost synergies and BAMS cost benefits.

The Fintech segment saw internal revenue in line with the prior year's quarters as growth in high quality recurring revenue was offset by much lower periodic revenue and specifically termination fees, which created about 300 basis points of headwind or internal revenue growth in the quarter.

Importantly processing revenue was up 5% in the quarter, which demonstrates the scale and leverage in the business.

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

We continue to see strong demand for our broad array of digital solutions total mobile subscribers across our leading digital platforms mobility, an architect grew 15% in the quarter to more than 11 billion users.

Despite the pandemic, we implemented more clients on architect than in any previous quarter, which should help bolster growth into 2021.

Adjusted operating income was up a very strong 19% in the quarter, the $265 million and is up 11% year to date the $721 million.

Adjusted operating margin increased 600 basis points in the quarter, the 36.4% on a combination of growth and processing revenue operational effectiveness benefits and cost synergies.

Year to date adjusted operating margin was up 390 basis points to 33.4%.

We continue to deliver client value across this highly scaled business with increasing efficiency and effectiveness, partially offset by the decline in periodic revenue.

We're also pleased with the synergy benefits, which are positively impacting segment performance in areas, such as technology infrastructure and procurement.

The payments and network segment internal revenue growth was 1% in the quarter and up four percentage points sequentially growth.

Growth in our card services and output solutions businesses, including the benefit of revenue synergies was partially offset by growth cobot driven weakness in our prepaid credit processing in biller businesses globally.

Internal revenue through September Thirtyth is in line with the prior year.

We continue to see excellent transaction growth in solutions, such as a consequence transfers and PDP, which again were nearly doubled compared to the prior year's quarter and up 21% sequentially.

The number of clients live on Zelle grew more than four fold compared to a year ago and.

And we expect to see meaningful growth across our electronic money movement solutions as consumers move money in a more real time world.