Q4 2020 Fiserv Inc Earnings Call

Inc 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 would now like to turn the conference over to Peter <unk> Senior Vice President of Investor Relations at Pfizer.

Thank you Ivy and good afternoon, everyone.

With me on the call today are Frank Bisignano, our President and Chief Executive Officer and Bob.

Bob Hau, our Chief Financial Officer.

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

Our remarks today will include forward looking statements about among other matters the impact as 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 you should 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 on this call along with a reconciliation of those measures to the nearest applicable GAAP measures.

Unless stated otherwise.

<unk> references our year over year comparisons and all references to internal revenue growth are on a constant currency basis.

Note that the full year 2019, non-GAAP financial measures and our earnings release and supplemental materials have been prepared by making certain adjustments to the sum of historical first data and fiserv GAAP financial information for periods prior to the acquisition date.

And now I'll turn the call over to Frank.

Thank you Peter and good afternoon, everyone two.

2021 as unprecedented on many levels, we started the year strong and and after entering the pandemic, we continued investing heavily and technology innovation, our client franchise and our people.

We've now entered 2021 with tremendous momentum.

And your company performed very well given the circumstances across a number of facets of our business.

22% sales growth for the year demonstrates that we are clearly winning and the client's office.

We strengthened our client franchise, raising and client satisfaction scores across all measures.

And we invest and how people platform resulted in top quartile engagement scores amongst companies and a fortune 500.

And we made outstanding progress on integration with <unk>.

Accelerated and increased synergy execution, while ramping our investment and innovative products and solutions.

We delivered 12% adjusted earnings per share growth for the year, marking our 30 <unk> consecutive year of double digit adjusted EPS growth.

And we delivered record free cash flow.

We are exiting the year stronger than we entered and we are well positioned to capitalize on our momentum in 2021 and beyond.

Let me provide a brief overview of our financial results and the quarter and Bob will provide more detail later on the call.

Total company internal revenue growth was 1%.

Performance was led by our merchant acceptance segment, which was up 3% a strong result in light of the global demands Eric.

Total company adjusted operating margin for the quarter was up 420 basis points and adjusted earnings per share increased 16%.

Free cash flow as it began excellent I'm in at $1 $1 billion and the quarter, bringing free cash flow for the full year two more than three $6 billion.

Our sales momentum remains quite strong.

Fourth quarter sales were.

19% with terrific results and our credit processing merchant acquiring and account processing businesses.

Sales for the full year were up an impressive 22% the combination of robust sales and excellent pipeline is it 'twenty 'twenty. One is evidence that our formula of bringing the strength and breadth of Pfizer as offerings together without.

Great and sales model is extremely well received and the client's office.

And bodes well for the future.

Now I'd like to update you on how our leading digital enabled merchant business is performing.

Through clubs are a leading SMB platform carrier and enterprise Omni channel Commerce solutions and Clover connect a rich ISP solutions set we continue to drive innovation.

And expand partnerships and deliver leading solutions to our merchant clients.

Mentum within the digital enabled segments of the merchant business continues to be excellent.

Clover as gross payment volume grew 25% to $34 billion, and a quarter or $135 billion annualized.

We continue to extend the breadth of services to Clover merchants with innovative solutions that enhance convenience.

Naturally in the digital segment for example, we recently introduced invoicing capabilities that allow clover and merchants, especially those in the services vertical to bill and collect payments from consumers electronically.

Carey.

So our continued growth with global ecommerce transactions up about 25% both in the quarter and for the full year.

We saw our omni channel transactions, such as order ahead and pick up in store and grow more than 125% year over year, what's known as our best known quick service restaurant clients seeing excellent growth.

We continue to capture market share, winning 46, new enterprise level E comm clients and the fourth quarter, including digital and acquiring for overstock Dot Com and Wingstop and North America and Europe, We signed total.

Paul one of the largest energy providers and the world to provide global digital payment acceptance services across more than 100 countries around the world.

We also expanded employer relationships delivering new products and services to key clients such as Lyft, where we are now powering and disbursements to drivers.

Over and connect allows us to win new partnerships and drive growth and our partner solutions business.

And the fourth quarter, we signed 44, new ISP partners, bringing us to 176, new Isd signed as a year.

Those new partner relationships are driving strong results and active merchants up 43% and Q4 and strong revenue growth and the I S E channel.

For example, during the quarter fly serve signed a strategic partnership agreement with our App as the largest provider of software and services for floor installation professionals to provide omni channel payment capabilities that are flying and customers.

We also signed one of the largest providers of <unk>.

I care product and technology to provide payment acceptance services to it as more than 7000 eye care professional customer.

To further expands our value added services for merchants Fiserv and citizens financial group have partnered to offer merchants, a new suite of lending solutions at the point of sale through citizens pay providing merchants with flexible payment options for customers to find out.

As purchases at the point of sale.

The program expands and partnership we've had with citizens since 2015 to provide new financing options and we expect it to drive adoption and the fast growing buy now pay later space.

Moving to account processing business, we continue to expand the number of privileged relationships, we have and our account processing business across financial institutions of all sizes and types. We signed 19, new core account processing clients and Nicole with her and.

Including five on the DNA platform.

Bringing the total to 60 as of the year with 25 on DNA.

I'd like to highlight a few of our recent wins and service first.

Commercial bank with more than $11 billion and assets signed on for a full suite of fiserv product, including core processing card services and output solutions.

Lakeside Bank, a full service bank with more than $2 billion and assets signed on Brown core processing, along with a robust suite of solutions that includes check free debit card services and Zelle and I'm also pleased that just reach.

And I only Republic Bank has partnered with Pfizer and <unk>.

Core processing, plus a rich suite of digital and payments solutions Republic, as a $5 billion asset full service retail and commercial bank that was voted the number one bank in America for service by Forbes and 2020.

And.

All of these.

The strength of wins were competitive takeaways and what a common characteristic they selected a leading core platform plus multiple surround digital solutions to support their goals of sustained growth and superior customer service.

Yes.

I'm also pleased to note that we signed three more de novo banks and the quarter.

And al Hayman and network segment, we continue to see robust sales activity, including several notable card production and personalization wins.

And the new agreement with capital one day at tap ones more than 1500, Atms to fiserv as money pass ATM network, while offering their customers access to thousands of additional surcharge free Atms across the country.

And I am pleased to note that we expanded our long standing partnership with Paypal, signing a deal and the quarter to integrate Paypal as a bill payment option for Fiserv, Villers and notable synergy sale.

With that let me update you on our integration efforts.

At Investor Day, we discussed how our integration continues to go extraordinarily well and as synergy execution as far ahead of original schedule.

Through December 31st we've already actions over $1 billion and cost savings and are well on our way to fully action at 1.2 billion dollar cost synergies by the end of this year.

We entered 2021 and with the majority of the integration work behind us and a focus on driving further growth and sustainable value in the years ahead.

And the revenue side, we're pleased with the level of synergy sales, which accelerated in the fourth quarter.

As of year, and we've already actually $215 million and annualized revenue synergies and as synergy sales pipeline is growing robustly, and giving us confidence and meeting or exceeding as.

$600 million target.

Our bank merchant program continues to be one of the larger synergy opportunity and offers financial institutions of all sizes and ability to offer their important and merchant clients.

Modern suite of merchant acquiring capabilities, including the innovative clover platform, along with digital capabilities like loyalty programs and E Comm solutions.

And the fourth quarter, we added 45, new bank merchant clients, bringing the total to 231, new clients since the merger with more than half of those wins competitive takeaways.

And the pipeline into 'twenty and 'twenty, one remains robust with over 500 financial institutions.

One thing our continued confidence in achieving this sizeable revenue synergy opportunity.

One final point on our digital initiatives before turning it over and above.

And as you've heard us discussed in the past one of the most important and strategic initiatives as to redefine the client experience by utilizing the latest technology to drive innovation and offer digital capabilities across our payments ecosystem.

And we've taken two important steps and the last 60 days and this area first.

First we acquired and that systems, the leading digital card services platform for financial institutions of all sizes.

We're committed to deploying capital both organically and Inorganically to develop the digital and data and next generation solutions that will drive growth long into the future.

And second further demonstrating our commitment to leadership in this area, we appointed a chief digital and data officer to lead these important and strategic growth initiatives across all websites.

Now in the past as discussion to Bob for more detail on the financial results.

Thank you Frank and good afternoon, everyone.

We had a strong fourth quarter and lot of continued pressure from the pandemic across the globe.

Total company internal revenue growth was 1% and the quarter led by the merchant acceptance segment, which grew 3%.

For the full year internal revenue was flat versus last year in line with our expectation that we communicated during our last earnings call.

Growth from revenue synergies, which were $46 million and in the quarter and $160 million for the year helped to mitigate the impact from continued pressure related to the pandemic.

During our last earnings call, we share that we saw transaction growth rates stabilize at or around July levels in the fourth quarter, our transaction and payment volume growth rates, we made relatively in line with what we saw in the third quarter.

Fourth quarter adjusted operating income was up a strong 10% to $1 3 billion.

And adjusted operating margin increased by a very strong 420 basis points to 35, 6%.

And by our rigorous cost synergy execution, which produced $177 million.

Of incremental cost synergies and the quarter as well as strong operating performance.

For the full year adjusted operating income increased by 2% to $4 4 billion.

And adjusted operating margin increased 170 basis points to 31, 4%.

Benefiting from $581 million of incremental cost synergies and the year and excellent operational performance.

The fact that we improved our margin by 170 basis points through the worst economic cycle and memory as a strong validation of the robust quality and resilience of our business.

And since most of the cost actions in 2020, we're focused on permanent and synergy achievement not short term cost savings. We believe our adjusted operating margin improvements are sustainable and expect continued strong improvements in 2021 and beyond.

Fourth quarter adjusted earnings per share increased 16% to $1 30.

Compared to $1 12 in the prior year as adjusted for divestitures.

Adjusted earnings per share for the full year increased 12% to $4 42.

Well ahead of our prior expectations.

Free cash flow and the quarter was once again very strong at $1 1 billion.

For the full year free cash flow increased 11% to more than $3 6 billion.

Free cash flow conversion was also very strong at 119% for the fourth quarter and 121% for the full year.

Turning to each of the segments Inc.

Internal revenue growth and the merchant acceptance segment was 3% and the quarter unimpressive results given the headwinds faced from economy that was hampered by the pandemic.

Our results were once again driven by strong performances in our portfolio SMB clients supported by our Clover platform enterprise clients supported by carrier and another strong quarter from our ISP business.

For the full year internal revenue is in line with the prior year.

As Frank discussed our Clover G. P. B continues to grow very nicely up 25% and the quarter. Despite the difficult macroeconomic environment for Smbs we.

We feel great about the strength of that portfolio and 2020, and even better about its performance and the months and quarters ahead as we get beyond the pandemic.

And our integrated payments or ISP business continues to perform extremely well with continued strong revenue growth and the quarter.

As we discussed at our Investor Day, we recently rolled out <unk> connect a cobra integrated solution for Isps we.

We believe that this solution will further extend our differentiation for Isps and their merchant customers and <unk>.

Continued to drive excellent growth and the future.

Adjusted operating income in the Aerospace me and acceptance segment increased 8% to $443 million and the quarter.

Adjusted operating margin was up 280 basis points and the quarter to 37% and increased 150 basis points sequentially.

On our Q2 earnings call after reporting our Covid impacted low point for our acceptance financial results. We said this segment's adjusted operating margin was expected to improve by more than 800 basis points and the second half of 'twenty and 'twenty compared to the first half.

We're pleased to achieve that with our second half acceptance margin of nearly 1000 basis points, bringing our full year margin to 25, 4%.

The Fintech segment internal revenue declined 1% and the fourth quarter compared to the prior year as growth and high quality recurring revenue was again offset by much lower periodic revenue most prominently termination fees, which created approximately 350 basis points of headwind to internal revenue growth.

And in the quarter.

For the full year internal revenue was in line with the prior year.

The shift towards digital banking took a strong step forward in 2020, with lockdowns, leading consumers and businesses alike to consider new ways of banking and we continue to see strong demand for a broad array of digital solutions as a result.

For example, total mobile subscribers across our leading digital platforms mobility and architect grew 15% and the quarter arc.

Architect implementations continue at a strong pace and in fact during the second half of the year, we completed more architect implementations and and all of 2019 and.

Excellent indicator for future growth.

Fiserv offerings, such as remote data capture have allowed our fi clients to offer safe convenient and fast self service check deposits for their consumer and commercial clients, while improving efficiency and their own results.

Deposits from Q4 grew 33% over prior year and were up.

More than 30% from a full year.

And while self service ATM deposits grew more than 50% and both the quarter and full year.

Adjusted operating income was up a strong 14% and the quarter to $271 million and grew 12% and the full year to $992 million.

Adjusted operating margin and the segment increased a robust 590 basis points and the quarter to 36, 5% on a combination of growth and processing revenue operational effectiveness benefits and cost synergies.

For the year adjusted operating margin was up an impressive 500 to 510 basis points to 34, 2% as the benefits of growth and processing revenue and are highly skilled business and the combination of both synergy and productivity gains more than offset the impact from lower periodic revenue.

The payments and network segment saw internal revenue declined 1% and the fourth quarter compared to the prior year.

As growth and our international issuer card services and output solutions businesses, including the benefit of revenue synergies was more than offset by COVID-19 driven impacts elsewhere and this segment.

Internal revenue for the year was in line with the prior year.

Debit transactions continued to show very stable levels of growth and the mid single digit range, we've seen as consistent mid to high single digit transaction growth since June and we remain confident that this level of sustainable going forward.

We continue to see excellent transaction growth and solutions such as account to account.

And Peter Peter Zelle.

Zelle transactions and the quarter more than doubled compared to prior year and were up 18% sequentially.

The number of clients live on Zelle has grown significantly this year nearly tripling our client count compared to a year ago, and we expect continued strong growth in 2021 and beyond.

Adjusted operating income for the segment was strong up 5% to $660 million and the quarter and was up 6% to $2 4 billion for the year.

Adjusted operating margin was up 300 basis points to 46, 4% and the quarter and it was up 280 basis points to 43, 3% for the year.

The positive impact of both revenue and cost synergies drove our solid adjusted operating income results both in the quarter and the full year.

The adjusted corporate operating loss was $87 million and the fourth quarter and $404 million for the full year, a 5% improvement over last year.

This improvement was driven by a combination of cost synergies and productivity as well as lower variable compensation, partially offset by incremental COVID-19 costs.

The adjusted effective tax rate and the quarter was 21, 7% and 29% for the full year down slightly from the prior year.

For 2021, we expect our full year adjusted effective tax rate fairly consistent with the 2020 rate and the range of 21% and 22%.

However, we do expect some variability and the rates by quarter, given different comparison points and the timing of discrete tax items as such.

Such we expect our Q1 2021 effective tax rate will be higher than Q1 last year.

As previously communicated our capital allocation priority for the second half of the year was to focus primarily on debt repayment, we repaid $740 million of debt and the quarter and $1 8 billion and the year. We also repurchased one 8 million shares of stock for $200 million and the <unk>.

Quarter, bringing total capital allocated to share repurchase to $1 6 billion.

For the full year.

We have 65 7 million shares authorized for repurchase as of December 31.

And rounding out our top capital allocation priorities as Frank mentioned earlier in December we announced the acquisition of the <unk> systems and closed that acquisition in January.

Total debt outstanding was 27 billion as at December 31, and debt to adjusted EBITDA EBITDA dropped to three six times, we are well on track to achieve our targeted leverage and the second half of 2021 as we anticipate both strong adjusted EBITDA growth and some further debt repayment this year.

<unk>.

And as you've heard as emphasized throughout our Investor day in December we are fully committed to our long standing capital strategy, which includes maintaining a strong balance sheet organic investment and innovative solutions and high value acquisitions like <unk> and.

Importantly share repurchase remains our benchmark for capital deployment.

With that let me turn the call back to Frank.

Thanks, Bob.

We expect 'twenty and 'twenty, one internal revenue growth to be 8% to 12% for the full year.

This is modestly better as the bottom end of the range than our preliminary outlook, we shared at our recent Investor day.

Given our current view of economic conditions, including the second stimulus in late December and the prospect of a third stimulus package later this quarter as.

Significant.

Growth rate acceleration relative to 'twenty and 'twenty is driven by the multi pronged impacts of our current expectations for and improving global economy.

The overall, continuing strength and a global merchant business, the accumulative impact of sales and implementation and continued achievement of end year revenue synergies.

We expect 2021 adjusted earnings per share and the range of $5 and 32.

<unk> $5.50, which is five cents above the range, we provided at our Investor day in December.

<unk> is driven by the stronger exit rate from 2020, and the benefit of stimulus programs and the U S. We expect adjusted operating margin to expand by at least 250 basis points and.

And break cash flow conversion will be greater than 108% per year.

Our internal revenue and adjusted EPS growth rate assumptions are grounded and our internal assumptions of when and how the economy will recover from the pandemic in 'twenty and 'twenty one.

The midpoint of our guidance generally assumes improvement as the pandemic and increase vaccinations throughout the first half of the year, leading to economic recovery and the second half.

There are several factors that we believe will impact the quarterly cadence of the year over year growth rates, largely driven by lapping out 'twenty and 'twenty performance, which included pre pandemic performance for much of the first quarter the depth of the impact in Q2.

And then as start of improvement and the second half.

Quarterly results may vary, including rates that may fall outside of the volume guidance range, both on the low and high and for a particular quarter.

We expect Q1 to be our toughest comparison and Q2, the most favorable comparison.

And then see more normalized comparisons for the second half of the year.

Throughout this past year every five serve associated with challenge to work differently.

To re imagine how we do our jobs to serve our clients who in turn we're learning how to serve their customers.

Faced with these challenges I'm proud of our results across a number of measures 2020 was a successful year.

Our client satisfaction scores improved measurably during a time line our clients need us and most we saw our employee engagement scores improve even as we executed against a complex integration and through a pandemic.

We meaningfully increased our synergy targets and accelerated the time to achieve those targets and then regress. The integration of first data to the verge of completion in 'twenty and 'twenty one.

And at the end of the day your company achieved its 35th consecutive year of double digit adjusted EPS growth.

Among the most important initiative here company undertook what's.

As it creation about forward together and plan to be a force for positive change and our communities as well.

Forward together plan as a four part commitment and support and empower underrepresented associates business owners and not for profit.

<unk> lowered together and plan the back to business program was launched last summer.

And as part of back to business, we committed to invest $10 million to support black and minority owned business owners and entrepreneurs.

We are well into that monetary commitment and are now meaningfully increasing it to <unk>.

<unk> million dollars.

As a further indication of our commitment.

Two continued progress and this important initiative, we recently appointed a senior executive as head of corporate social responsibility to lead these efforts for <unk> as well as oversee sustainability efforts for the organization.

<unk> was once again named a world's most admired company for the eighth consecutive year with excellent scores and people management, social responsibility and a host of other categories.

This is well deserved recognition of the more than 40000 and hard working and caring Fi serv associates around the world.

I will close by thanking all of them for working relentlessly to serve our clients and you our shareholders.

With that operator, let's.

As opening the line for questions.

Thank you we would now like to open the phone lines for any questions. If you would like to ask a question you May press star one on your phone if you would like to withdraw. Your question you May Press Star two and our first question is from Lisa Ellis from Moffett Nathan Your line is open.

Hey, good afternoon, and a good stuff.

Our first question from me as on Carrots, you called out 46, new enterprise wins and merchant acceptance this quarter.

Can you describe how the law.

Launch of carriage as improving your value proposition in the enterprise space and and maybe give some color on from a customer feedback you're getting on that offering.

Well I think the.

The strategic playing around and care. It is that we've integrated for ease of access globally. So although it can be utilized and many currencies and many countries, it's multinational capabilities as well.

Resonating very very well and the clients office and that is of access.

Its ability to optimize acceptance is really what's driving a very high win rate there and the engineering underneath it was bringing.

To a single platform as single instance, and ability to execute globally.

And as you've heard us talk about through the course of the year.

The one hundreds of wins that we've had institutional a and those are and.

And and active big names that are.

Leaning into the ecommerce and economy so.

And a very well and the clients office a lot of work done by the team to build it out and get it to be the platform. That's that's one thing and the market.

Yeah.

Good stuff and my follow up quick one as for Bob could you just give a little color on the segment level outlooks for 2021 and also what type of.

Transaction growth and unit growth, you're you're anticipating or as embedded in your outlook. Thank you.

Truly so we don't give specific guidance by our individual segments, but let me try to give you a little bit of color to get you kind of Directionally. Obviously, if you look at our.

Our merchant acceptance segment represents about 40% of the overall company revenue, we had given during investor day, and expectation of mid term or medium term growth of about 9% to 12%.

Certainly expect in 2021 to be above even the high end of that as we rebound slash. We cover from what has certainly been a pretty difficult year and in particular and second quarter of 2020.

Frank laid out a little bit of some of the key assumptions that we've got in our overall.

Revenue and EPS growth for that matter and it certainly plays a key part and the improvement accelerated growth in the merchant segment things like having a large number of folks vaccinated seeing some of the restrictions that are in place, particularly in Europe.

But even across the United States being lifted and seeing a recovery a general economic recovery and the second half of the year. If you look at the Fintech segment.

Very much impacted this year by periodic revenue.

<unk> seen that really across the year and particular in the second half of the year, but even a little bit and the first half and and overall impact. This year as we look to 2021, we see some of that persisting in Q1 and a bit into the second quarter book by the time, we get to the second half of the year.

And we see that headwind subsiding, such that we would expect the Fintech segment, which has medium term outlook of about 4% to 6% to be in that range for the full year 2021, and we're not counting on a recovery or a rebound of a periodic revenue slash termination fees its really.

We.

Lapped the pretty significant decline we've had over the last several quarters and it doesn't it doesn't continue and so we will see benefit really and the second half of 2021 and then the final segment the payments segment again above the other 40% of the overall company medium term guidance here.

<unk> was 5% to 8% I would expect this segment to probably be at the upper end of that range in 2021, as we see transaction growth and improve kind of post COVID-19 in particular, and our bill pay business some of our <unk> and of course as you know we have a leading position.

And retail private label and as those retailers improve again, particularly in the second half of the year, we'll see some improvement and of course, you've certainly heard us talk about some very significant wins and our issuer processing business. In this segment the very large ones that we talked about during the last earnings call really.

And provide much lift in 2021, but there are.

Quite a few below those top three and don't take quite as long as the implement and Youll see some of those come on into 2021, and again provide some nice growth into that business going into that segment and the last driver of that business I'd, probably point to as zelle.

As I mentioned on my prepared remarks, nearly tripling the number of F. EIS on Zelf through fiserv and not only do we see that continuing to grow but also more and more consumers.

<unk>, a bank centric Peter <unk> network, and seeing more transaction volume so that gives us some confidence that we'll be kind of and the upper end of the mid term range of 5% to 8%.

And the last thing I'd point Lisa as.

We're going to see some probably unique variation and the growth rates by quarter again, Frank talked a little bit about this in his prepared remarks Q1 as you recall in 2020 was essentially COVID-19 free for call. It roughly 10 of the 13 weeks and the first quarter and we had had a very.

Strong first quarter until Covid hit really at the latter part of March and obviously very significantly in Q2. So I would expect Q1, two and not only be our lowest point and the quarter in terms of growth rate year over year, but actually probably people LOE guidance range with the rebound and the.

Opposite take place and second quarter. When you have a much easier comps will be on the above the upper end of our guidance range such that by the time, we exit the first half of the year, we're trading and that.

Within the overall internal revenue growth and EPS guidance range on a first half basis and be set nicely for the second half.

Fantastic color. Thank you very much.

Thank you. Our next question comes from Dave Koning from Baird. Your line is open.

Yeah, Hey, guys, great year, a great year.

Yeah, Yeah, I guess first of all I guess sort of a similar question just on margin expansion by segment I know you don't give a lot of color on this but the merchant segment was the one that was actually still down year over year for margins in 2020, what are the other two nicely expanded so should we expect as revenues come back and that segment for that one.

And probably to be the most benefited by margin expansion and then the other two closer to the guidance range.

Yes, you're probably not too far off and that thinking.

You hit the issue right on the head obviously extremely difficult second quarter. Both in terms of revenue and margin in that segment really nice recovery sequentially into the second half of the year and so we head into 2021 in much better position than we did and the first.

So we will see some nice improvement again, you'll get the benefit of the comparison point in second quarter of 2021 overall I would say when we close the books 12 months from now we are on this call I would expect margin expansion and all three segments and.

And probably a bigger lift out of the merchant acceptance business.

Got you. Thanks, and then just the follow up.

One thing you don't talk a lot about as the equity income line, it's about 5% of total profit, but I would imagine that got hit pretty hard. This year, just the bank JV as and stuff and Mike correlate more with the merchant segment, so it'd probably be up more than just the average business I I don't know if that's a good way to think about it but I just wonder if there's any context around the equity income line.

No actually I think that's exactly the way to think about it and you're right. That's the largest portion of that as the merchant joint ventures and as we see.

And the merchant business overall recover I would expect to see the joint venture as participated that and help with that equity line.

Awesome. Thanks, guys.

David.

Thank you. Our next question comes from Andrew Jeffrey from tourists Securities. Your line is open.

Alright. Good afternoon. Appreciate you taking the question.

Hi, My question is really around.

A couple of I guess tech enabled.

As she is generally and merchant I'm thinking about E com and the enterprise E Com business and also omni general generally great Kpis in terms of volume.

Bob could you speak to.

Yield contribution and and also maybe even clover I assume these are higher yielding transactions and given the growth rates should blend up.

<unk> as organic revenue growth all things considered I am just trying to think about order of magnitude and impact from your tech enabled business generally.

Yes.

Yes.

And <unk>.

Certainly the euro and the right track.

Clover.

And obviously have exposure and smbs.

Generally has higher yield and and general Tech enabled does.

Certainly the thing to consider though as that was a big element of the growth in 2020 and so.

You don't necessarily see a massive acceleration of that because that was actually one of the things that helped the overall growth rate of the of the merchant segment as.

Small businesses and.

And.

I'll broadly shutdown again, particularly in the second quarter people move to the Tech enabled E commerce type transactions.

And you heard as report very strong growth throughout the year in overall <unk> volume, we'll obviously see that continue but as a percentage of the overall share of.

Activity within the merchant segment.

And you won't necessarily see a big change overall, so the margin improvement really as driven by continued productivity and scale business benefit as well as synergy benefits.

Okay. That's helpful. Thanks, and just as.

As a quick follow up.

Frank you called out the bank channel, which is a.

Part of your distribution network and I know you know.

And very well and spent a lot of time on lots of new banks do you feel like you could get.

Adequate productivity out of that channel long term, especially as it as it relates to SMB merchant acquiring and acceptance.

Yeah, I think I think yes, as 100%, yes, and I would think about it.

In multiple ways, one I would think about the bank channel to itself. The other I think about distribution partners also you've seen us announce Verizon paychex.

So these are contact points, where in fact, they're touching smbs and they think they will enhance the relationship with the SMB through Clover offering I mean, you see Verizon and package it.

US in their offering now so.

I'd like to take a broader perspective on the partnership and then we could drop down to what we're doing with outback.

Our bank partners and because we have the as privileged relationships and the core the ability and the brand.

Sales very very good and very strong.

Well it will.

Have the same margin as a fabulous carat offering and answer would be no, but if you think about our ability to deliver and grow merchants throughout the country. It has very very high and very powerful and some of the case as you know, it's just penetrating their base it can.

And as them and new offering into their base, our ability to do it digitally as much higher than it would have been two or three years ago.

Completely accretive as.

And as fundamentally a responsibility with our bank partners to do as to bring down the possibility and it's actually a revenue generator for them also so from that perspective, it's good for our partnerships and deepens and we're building an integrated stacks that caused them to have a better read.

Relationship with their client and also.

Thanks, a lot.

Okay.

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

Alright, Hey, guys. Thanks.

I wanted to circle back to global for a minute.

We've done a lot of work on it recently again it was up 25% as you guys said.

And combined with other kpis like the army keeps going up.

100% it would seem that your market share position as up year over year, and so I'm curious if you can give us a sense of that.

The growth if there was growth and the number of Migs per day.

And the merchant count year over year, when you couple that and the SMB side together with the Internet.

Both domestic international and even the enterprise side sounded strong so really just more than volume growth and revenue growth.

Curious as you heard of anything you can share about the number of merchants and the experience and the SMB side versus enterprise.

Well why don't why don't I talk to you a little bit about the strategy behind that and why that growth is happening and it really is about market share gains it's market share gains and the Iot space, it's market share gains and the E Comm space and then it's market share gains.

On the SMB.

And really Clover has played a significant role and that I mean.

Back to the question about bank partnerships and bank distributions and that's one Avenue for us So what we've seen as growth and all of those and you know if.

If you think about what's happened and you know the question and one might ask is.

How how as your business performed as it has.

And it's because of the Fabulous client base, we have and general and then secondarily us having invested heavily before.

We got here actually in 17, and 18, and then 2019, we had a good strong industry leading growth rate through 19, and then the combination of the two companies has allowed us to be able to grow all facets of this and I would say you know when you look at it.

Both across across all of it across SMB and every manner shape and form across ISP is as as you know we didn't have a data position and we continue to grow that out and that'll continue that pipeline and strong and then.

Bringing a saturated carat offering too.

To a large institutional clients. So it is about market share gains.

Okay and.

And then just my quick follow up as on the capital allocation and I know, we left your Investor day, looking forward to and maybe $5 billion potential or even $5 6 billion as a potential capital.

Allocation and potential per year.

When we think about your appetite right now Frank or Bob and when we think about coming out of this this blackout period pre earnings.

We expect that you guys see the stock is undervalued and like many investing any of your investors do that you'd be proactive about it now and going forward from here and and.

Just to remind us as that rate the right way to think about it where there as maybe as much as four to six or five 6 billion of potential and maybe just between buybacks and deleveraging.

Yes Darren.

Thank you the five to six I assume you're getting we during investor day talked about $30 billion of capital available over the next five years.

We certainly expect very good free cash flow into 2021, we had a great 2020.

And see that continuing.

This year and certainly we continue to focus on capital deployment through the eyes or through the lens of share repurchase we certainly would tell you that.

And where the share price is today.

Buyer.

And I don't think you find many cfos to tell you otherwise but.

Trading from a 52 week high and and given where we see 2020 one's results and.

Where valuations.

Valuations have moved we think theres, a real opportunity and so youll see as continued to be active we pretty much are and the market every quarter. I think we have been for the five years I've been here other than when we suspended for a couple of quarters post announcing the merger with first data and we'll continue to do that we do have some debt to pay down.

With the balance of this year, but I am a big believer of quote the genius of the and and like we did in 2020 will pay down some debt, we'll buy back some shares and we will do some acquisitions and we will continue to do that aggressively across the company.

Frankly, and I think no I think I think.

As we laid out at Investor day, and EBIT. If you look at what we've done over the past year and change you see a very balanced approach, we'll buy back shares and pay down debt and we'll strategically acquire assets.

Got it thanks guys.

Thanks Darren.

Thank you. Our next question comes from Jeff Cantwell from Guggenheim Securities. Your line is open.

Hi, good afternoon, and thanks for taking my question.

I wanted to ask that'll be on data acquisition can you talk a little bit about the sit there and all the onboard as part of the team. It sounds like it's a very nice business has some good scale to it and so.

Sounds like it's a modern platform. So it seems like it's going to be a nice addition, can you tell us a little bit more about that and then how can that be enhanced if that's the right word for it.

By becoming part of Fiserv full time and in other words, what are the future synergies.

The future opportunity as you see there on a combined basis and all of its onboard any color there would be great. Thanks very much.

Yeah.

First of all.

And we know on that very well for a long time had a great relationship and.

The.

And one of the founders actually Oh came over to our company earlier and so we and then.

We have always had a deep relationship zelle and management, so I'd consider that as a company we knew very well and we can strategically think about how to integrate platforms you know.

I think we always it as the leading card enable them and Pat.

And that form from virtual virtual access, but when you bring it inside the company.

Alex sight net.

And the calendars excitement so that we can do something much larger than that and cut it down on their own.

And if you think about the Clover and act.

Acquisition and what it turned into.

Sure.

There is great so on and <unk> of course as soon as a much larger enterprise, we definitely increased our digital DNA inside the company and it'll be a complement to our sunnyvale large sunnyvale presence with Clover, and then with us sitting up Chi.

<unk> digital and data officer their ability to ultimately take.

Debit and credit core banking and give all financial institutions the opportunity to have one click for their client to get to all of that data is really where we take and we've already Inc. First win as an incumbent <unk> large named Paul.

And I can name institution.

So we feel great about it I think.

We knew it well so it was easy to integrate and we are deep integration meetings weekly and driving the top line and and I think and can look forward to us having having.

Large growth and digital presence through its acquisition.

Okay. I appreciate the color are excited to see where your ticket thanks very much.

Thanks.

Thank you.

Next question comes from David <unk> from Evercore ISI. Your line is open.

Looking at the $500 million Innovation Fund you announced at the time of acquiring first data could you.

Could you address how much of that innovation spending you expect to occur this year.

And what's built into the adjusted operating margin expansion target of at least 250 basis points and then are there any callouts on specific new product innovations that we should watch out for and the next 12 months.

Thank you for that and so we had talked about a.

A year ago. So that we have created a number of working groups within that kind of day to begin a generation.

Where are these next ideas for innovation would come and the output product of that actually was the ending up of creating as chief digital and data off of share within the company and that.

That would have a structure to allow us to deploy the $500 million of course, we already have begun that as.

And begin to do it in a way that will accelerate growth.

As as we go forward and if you go back to Investor Day, and we had talked about the 500 million was in.

Our outlook that we have given you, but there was nothing on the top line for it and we're already spend and so on.

I think what you can find today is a set of initiatives a series of <unk>.

As a project being deployed a structure built inside the company and when the Chief digital and data officer to be able to help it and move forward as a manner that is across the whole company and so I would think as we get into the second half of this year and your move ins and.

Next year, you'll start seeing these digital and data initiatives.

Which ultimately will roll into the P&L on a top.

And so and and.

You know on dot.

And viewed as part of the.

The 500, but the capability it brings will allow us to move at a faster rate on many of the digital and data innovations and when I say connecting the white space between the four pillars of our business to allow us to unlock opportunity per hour.

Clients.

Anything you want and Dave in terms of spending this year certainly fully encompassed in our overall guidance.

And gets us still the the 'twenty and 'twenty, 4% EPS growth and at least 250 basis point margin improvement there.

And there will be some incremental spend this year of course, we call. This as a fair amount of development and so a portion of this gets capitalized on the balance sheet and comes over time and so it isn't necessarily a big increase year over year and again certainly fully encompassed in our overall guidance.

Thank you very much.

Yeah.

Thank you and our last question comes from Tien Tsin Huang from Jpmorgan. Your line is open.

Thank you. So much just one question on new sales and I know up 19, I think and the fourth quarter of 'twenty two for the year.

I'm curious how you feel about the sales outlook or what kind of targets you set internally for free.

For fiscal 'twenty, one do you feel good about compounding at a similar level.

Yeah, I mean, we had we had a.

We had talked about during the course of last year and sort of Investor day that you know, we see ourselves being close to 20%.

Sales growth company.

You know in terms of institutional sales because that's what we're really talking about there. So and January is off to a really good start so of Hill ROM and good about January as you know.

And when I got to start thinking about it.

And the pipeline of opportunities as robust so I mean it is.

A very well, we see as integrated model and the clients office and so and then what our clients sat stats going up I think that bodes very well our employee engagement going up inside the company, while Paul we protected them and as very tough times.

So I think we feel very strong and good about what's gonna happen and during the course of this year around that.

Excellent. Thank you.

Right.

Well I like to thank everybody for joining us. This afternoon, we tremendously and appreciate your support as they have any further questions. Please don't hesitate to contact us and have a great evening and thank you for your time.

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

[music].

[music].

Welcome to the Pfizer 2024th quarter earnings Conference call, all participants will be in a listen only mode until the question and answer session.

And following the presentation as a reminder, today's call is being recorded at this time I would now like to turn the conference over to Peter <unk> Senior Vice President of Investor Relations at Pfizer.

Thank you Ivy and good afternoon, everyone.

And you're on the call today are Frank Bisignano, our President and Chief Executive Officer, and Bob Hau, Our Chief Financial Officer.

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

Our remarks today will include forward looking statements about among other matters the impact that the COVID-19 pandemic on our business expected operating and financial results and 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 as you refer.

First 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 on this call along with a reconciliation of those measures to the nearest ethical GAAP measures.

Unless stated otherwise.

Lawrence references our year over year comparisons and all references to internal revenue growth on a constant currency basis.

Note that the full year 2019, non-GAAP financial measures and our earnings release and supplemental materials have been prepared by making certain adjustments to the sum of historical first data and fiserv GAAP financial information for periods prior to the acquisition date.

And now I'll turn the call over to Frank.

Thank you Peter and good afternoon, everyone two.

2021 as unprecedented on many levels, we started the year strong and and after entering the pandemic, we continued investing heavily and technology innovation, our client franchise and our people.

We've now and through 2021 when it from.

And then there's momentum.

And your company performed very well given the circumstances across a number of assets and the business.

22% sales growth for the year demonstrates that we're clearly winning and the client's office.

And we strengthened our client franchise, raising and client satisfaction scores across all measures.

When investing in our people platform resulted in top quartile engagement scores amongst companies and a fortune 500.

We made outstanding progress on integration.

Accelerated and increased synergy execution, while ramping our investment and innovative products and solutions.

We delivered 12% adjusted earnings per share growth for the year, marking our 36th consecutive year of double digit adjusted EPS growth.

And we delivered record free cash flow.

We are exiting the year stronger than we entered and we're well positioned to capitalize on our momentum in 'twenty and 'twenty, one and beyond.

Let me provide a brief overview of our financial results and the quarter and Bob will provide more detail later on the call.

Total company internal revenue growth was 1%.

That performance was led by our merchant acceptance segment, which was up 3%.

Strong results in light of the global demand is that right.

Total company adjusted operating margin for the quarter was up 420 basis points and adjusted earnings per share increased 16%.

Free cash flow as it began exxon.

And at $1.1 billion, and nicoletta, bringing free cash flow for the full year two more than three $6 billion.

Our sales momentum remains quite strong.

Fourth quarter sales were up 19% with terrific results.

Processing merchant acquiring and account processing businesses.

As for the full year were up an impressive 22% comp.

A combination of robust sales and excellent pipeline and the 'twenty 'twenty. One is evidence that our formula of green and the strength and breadth of <unk> offerings together with our integrated sales model is extremely well received and the client's office.

And bodes well for the future.

Now I'd like to update you on how our leading digital enabled merchant business is performing.

Through club.

And our leading and SMB platform carrier and enterprise Omni channel Commerce solution and Clover and connect.

Rich <unk> solutions that we continue to drive innovation and.

And partnerships and deliver leading solutions to our merchant clients know.

And the momentum within the digital enabled segments of the merchandise as continues to be excellent.

Clover as gross payment volume grew 25% to $34 billion and the corner.

Or $135 billion annualized.

Container and extend the breadth of services to Clover merchants with innovative solutions that enhance convenience, especially in the digital segment. For example, we recently introduced invoicing capabilities that allow clover and merchants.

Specially those and the services vertical to bill and collect payments from consumers electronically.

Carey.

Our continued growth with global ecommerce transactions up about 25% votes, and the quarter and for the full year.

We saw our omni channel transactions, such as order ahead and pick up in store and grow more than 125% year over year.

One of our best known quick service restaurant and clients seeing excellent growth.

We continue to capture market share when Inc, 46, new enterprise level E comm clients and the fourth quarter, including digital and acquiring for overstock Dot Com and Wingstop and North America and Europe, We signed total.

Paul one of the largest energy providers and the world to provide global digital Ham and acceptance services across more than 100 countries around the world.

We also expanded employer relationships delivering new products and services the key clients such as the left.

We are now powering and disbursements to drivers and Clos.

Over and connect allows us to win new partnerships and drive growth and our partner solutions business and.

And the fourth quarter, we signed 44, new ISP partners, bringing us to 176, new Isd signed for the year.

Those new partner relationships are driving strong results and active merchants up 43% and Q4 and strong revenue growth and the IFA channel.

For example, Dora.

During the quarter <unk> signed a strategic partnership agreement with our App as the largest provider of software and services for for installation and professionals to provide omni channel payment capabilities that are flying and customers.

We also signed one of the largest providers of eye care product and technology to provide payment acceptance services to its more than 7000 eye care professional customers.

To further expand our value added services from merchants Fiserv and citizens financial group have partnered to offer merchants, a new suite of lending solutions at the point of sale through citizens pay per.

Providing merchants with flexible payment options for customers and finance purchases at the point of sale.

Program expands and partnership we've had with citizens since 2015 to provide new financing options and we expect it to drive adoption and the vast growing buy now pay later space.

Moving to account processing business, we continue to expand the number of privileged relationships, we have account processing business across financial institutions of all sizes and types. We signed 19, new core account processing clients and nickel weather.

Including five on the DNA platform, bringing the total to 60 as of the year with 25 and DNA.

To highlight a few of our recent wins.

Service first a commercial bank with more than $11 billion and assets signed on for a full suite of fiserv product, including core processing card services and output solutions.

Right side Bank.

And service bank with more than $2 billion and assets signed on Brown core processing, along with a robust suite of solutions that includes check free cash.

The card services and Zelle and.

I'm also pleased that just recently Republic Bank has partnered with Pfizer and our core processing plus a rich suite of digital and payments solutions.

Public as a $5 billion asset full service retail and commercial bank that was voted the number one bank in America for service by Forbes and 2020.

All of these.

There was strength give wins were competitive takeaways and what a common characteristic.

And he selected a leading core platform plus multiple surround and digital solutions to support their goals of sustained growth and superior customer service.

I'm also pleased to note that we signed three more de novo banks and the quarter.

And our payment and network segment, we continue to see robust sales activity, including several notable card production and personalization and wounds, we aimed to a new agreement with capital one that cap line is more than 1500 Atms to fiserv as money.

As ATM network, while offering their customers access to thousands of additional surcharge free Atms across the country.

And I am pleased to note that we expanded our long standing partnership with Paypal, signing a deal and when the court.

And or to integrate Paypal as a bill payment option for Fi share and Villers and.

Notable synergy sales.

With that let me update you on our integration efforts and Investor Day, We discussed how our integration continues to grow extraordinarily well and as synergy execution as far ahead of original schedule for.

Through December 31st.

We've already actually and over $1 billion from cost savings and are well on our way to fully action at one 2 billion cost synergies by the end of this year.

We entered 2021 and what the majority of the integration work behind us and a focus on driving further growth and sustainable value in the years ahead.

On the revenue side, we're pleased with the level of synergy sales, which accelerated in the fourth quarter.

As of year, and we've already actually $215 million and annualized revenue synergies and as.

Synergy sales pipeline is growing robustly, and giving us confidence and meeting or exceeding as.

$600 million target.

Our bank merchant program continues to be one of the larger synergy opportunity and offer as financial institutions of all sizes and ability to offer they are important as merchant clients, a modern suite of merchant acquiring capabilities, including the innovative global.

Platform, along with digital capabilities like loyalty programs and E Comm solutions.

And the fourth quarter, we added 45, new bank merchant clients, bringing the total to 231, new clients since the merger with more than half of those wins competitive takeaways.

The pipeline into 2021 remains robust with over 500 financial institutions, prompting our continued confidence in achieving this sizeable revenue synergy opportunity.

One final point on our digital initiatives before turning it over and above.

As you've heard us discussed in the past one of the most important and strategic initiatives as Jim.

We define a client experience by utilizing the latest technology to drive innovation and offer digital capabilities across our payments ecosystem. We've taken two important steps and the last 60 days and this area first.

First.

And we acquired and.

Systems, the leading digital card services platform for financial institutions of all sizes.

We're committed to deploying capital both organically and Inorganically to develop the digital and data and next generation solutions that will drive growth long into the future.

And second further demonstrating our commitment to leadership in this area, we appointed a chief digital and data officer to lead these important and strategic growth initiatives across all upside as center.

Now in the past as discussion to Bob for more detail on the financial results.

Thank you Frank and good afternoon, everyone. We.

We had a strong fourth quarter in light of continued pressure from the pandemic across the globe.

Total company internal revenue growth was 1% and the quarter led by the merchant acceptance segment, which grew 3%.

For the full year internal revenue was flat versus last year in line with our expectation that we communicated during our last earnings call.

Growth from revenue synergies, which were $46 million and the quarter and $160 million for the year helped to mitigate the impact from continued pressure related to the pandemic.

During our last earnings call, we share that we saw transaction growth rates stabilize at or around July levels in the fourth quarter, our transaction and payment volume growth rates remained relatively in line with what we saw in the third quarter.

Fourth quarter adjusted operating income was up a strong 10% to $1 3 billion and adjusted operating margin increased by a very strong 420 basis points to 35, 6% driven by a rigorous cost synergy execution, which produced $177 million.

Of incremental cost synergies and the quarter as well as strong operating performance.

For the full year adjusted operating income increased by 2% to $4 4 billion.

And adjusted operating margin increased 170 basis points to 31, 4% benefiting from $581 million of incremental cost synergies and the year and excellent operational performance.

The fact that we improved our margin by 170 basis points through the worst economic cycle and memory as a strong validation of the robust quality and resilience of our business.

And since most of the cost actions in 2020, we're focused on permanent synergy achievement not short term cost savings. We believe our adjusted operating margin improvements are sustainable and expect continued strong improvements in 2021 and beyond.

Fourth quarter adjusted earnings per share increased 16% to $1 30.

Compared to $1 12 in the prior year as adjusted for divestitures.

Adjusted earnings per share for the full year increased 12% to $4 42.

Well ahead of our prior expectations.

Free cash flow and the quarter was once again very strong at $1 1 billion.

For the full year free cash flow increased 11% to more than $3 6 billion.

Free cash flow conversion was also very strong at 119% for the fourth quarter and 121% for the full year.

Turning to each of the segments.

Internal revenue growth and the merchant acceptance segment was 3% and the quarter unimpressive results given the headwinds faced from economy that was hampered by the pandemic.

Our results were once again driven by strong performances in our portfolio SMB clients supported by our Clover platform enterprise clients supported by carrier and another strong quarter from our ISP business.

For the full year internal revenue as in line with the prior year.

As Frank discussed, our Clover, and <unk> continues to grow very nicely up 25% and the quarter. Despite the difficult macroeconomic environment for Smbs we.

We feel great about the strength of that portfolio and 2020, and even better about its performance and in the months and quarters ahead as we get beyond the pandemic.

And our integrated payments or ISP business continues to perform extremely well with continued strong revenue growth and the quarter.

As we discussed at our Investor Day, we recently rolled out Covid connect October integrated solution for Isps we.

We believe that this solution will further extend our differentiation for Isps and their merchant customers and continue to drive excellent growth and the future.

Adjusted operating income and the aerospace and acceptance segment increased 8% to $443 million and the quarter.

Adjusted operating margin was up 280 basis points and the quarter to 37% and increased 150 basis points sequentially.

On our Q2 earnings call after reporting our Covid impacted low point for our acceptance financial results. We said the segment's adjusted operating margin was expected to improve by more than 800 basis points and the second half of 2020 compared to the first half.

We're pleased to achieve that with our second half acceptance margin of nearly 1000 basis points, bringing our full year margin to 25, 4%.

The Fintech segment internal revenue declined 1% and the fourth quarter compared to the prior year as growth and high quality recurring revenue was again offset by much lower periodic revenue most prominently termination fees, which created approximately 350 basis points of headwind to internal revenue growth and.

And the quarter.

For the full year internal revenue was in line with the prior year.

The shift towards digital banking took a strong step forward in 2020, with lockdowns, leading consumers and businesses alike to consider new ways of banking and we continue to see strong demand for a broad array of digital solutions as a result.

For example, total mobile subscribers across our leading digital platforms mobility and architect grew 15% and the quarter RK.

Architect implementations continue at a strong pace and in fact during the second half of the year, we completed more architect implementations and and all of 2019 and excellent indicator for future growth.

Fiserv offerings, such as remote data capture have allowed our fi clients to offer safe convenient and first self service check deposits for their consumer and commercial clients, while improving efficiency and their own results.

Mobile deposits from Q4 grew 33% over prior year and were up.

More than 30% from a full year, well self service ATM deposits grew more than 50% and both the quarter and full year.

Adjusted operating income was up a strong 14% and the quarter to $271 million and grew 12% and the full year to $992 million.

Adjusted operating margin and the segment increased a robust 590 basis points and the quarter to 36, 5% on a combination of growth and processing revenue operational effectiveness benefits and cost synergies.

For the year adjusted operating margin was up an impressive 500 to 510 basis points to 34, 2% as the benefits of growth and processing revenue and our highly skilled business and the combination of both synergy and productivity gains more than offset the impact from lower periodic revenue.

The payments and network segment saw internal revenue declined 1% and the fourth quarter compared to the prior year as growth and our international issuer card services and output solutions businesses, including the benefit of revenue synergies was more than offset by COVID-19 driven impacts elsewhere and this segment.

Internal revenue for the year was in line with the prior year.

Debit transactions continued to show very stable levels of growth and the mid single digit range, we've seen as consistent mid to high single digit transaction growth since June and we remain confident that this level of sustainable going forward.

We continue to see excellent transaction growth and solutions, such as account to account and PDP.

Zelle transactions and the quarter more than doubled compared to prior year and were up 18% sequentially.

The number of clients live on Zelle has grown significantly this year nearly tripling our client count compared to a year ago, and we expect continued strong growth in 2021 and beyond.

Adjusted operating income for the segment was strong up 5% to $660 million and the quarter and was up 6% to $2 4 billion for the year.

Adjusted operating margin was up 300 basis points to 46, 4% and the quarter and it was.

As up 280 basis points to 43, 3% for the year.

They've impacted both revenue and cost synergies drove our solid adjusted operating income results both in the quarter and the full year.

The adjusted corporate operating loss was $87 million and the fourth quarter and $404 million for the full year, a 5% improvement over last year.

This improvement was driven by a combination of cost synergies and productivity as well as lower variable compensation, partially offset by incremental COVID-19 costs.

The adjusted effective tax rate and the quarter was 21, 7% and 29% for the full year down slightly from the prior year.

For 2021, we expect our full year adjusted effective tax rate fairly consistent with the 2020 rate and the range of 21% to 22%.

However, we do expect some variability and the rates by quarter, given different comparison points and the timing of discrete tax items as such we expect our Q1 2021 effective tax rate will be higher than Q1 last year.

As previously communicated our capital allocation priority for the second half of the year was to focus primarily on debt repayment.

We repaid $740 million of debt and the quarter and $1 8 billion and the year. We also repurchased one 8 million shares of stock for $200 million and the fourth quarter, bringing total capital allocated to share repurchase to $1 6 billion for.

For the full year.

We have $65 7 million shares authorized for repurchase as of December 31.

And rounding out our top capital allocation priorities as Frank mentioned earlier in December we announced the acquisition of the on data systems and closed that acquisition in January.

Total debt outstanding was $20 7 billion at December 31, and debt to adjusted EBITDA dropped to three six times, we are well on track to achieve our targeted leverage and the second half of 2021 as we anticipate both strong adjusted EBITDA growth and some further debt repayment this year.

<unk>.

And as you've heard as emphasized throughout our Investor day in December we are fully committed to our longstanding capital strategy, which includes maintaining a strong balance sheet organic investment and innovative solutions and high value acquisitions like <unk> and.

Importantly share repurchase remains our benchmark for capital deployment.

With that let me turn the call back to Frank.

Thanks, Bob.

We expect 2021 internal revenue growth to be 8% to 12% for the full year.

This is modestly better as the bottom end of the range than our preliminary outlook, we shared at our recent Investor day.

Given our current view of economic conditions, including the second stimulus and late December and the prospect of a third stimulus package later this quarter.

This significant growth rate acceleration relative to 2020 is driven by the multi pronged impacts of our current expectations for and improving global economy.

Overall, continuing strength and a global merchant business the <unk>.

Cumulative impact of sales and implementation and continued achievement of end year revenue synergies.

We expect 2021 adjusted earnings per share and the range of $5 and 30.

To $5.50, which is five and above the range, we provided at our Investor day in December and.

Improvement as driven by the stronger exit rate from 2020, and the benefit of stimulus programs and the U S. We expect adjusted operating margin to expand by at least 250 basis points.

And free cash flow conversion will be greater than 188% per year.

Our internal revenue and adjusted EPS growth rate assumptions are grounded and our internal assumptions of when and how the economy will recover from the pandemic in 'twenty and 'twenty one.

The midpoint of our guidance generally assumes improvement as the pandemic and increased vaccinations throughout the first half of the year, leading to economic recovery and the second half.

There are several factors that we believe will impact the quarterly cadence of the year over year growth rates, largely driven by lapping as 2020 performance, which included a pre pandemic performance from much of the first quarter the day.

The impact in Q2 and.

And then the start of improvement and the second half.

Quarterly results may vary, including rates that may fall outside of the volume guidance range, both on the low and high and a particular quarter.

We expect Q1 to be our toughest comparison and Q2, the most favorable comparison.

And then see more normalized comparisons for the second half of the year.

Throughout this past year every five serve associated with challenge to work differently.

To re imagine how we do our jobs to serve our clients who in turn we're learning how to serve their customers.

Faced with these challenges I am proud of our results across a number of measures 2020 was a successful year.

Our client satisfaction scores improved measurably during a time when our clients need us and most we saw.

And our employee engagement scores improve even as we executed against a complex integration and through a pandemic.

We meaningfully increased our synergy targets and accelerated the time to achieve those targets and.

And then regress the integration of first data as a verge of completion in 'twenty and 'twenty one.

And at the end of the day your company achieve its 30 <unk> consecutive year of double digit adjusted EPS growth.

Among the most important initiative here company undertook.

Was it creation about forward together and plan to be a force for positive.

Positive change and outcome.

It is.

Our forward together plan as a four part commitment and support and empower underrepresented and associates business owners and not for profits.

Hilla about forward together and plan the back to business program was launched last summer.

As part of back to business, we committed to invest $10 million to support black and minority owned and business owners and entrepreneurs.

We are well into that monetary commitment and are now meaningfully increasing it to $50 million.

As a further indication of our commitment.

And you continued progress and this important initiative, we recently appointed a senior executive as head of corporate social responsibility to lead these efforts or by centered as well as oversee the sustainability efforts of the organization.

<unk> was once again named a world's most admired company for the eighth consecutive year with excellent scores and people management and social responsibility and a host of other categories.

This is well deserved recognition of the more than 40000 and hard working and caring Fi serv associates around the world.

I will close by thanking all of them for working relentlessly to serve our clients 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 any questions. If you would like to ask a question you May press star one on your phone if you would like to withdraw. Your question you May Press Star two and our first question is from Lisa Ellis from Moffett Nathan Your line is open.

Hey, good afternoon.

Thanks, guys first question from me as on Carrots, you called out 46, new enterprise wins and merchant acceptance this quarter.

Can you describe how the launch of carriage as improving your value proposition in the enterprise and space and maybe give some color on some of the customer feedback you're getting on that offering.

Well I think the.

And the strategic point or al and care. It is that we've integrated for ease of access globally. So although it can be utilized and many currencies and many countries. It's multinational capabilities is resonating very very well and our clients.

And then ease of access.

Its ability to optimize acceptance is really what's driving a very high win rate there and the.

Engineering underneath it was bringing.

To a single platform as a single instance, and ability to execute globally.

And as you've heard us talk about through the course of the year.

Well the one hundreds of wins that we've had institutional a and those are.

And in active and big names that are.

Leaning into the ecommerce and economy so.

As resonated very well and the clients office a lot of work done by the team to build it out and get it to be the platform. That's that's one thing and the market.

Good stuff and my follow up quick one as for Bob could you just.

Give a little color on the segment level outlooks for 2021 and also what type of.

Yeah.

Zacks and growth of unit growth, you're you're anticipating or as embedded in your outlook. Thank you.

Surely we don't give specific guidance by our individual segments, but let me try to give you a little bit of color to get you kind of Directionally. Obviously, if you look at our.

Our merchant acceptance segment represents about 40% of the overall company revenue, we had given during investor day and <unk>.

Expectation of mid term or medium term growth of about 9% to 12%.

We certainly expect in 2021 to be above even the high end of that as we rebound slash we cover from what it has certainly been a pretty difficult year and in particular and second quarter of 2020.

<unk>.

Frank laid out a little bit of some of the key assumptions that we've got in our overall.

Revenue and EPS growth for that matter and it certainly plays a key part and the improvement accelerated growth in the merchant segment things like having a large number of folks vaccinated seeing some of the restrictions that are in place, particularly and you.

Europe, but even across the United States being lifted and seeing a recovery a general economic recovery and the second half of the year. If you look at.

Fintech segment.

Very much impacted this year by periodic revenue.

We've seen that really across the year and particular in the second half of the year, but even a little bit and the first half and overall impacted this year as we look to 2021, we see some of that persisting in Q1 and a bit into the second quarter, but by the time, we get to the second half of the year.

Here, we see that headwind subsiding, such that we would expect the Fintech segment, which has medium term outlook of about 4% to 6% to be in that range for the full year 2021, and we're not counting on a recovery or a rebound of periodic revenue slash termination fees. It is.

And that we lap.

Lap the pretty significant decline we've had over the last several quarters and it doesn't it doesn't continue and so we will see benefit really and the second half of 2021.

And then the final segment the payments segment again above the other 40% of the overall company medium term guidance here was 5% to 8% I would expect this segment to probably be at the upper end of that range in 2021, as we see transaction growth and improve kind of post call.

But in particular and our bill pay business some of our <unk> and of course as you know, we have a leading position and retail private label and as those retailers improve again, particularly in the second half of the year, we'll see some improvement and of course.

You have certainly heard us talk about some very significant wins and our issuer processing business. In this segment the very large ones that we talked about during the last earnings call really won't provide much lift in 2021, but there are quite.

Quite a few below those top three and don't take quite as long as the implement and Youll see some of those come on into 2021, and again provide some nice growth into that business going into that segment and the last driver of that business I'd, probably point to as zelle.

As I mentioned on my prepared remarks, nearly tripling the number of EFI as on Zelf through fiserv and not only do we see that continuing to grow but also more and more consumers.

<unk> of bank centric, Peter <unk> network, and seeing more transaction volume so that gives us some confidence that we'll be kind of and the upper end of the mid term range of 5% to 8%.

And the last thing I'd point Lisa as.

We're going to see some probably unique variation and the growth rates by quarter again, Frank talked a little bit about this in his prepared remarks Q1 as you recall in 2020 was essentially COVID-19 free for call. It roughly 10 of the 13 weeks and the first quarter and we had had a very.

Strong first quarter until Covid hit really at the latter part of March and obviously very significantly in Q2. So I would expect Q1 to not only be our lowest point and the quarter in terms of growth rate year over year, but actually probably people LOE guidance range with the rebound and the.

Opposite take place and second quarter, when you're a much easier comps will be on the above the upper end of our guidance range such that by the time, we exit the first half of the year, we're trading and that.

And within the overall internal revenue growth and EPS guidance range on the first half basis and be set nicely for the second half.

Fantastic color. Thank you very much.

Thank you. Our next question comes from Dave Koning from Baird. Your line is open.

Yeah, Hey, guys, great year, a great year.

Yeah, Yeah, I guess first of all I guess sort of a similar question just on margin expansion by segment I know you don't give a lot of color on this but the merchant segment was the one that was actually still down year over year for margins in 2020, what are the other two nicely expanded so should we expect as revenues come back and that segment for that one.

And probably to be the most benefited by margin expansion and then the other two closer to the guidance range.

Yes, you're probably not too far off and that thinking.

You hit the issue right on the head obviously extremely difficult second quarter. Both in terms of revenue and margin in that segment really nice recovery sequentially into the second half of the year and so we head into 2021 in much better position than we did and the first.

So we will see some nice improvement again youll get the benefit of the comparison point in second quarter of 2021 overall I would say when we closed the books 12 months from now we are on this call I would expect margin expansion and all three segments.

And probably a bigger lift out of the merchant acceptance business.

Got you. Thanks, and then just the follow up.

One thing you don't talk a lot about as the equity income line, it's about 5% of total profit, but I would imagine that got hit pretty hard. This year, just the bank JV as and stuff and might correlate more with the merchant segment. So it'd probably be up more than just the average business I don't know if thats a good way to think about it but I just wonder if there's any context around the equity income line.

No actually I think that's exactly the way to think about it and Youre right Thats the largest portion of that as the merchant joint ventures and as we see.

And the merchant business overall recover I would expect to see the joint venture as participated that and help with that equity line.

Awesome. Thanks, guys.

David.

Thank you. Our next question comes from Andrew Jeffrey from <unk> Securities. Your line is open.

Hi, Good afternoon, and appreciate you taking the question.

Yes.

My question is really around.

A couple of I guess tech enabled.

As generally and merchant I'm thinking about E com and the enterprise E Com business and also omni general generally great Kpis in terms of volume.

Bob can you speak to.

Yield contribution and and all.

And so maybe even clover I assume these are higher yielding transactions and given the growth rates should blend up.

<unk> as organic revenue growth all things considered I am just trying to think about order of magnitude and impact from your technical business generally.

Yes.

<unk>.

Certainly the euro and the right track.

Clover, and obviously have exposure and Smbs and <unk>.

Generally has higher yield and in general Tech enabled does.

And certainly the thing to consider though as that was a big element of the growth in 2020 and.

And so you don't necessarily see a massive acceleration of that because that was actually one of the things that helped the overall growth rate of the of the merchant segment as small businesses and.

<unk> and <unk>.

Retail broadly shutdown again, particularly in the second quarter people move to tech enabled E commerce type transactions and.

And you heard as report very strong growth throughout the year in overall <unk> volume, we'll obviously see that continue but as a percentage of the overall share of.

Activity within the merchant segment.

You won't necessarily see a big change overall, so the margin improvement really as driven by continued productivity and scale business benefit as well as synergy benefits.

Okay. That's helpful. Thanks, and just as.

As a quick follow up.

Frank you called out the bank channel, which is a <unk>.

Part of your distribution network and I know you know.

And very well and spent a lot of time on lots of new banks do you feel like you can get.

Adequate productivity out of that channel long term, especially as it as it relates to SMB merchant acquiring and acceptance.

Yeah, I think I think yes, as 100%, yes, and I would think of that.

And in multiple ways, one I would think about the bank channel to itself. The other I think about distribution partners also you've seen us announce Verizon paychex.

So these are contact points, where in fact, they're touching smbs and they think that will enhance their relationship with the SMB through our clothes, we're offering.

You see Verizon and package it.

And in us in their offering now so.

I'd like to take a broader perspective on the partnership and then we could drop down to what we're doing with.

And our bank partners and because we have the as privileged relationships and the core the ability and the brand sales.

Sales very very good and very strong.

Well it will.

Have the same margin as Fabulous caret offering and the answer would be no, but if you think about our ability to deliver and grow merchants throughout the country, it's very very high and very powerful and some of the cases as you know, it's just penetrating their base Inc.

And as them and new offering into their base, our ability to do a day Julia as much higher than it would have been two or three years ago, so completely accretive.

And as fundamentally a responsibility with our bank partners to do this to bring down the possibility and it's actually a revenue generator for them also so from that perspective, it's good for our partnerships and deepens and we are building integrated stacks that caused them to have a battery.

Relationship with their client and also.

Thanks, a lot.

Okay.

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

Alright, Hey, guys. Thanks.

I wanted to circle back to global for a minute.

We've done a lot of work on it recently again it was up 25% as you guys said.

And and combined with other kpis like beyond <unk>, and a 100% it would seem that your market share position as up year over year and so I'm curious if you can give us a sense of that.

The growth if there was growth and the number of bids.

And the merchant count year over year, when you couple that and the SMB side together with the Internet.

Both domestic international and even the enterprise side, John and strong so really just more than volume growth and revenue growth.

Curious if you've heard anything you can share about the number of merchants and the experience and the SMB side versus enterprise.

Well why don't I talk to you a little bit about the strategy behind that and why that growth is happening and it really is about market share gains as market share gains and the Iot space, it's market share gains and the E Commerce space and then it's market share gains.

On the SMB.

And really Clover has played a significant role and that I mean.

Back to the question about bank partnerships and bank distributions, that's one avenue for us So what we've seen as growth and all of those and.

If you think about what's happened and.

A question and one might ask as.

How how as your business performed as it has.

The cost of the Fabulous client base, we have and general and then secondarily us having invested heavily before.

We got here actually in 17 18, and then through 19, we had a good strong industry leading growth rate through 19, and then the combination of the two companies has allowed us to be able to grow all facets of this and I would say when you look and its growth.

And cross across all of it.

<unk> SMB and every manner shape and form across.

And he is as as you know.

We didn't have a big position and we continue to grow that out and that will continue that pipeline is strong and then.

And our century and a carat offering two.

Two large institutional.

Channel clients. So it is as our market share gains.

Okay.

And then just my quick follow up as on the capital allocation I know, we left your Investor day, looking forward to and maybe $5 billion potential or even $5 6 billion as a potential capital allocation.

Allocation potential per year.

When we think about your appetite right now Frank or Bob and when we think about coming out of this blackout period pre earnings.

Should we expect that you guys see the stock is undervalued and like many investing any of your investors do that you'd be proactive about it now and going forward from here and.

And just to remind us as that rate the right way to think about it were there as maybe as much as 4% to six or $5 6 billion of potential and maybe just between buybacks and deleveraging.

Yes Darren.

Thank you.

And the five to six I assume youre getting we during Investor day talked about $30 billion of capital available over the next five years.

We certainly expect very good free cash flow into 2021, we had a great 2020.

And see that continuing.

This year and certainly we continue to focus on capital deployment through the eyes or through the lens of share repurchase we certainly would tell you that.

And where the share prices today.

Buyer.

And I don't think you find many cfos to tell you otherwise but.

We're still trading from a 52 week high and and given where we see 2020 one's results and.

Where valuations.

Valuations have moved we think there as a real opportunity and so youll see as continued to be active we pretty much are and the market every quarter. I think we have been for five years I've been here other than when we suspended for a couple of quarters post announcing the merger with first data and we'll continue to do that we do have some day.

Got to pay down.

The balance of this year, but I am a big believer of quote the genius of the and and like we did in 'twenty and 'twenty, we'll pay down some debt, we'll buy back some shares and we will do some acquisitions and we will continue to do that aggressively across the company.

Frankly, and I think no I think I think as it.

And we laid out and Investor day, and EBIT. If you look at what we've done over the past year and change you see a very balanced approach, we'll buy back shares and pay down debt and we'll strategically acquire assets.

Got it.

Thanks, guys.

Thanks Darren.

Thank you. Our next question comes from Jeff Cantwell from Guggenheim Securities. Your line is open.

Hi, good afternoon, and thanks for taking my question I wanted to ask and that'll be on data acquisition can you talk a little bit about the sit there and all the on data as part of the team.

Sounds like it's a very nice business has some good scale to it and it sounds like it's a modern platform. So it seems like it's going to be a nice addition.

Tell us a little bit more about that and then.

And how can that be enhanced as estimate Woodford and Bobby.

And while becoming part of Fiserv full time and in other words, what are the future synergies.

The future opportunities as you see there on a combined basis and all of its onboard any color there would be great. Thanks very much.

Yeah.

First of all.

We know on that very well for a long time had a great relationship and.

The.

One of the founders actually.

Came over to our company earlier, and so we and then.

We as always had a deep relationship Zale and management and so I would consider that as a company we knew very well and we can strategically think about how to integrate platforms.

So I think we are as it as the leading.

Card enablement platform from virtual virtual access.

But when you bring it inside the company.

Alex <unk>.

And the calendars excitement so that we can do something much larger than that and cut it down on their own.

And if you think about the Clover and <unk>.

Acquisition and what it turned into.

Is there as there is great so on and <unk> of course as soon as a much larger enterprise, we definitely increased our digital DNA inside the company and it'll be a complement to our sunnyvale large sunnyvale presence with Clover and <unk>.

And then with us sitting up chief digital and data office and the ability to ultimately take.

Debit and credit core banking and give all financial institutions the opportunity as it has.

One click for their client to get to all of that data is really where we take and we've already Inc. First win as in any company or a large named Paul as you name institution.

So we feel great about it I think.

We knew it well so it was easy to integrate and we are deep integration meetings weekly and driving the top line and and I think you can look forward to us having having.

<unk> growth and digital presence through its acquisition.

Okay I appreciate the color all excited to see where your ticket. Thanks Sir.

Sure.

Thanks.

Thank you. Our next question comes from David <unk> from Evercore ISI. Your line is open.

Thank you looking at the $500 million Innovation Fund you announced at the time of acquiring first data could you.

Could you address how much of that innovation spending you expect to occur this year.

What's built into the adjusted operating margin expansion target of at least 250 basis points and then are there any callouts on specific new product innovations that we should watch out for and the next 12 months.

Well you know.

Thank you for that and so we had talked about.

A year ago. So we have created a number of working groups within the company to begin the generation of where these next ideas for innovation and would come and the output product of that actually was the ending up and.

Creating as chief digital and data off of share within the company and that.

That would have a structure to allow us to deploy the $500 million of course, we already have begun that as.

And begin to do it in a way that will accelerate growth.

As as we go forward and if you go back and Investor Day, and we had talked about the 500 million was in.

Our outlook that we have given you, but there was nothing on the top line for it and we're already spending and so I think what you can find today is a set of initiatives a series of <unk>.

Project being deployed a structure built inside the company line achieved digital and data officer to be able to help it and move forward as a manner that is across the whole company and so I would think as we get into the second half of this year and you move into and.

And next year, you'll start seeing these digital and data initiatives.

Which ultimately will roll into the P&L on the top.

And so and.

On dot.

And viewed as part of the 500, but the capability.

It brings will allow us to move at a faster rate on many of the digital and data innovations and what I say connecting the white space between the four pillars of our business to allow us to unlock opportunity for our clients.

Rob anything you want and Dave in terms of spending this year, certainly fully accomplished and our overall guidance.

And gets us still the the 'twenty and 'twenty, 4% EPS growth and at least 250 basis point margin improvement.

There will be some incremental spend this year of course recall this as a fair amount of development and so a portion of this gets capitalized on the balance sheet and comes over time and so it isn't necessarily a big increase year over year and again certainly fully encompassed in our overall guidance.

Thank you very much.

Yeah.

Thank you and our last question comes from Tien Tsin Huang from Jpmorgan. Your line is open.

Thank you so much just one question on the new sales I know up 19, I think and the fourth quarter of 'twenty two for the year.

I'm curious how you feel about the new sales outlook or what kind of targets you set internally for.

For fiscal 'twenty, one do you feel good about compounding at the similar level.

Yes, I mean, we had.

We had talked about during the course of last year and through Investor day that you know.

We see ourselves.

And close to 20%.

Sales growth company.

In terms of institutional sales because thats what were really talking about there. So and January is off to a really good start so of hill ROM and good about January.

And now.

And where I got to start thinking about it and.

And the pipeline of opportunities as robust so I mean it is.

And.

A very well received integrated model and the clients office and so and then what our clients sat stats going up I think that bodes very well.

Player engagement going up inside the company.

Paul we protected them and as very tough times. So I think we feel very good about what's going to happen during the course of this year around that.

Excellent. Thank you.

Yes.

Well.

I'd like to thank everybody for joining us. This afternoon will be tremendously appreciate your support that any further questions. Please don't hesitate to contact us and have a great evening. Thank you for your time.

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