Q1 2021 Fiserv Inc Earnings Call
Yeah.
Okay.
[music].
Welcome to the Pfizer of 2021 first quarter earnings Conference call. All participants will be in a listen only mode until the question and answer session begins following the presentation. As a reminder, today's call is being recorded at this time I will turn the call over to Sue Leukergy Senior Vice President of Investor Relations at Pfizer.
Thank you and good morning.
With me on the call today of free.
And as Ignacio <unk>, President and Chief Executive Officer and.
And Bob Hau, our Chief Financial Officer.
The earnings release and supplemental materials for the quarter are available on the Investor Relations section of fist of dotcom.
Our remarks today will include forward looking statements about among other matters the.
Back to the COVID-19, pandemic and our business.
Specced adult preventing and financial results.
Strategic initiative and the.
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 the 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 to non <unk> measures discussed in this growth.
Along with the reconciliation of those measures to the nearest applicable GAAP measures.
Unless otherwise stated performance references are yet it will be a comparison.
And all references to intend as revenue growth of.
On a constant currency basis.
And now I'll turn the call over to Frank.
Thank you shoot Brexit ahead of the other team.
Through 2021 is off to a strong start with Q1 and are better than our expectations across the broad range of metrics the <unk>.
Strength of our results reflects our continued investment and technology innovation, our client portfolio and as people through the COVID-19 pandemic.
Let me provide a brief overview of our strong financial results and the quarter.
And I have noticed so Q1 earnings presentation has been updated and.
And there are volume wrong I'll provide some overview comments captured on the first three pages and then Bob will provide more detail on the subsequent slides.
Total company internal revenue growth was 4% for the quarter, including low double digit growth in March that performance was led by our merchant acceptance segment, which was up 8% and a.
<unk> will result in light of the global pandemic and continued COVID-19 restrictions, particularly in Brazil and.
And a variety of countries and EMEA for much of the quarter.
Adjusted operating margin grew 360 basis points, resulting in an 18% increase and adjusted earnings per share.
Free cash flow grew 8% to $821 million.
And 130% conversion to adjusted net income.
Our sales momentum remains quite strong as first quarter sales were up 42% with strong results.
<unk> and international businesses.
And then as momentum continues and during the second quarter yesterday, we announced the 20 year agreement with kasha economic barrel to become the exclusive provider of merchant acquiring services kasha as one of Brazil's largest.
As banks with more than 26 of the Allergan sales outlet.
And of broad presence throughout all of the Brazil, making this one of the largest wins for our company and in Latin America, and one of the largest globally.
Also this morning, we announced the new solution with Paypal to enable our merchant network across the Clover and current platforms to access the payments via Paypal and venmo through QR codes and presented at the point of sale.
We believe this as an important offering ground merchants as consumer preferences continue to shift towards the touch free transactions.
The combination of robust sales and excellent pipeline is evidence that our formula of bringing the strength and breadth of by serves offerings together and without integrated sales model is extremely well received and the clients office and we believe bodes well for.
For the future.
Now I'd like to update you on how our leading digital enabled merchant businesses performing.
During the Glover, leading SMB platform current our enterprise Omni channel Commerce solution and Clover connect our rich <unk>. The solutions that we continue to drive innovation ex band partnerships and deliver leading flu.
And to our merchant clients.
And the momentum within the digital enabled segments of the merchant business continues to be excellent.
Clover as gross payments volume grew 36% year over year two of $141 billion annualized.
To provide some more context around the strength of the Clover platform GEC as growing 75% from 81 billion and Q1 2019, two in Q1, two to 141 billion.
In Q1 this year.
As might be economic headwinds from the pandemic.
Current.
Enterprise Omnichannel solution continued to perform very well.
E Commerce transactions grew 24% compared to the prior year.
And <unk> channel transactions, such as order ahead, and pickup and store, we're up over 122% year over year.
And we won a record 51, new enterprise level e-commerce clients and the first quarter, including <unk>.
Cost plus world market of U S specialty retailer for which advisor of it has been chosen to provide E. Commerce gateway point of sale of hardware devices and value added services like security token innovation.
We had a very strong result for sales internationally. The notable wins in EMEA and include select of Europe's leading self serve as the retailer offer a coffee and convenience food solutions ROIC advisor has been chosen to provide acquiring services and.
Unintended.
Hardware and <unk>.
Once again, we ended our relationship with one of the largest e-commerce marketplaces, and the region and APAC. We won the merchant acquiring business from Australia, and the second largest bill payment provider.
We also expanded our relationships with key brands such as state of arm, where we are piloting a new digital payout experience for insurance claims.
Recognizing how innovation to bring digital payments to all consumers Pfizer was named one of the world's most innovative companies by fast company for al role and enabling the acceptance of U S Department of Agriculture's snap online.
<unk> EBIT payments during the pandemic.
We continue to see great momentum and the ISP space with the <unk> connect and the first quarter, we signed 42, new ISP partners.
And our continued strength of the expanding partner relationships and is driving strong results and active merchants, which were up 38% in Q1 and I as the channel revenue growth, which was up 34% for example, during the quarter of Pfizer further.
Some of his lead and the mortgage servicing software vertical by signing of a strategic partnership agreement with mortgage cadence and Accenture company, which provides the loan origination software for the mortgage industry. The.
This is yet another example of our successful integrated sale.
Fueling to fuel future growth and our ISP channels.
Additionally, we are continuing to build and enhance our existing ISP relationships by leveraging our technology and market knowledge and the quarter. We finalized an agreement with E tail net can move their large set of existing merchants to us.
And build upon the agreement we had in place renewed emerges.
Moving to the account processing business, we continue to expand our number of regulatory relationships across financial institutions of all sizes and types. We signed 10, new core account processing clients and the quarter, including five on the DNA plaque.
One I'd like to highlight a few of the recent wins as we mentioned on our last earnings call. We signed the Republic first bank, the commercial bank with more than $5 billion and assets and rated America's best banks by Forbes for a full service of buys the product.
Including for processing card services and output solutions and February.
Additionally, we signed two de Novo banks, and the quarter, including Genesis Bank of newly chartered Bank focus as a minority depository institution. This win continues to show our commitment to supporting minority communities.
A majority of diesel our share of wins were competitive takeaway is what the common characteristic of the client selected a leading for platform plus multiple surround digital solutions to support their goal of sustained growth and superior customer service.
Service.
These wins also as black and the strength of our offering for a wide range of clients from de Novo banks, the large financial institutions.
And on payment and network segment, we continue to leverage the power of our combined solutions to drive revenue synergies in Q1 with signs of significant new agreement to provide statement and letter of services to a major U S health care services provider strength.
And our position in this industry vertical.
The other building on our digital momentum in Q1, we signed agreements to provide digital solutions for burst of rise and bank as well as Penn The credit Union and book.
All the cases, leveraging our newly acquired on the capabilities through all of that we can enable our clients. The authors their cardholders personalized real time digital experiences driving cardholder engagement and spend we expect kantar.
<unk> adoption of these digital solutions across our client base.
With that let.
Let me update you on and our integration efforts during Q1, we've already action nearly $1 $1 billion of cost savings and are well on our way the boy action of one 2 billion cost synergy objective by the end of this year.
With the majority of and the integration work behind US we are focused 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 and the various quarter.
As of the end of Q1, we've already actually $265 million and annual revenue synergies and synergies sales pipeline is growing robustly and we expect to meet or exceed our $600 million target over the five years post the merger.
Our bank margin program continues to be of synergy opportunity and offer as financial institutions of all sizes the ability to offer their imported from merchant clients of modern suite of merchant acquiring capabilities, including the innovative glover of platform along.
With digital capabilities like loyalty programs and E Commerce solutions.
And the first quarter, we added 34, new bank merchant clients six always assets of over 1 billion a day.
Additionally, half of these wins were competitive takeaways and the pipeline remains robust through the rest of 2021.
One final point on the digital initiatives before turning it over and above.
And as you've heard us discuss and of asked one of the most important and strategic initiatives as to read the buying of client experience by utilizing the latest technology to drive innovation and offer of digital capabilities across our payments ecosystem and.
An example of that and commitment to this area as the acquisition of the systems, a leading digital experience platform provider for financial institutions of all sizes, which closed in the first quarter. We also acquired right Esa and <unk>.
<unk> based platform that adds hyper localized commerce capabilities to current thereby enhancing our beyond the buy button and strategy.
Last but not least we announced the definitive agreement as to acquire pineapple payments of leaving the ISO focused on integrated payments.
Now, let me pass the discussions of for more detail on our financial results.
Thank you Frank and good morning, everyone.
And if you're following along on our new slides I'll cover some detail on each of our segments.
We had a strong first quarter in light of continued pressure from the pandemic across the globe.
Q1 represents the final period of pre pandemic comparison points with the impact beginning to materialize in the final two weeks of March last year.
January and February trends were and then how kind of March and April trends, where just the kind of understand how the months work you know as as things kind of progressed.
Yeah and taken out.
Macro level and you know.
January and February obviously.
Began a little movement up and volume, but really not very much ex U.
If you remember you know and in February we talked to you all and gave a little Lucky and what we saw up until then and that's when we took a really of that that bottom and from for the flow firm up from seven to eight because as we felt it felt better than eight days and when we.
Talk to you on December 8th at Investor Day, and we did see.
A strong.
March we sort of a weaker February and the U S. I'd I'd kind of fair amount of that to weather the storm going on with sort of a stronger March.
But I think on top of that we saw more of Lockdowns and Amir.
And.
Brazil as I had talked about previously although.
Hampered tremendously by COVID-19 and still had spending going on and I see as really the Kermit and two eight.
April and as were kind of head to the end of it we see the progression and the U S. Obviously, India's the challenged environment and.
And total right now of me is beginning to open up and Brazil continues to perform.
And why we take the bottom up from benign there if that's helpful to you.
Yeah, no. Thank you and I guess another way of kind of think through this and as we look really into Q2 I look back at the last five years. The first data the GBS segment and.
Very routinely it was up about 10% sequentially in Q2 at or very close to the same every year and margins were up like the incremental margins were nearly 100% so the.
Got three or four of 500 basis point sequential jump and margins is there anything different about that seasonality of would almost seem like the season that it would be even better this Q2 than the than some of those past trends, but just trying to triangulate that.
Yes, I think you're thinking about it right I mean look at it.
And as and January versus last January.
What is definitely definitely of bat and compare.
Sit or Q2, and why we talk about it as being outside the top end of the range is because as you know it's against the weak comp so I would expect and seasonality of this.
Better than you would have ever see the recall during our earnings call last quarter and 90 days ago. When we talked about the cadence of our revenue growth. We expected Q1 to be below the guidance the full year guidance range, given the comps against pre pandemic period.
And really all of January February and half of March and then second quarter would actually be above the the full year guidance range with the second half of the year more in line with the overall full year.
We do expect sequentially to continue to see seasonality benefit Q1, and Q2 and the merchant segment will also see the benefit of.
Pandemic, continuing to subside, particularly in the U S as more and more people get inoculated and hopefully improvement in EMEA and some of the Lockdowns begins to be relaxed.
Yeah, great. Thanks, guys nice job.
And in the morning to Dave.
Thanks.
Thank you and our next question comes from Darrin Peller from Wolfe Research. Your line is open.
Hey, guys great job. Thanks.
You know I wanted to just hone in on looking at the outperformance and the merchant side going back Frank as you look at what you guys outperformed on Theres a lot of the baby was it mix or was it the.
Technology, you showed some really good data points on Clover and care of my skis and now when thinking about coming on the other side of this pandemic first of all if you can comment on that point that its probably a good combination of mix and technology. What was the areas that really stood out technologically what are the areas that you now see on the other side of the pandemic that are doing more than you.
Would've thought pre pandemic and could drive even better growth to that 9% to 12% merchant range.
You've talked about.
Yes, I think Hershey.
Think about cohort of growth very very strong income wins and that the backlog of that the onboarding continues to be very very strong.
As the business performing well.
I mean, lockdowns and EMEA and definitely affect us and the I would see us coming and we can.
All of that in the U K opening up.
And our client mix, we've been bullish on the whole way but of all.
Also and very clear.
And that we have a huge diverse client base from smbs to large enterprises and of cross February.
Industry sector.
And as well as the large presence and geographies and.
So I think when you look at.
And outward.
We still have you know lagging.
Lagging lagging vertical restaurants travel and services right.
So we have and expectation.
And then in the later second quarter and the third and fourth.
As long as you're as cover of well, we have invested heavily and Clover continues do it heavily and Carrick continue to do it and heavily as well.
Of our connect.
So while the point to us being able to continue the type of momentum and we have for a long time.
Okay, Alright, so all of those areas I'm, probably going to be a bigger percentage of the mix coming out of this and they were before I guess right.
So and again Darren.
Whether its clover or characterize vs. The mix contribution the revenue contribution from those areas, probably will be of notably bigger percentage of revenue coming out of the pandemic than they were before I would say and I don't know if you can give any update on the data points around that but the investor day start us off with some good ones as that.
Fair.
Yes, Victor and I think there's a couple of things that will play a number one and as Frank pointed out what.
What we have.
Strength of diversity of geography and and.
The client base, meaning we serve the largest retailers and the world of all the way down to the smallest of Smbs.
The breadth has served us well, but we also of course have pretty meaningful exposure to restaurants and retail that have still of lot of recovery ahead of them that will help us with growth going forward. We think we've outperformed the market. The last 468 quarters quite frankly, and we have the opportunity to convert.
And that the other of dynamic of course, as as Clover, and ISP and E com, which are growing faster than the overall average become a larger part you will see better growth from those becoming a more meaningful piece of the overall company as we pointed out of $1 billion E comm business continuing to grow nicely.
And it becomes a bigger part of that $6 billion segment and providing some nice growth alright. So as very quickly repurchasing shares I think you did buy as a little over 5 million shares again, that's a key area of that we focus on for you guys and especially given good free cash conversion. So just can you update us on your appetite and your capacity for the rest of this year and.
And thanks again guys.
Yes, sure the feel great about the.
The position that we're in a good cash generation and the first quarter I mentioned in my prepared remarks, a little bit of constant receivable growth driven given the strong March which of course will generate cash and the second quarter as we collect those receivables of 100 of 3% conversion and the first.
Quarter, well on track to do the 108 for the full year. So we feel of Hey, We've got continued good strong free cash flow generation gives us the capacity to buy back shares and of course as you heard us lay out and our earnings and our Investor day.
Back in December $30 billion of capital to deploy.
Deploy over the next five years.
And we did of meaningful buyback and the first quarter and we see the opportunity to do that for the balance of the year.
Great. Thanks again guys.
Thank you. Our next question comes from Lisa Ellis from Moffett Nathanson. Your line is open.
Good morning, guys I had a specific question on the use of the digital sales channels for Clover on the if I recall prior to the merger with Pfizer of this was an area of first data had invested really heavily and and building.
Online sales channel saw margin could apply get approved instantly by the the clover or <unk>.
Directly and I realize we haven't heard a lot about this.
Of too much and the last year of T cells, just wondering and at the time that was a major differentiator for your platform compared to your large.
<unk> could you just update us on how widely this channel has been deployed and and how significant of a factor is and clover sales. Thank you.
I'd say first of all we continued from here and there.
And when did you hear us talk about.
The addition of new Bank programs, we view every one of those as US ultimately driving digital adoption right. We've always believed the partners who are of Great places for digital adoption and we believe.
Clover itself as great place for the digital adoption.
And when you look at the totality of the business globally.
I would still put it in the not meaningful and total category, but of channel, which continues to accelerate its growth and one that we believe and we will deliver more integrated opportunities for digital sign.
And when you think about the things that the longer term without a bank partner and as having a one of the kind of digital experience for that bank merchant partner, while continuing to work with the paychex and the Verizon as also and using all of the direct.
Channel the digitally sign up so I think and it'll be part of the five year journey, we talk about it.
No.
Not the overwhelming part of our sign of machine, but on the capability is huge and our ability to.
To attract new partners because of that digital capability and sign up merchants as has been contributing to the growth rate.
Okay, and then my follow up another.
One related to go to market or distribution on the merchant side. Just a question on your strategy with e-commerce platforms, and I'm thinking specifically about businesses that aggregate smbs and of particular industry like restaurant, aggregators or retail aggregators of particular type with everything.
Youre doing with Clover with care and the corporate connect.
And with the recent acquisitions how are you serving these types of customers or how are you how do they sort of fit into your strategy and merchant. Thank you.
And fifth.
And within our strategy, we've always viewed us as a partner of choice of great distributor.
We operate in basically every every vertical and every capability and you hear us today talk about extending the relationship in Brazil, and Latin America.
And with one of the largest the income players that can really an example of our commitment to marketplaces actual.
And you'll see that happen internally on the new openings coming Mark and places us being a enabler and a.
The distributor for them too. So I think we of a deep commitment there I think as capabilities as strong and you hear it and the things that we say today and no announcements.
Terrific. Thank you.
Good day.
Thank you. Our next question comes from Dan Donlan from Mizuho. Your line is open.
Hey, Thank you amazing results very impressive great job, Frank and <unk>.
<unk>.
Thank you Sir.
And so.
And it almost refused to accept the explanation that it's just the macro improvement I mean, I think there's significant share gains that you guys are getting out there and thats. What we are hearing from the channel.
And merchant acquiring can you can you maybe give us a little bit of and understanding of who you're taking share from who youre displacing what are you seeing out there how are you winning and where you wouldn't and thank you.
Well, if you think about.
And you know at the global it's a global business, where and so you saw us announce a.
The large deal in Brazil.
And we've been and we started that Brazilian business as that <unk> exist in and we've been.
Taking share beyond where anybody at the outlets capable and that market itself.
So I'd point to that because we weren't a big guy as the player and back in 15 and 16.
Or probably 17 until invoice card connect and blueprint, but there was this just together of Clover and begin that journey you always see that.
You well know Hello, probably people thought where any income Langer and we continue to win in that space now and some of these cases.
And if it's new markets, where in many cases is taking it from.
All of the places you answered that.
And I went.
And look at US, saying, Hey, you know if you go through the.
The hundreds of.
Bank merchant wins, we have talked about fundamentally those are 50% takeaways.
So.
We continue to compete against everybody very strongly and that as in every market in every vertical and it gets back to what we as said on Investor Day. When you look at this.
Our portfolio of Clover, with Clover and connect with the carrot with global distribution with the client base that we have from the largest in the world the corner.
Corner as I like to say at the corner of solar.
I think we built a business that's the most diverse and probably has the most technology and Allstate.
Thank you and then quick follow up.
If I think about that 8% growth and merchant would you and I'm sorry, if I missed it can you give us the maybe the cadence like January February March and what it's looking like in April specifically on that 8% and merchant.
There any way to parse it out a little bit yes.
Yes, Dan and I think there is a couple of things and.
And if you look at the year over year of growth rate, obviously, given the pre pandemic comparison in January and February and then March half the quarter was pre pandemic. The other half can be half per month. The other half the month was a pretty severe.
Shutdown as as particularly in the U S. But also in Europe and people really significantly went home.
And commerce really took a hit in second half of March last year. So you see the year over year comps get significantly better in those last two weeks.
And just look at kind of the raw transactions January started out the year.
A year of the quarter strong February as Frank mentioned, we saw some weather, particularly in the south and the U S.
Slow things down a bit and then March came back quite a bit stronger. If you have you can adjust per whether I would say January started out nice February again adjusted for weather was again.
In line are good with January and and we started seeing things really pick up in March.
Sure and not coincidentally and.
And help supported by the system three payments that started flowing out and we've seen that continue into April. So we're definitely feeling the the recovery of the pandemic as vaccines really spread and the U S. We're seeing more and more commerce retail picking up.
Restaurants, starting to pick up still down year over year, and and a meaningful way, but I'm starting to improve sequentially pretty nicely.
Thank you I appreciate it.
Thank you. Our next question comes from Andrew Jeffrey from curious Securities. Your line is open.
Hi, Pardon me good morning, I appreciate you taking the question.
Uh huh.
Lots of of helpful inputs and commentary and the acceptance business.
Can you talk a little bit about churn and I'm, just trying to get a sense of how that might improve or what the dynamic looks like as we reopen.
In terms of what's coming and the top of the funnel will be that Clover, SMB enterprise and converse of what's coming out of the bottom of the funnel and how we think about that sort of all of translating into sustainable internal revenue growth and your acceptance business.
Yeah.
No.
And a pandemic.
Yes, a lot of people to shut down their businesses and get the one of the people to open up new business as I think we're going to see the strongest small business formation and the second half that we've ever seen and Thats why these channels, we have and so darn valuable.
Our commitment to the small businesses and price our us even as the.
Technical provider one of you to the SBA for the restaurant brand.
So I think I think we've done a good job over the long haul of keeping our clients and I think as global platform as the platform and on carrier platform all of.
And are well received by our client base.
And you know.
I look for strength and small business formation.
And for those who shut down and come back and and differentiate and four of them. So I guess the churn seems very good for us. If you want to think about attrition I mean, we feel strong about job, we're doing and of course, you know any client leaving of sets us at any level.
But I think the other part you kind of put on top of it as a tremendously strong and small business formation and why all of these channels. We have we believe are so darn valuable for us and that process.
Okay helpful. Thank you and and quick.
Quick follow up on payments.
And again really nice kpis, whether it's now or.
Debit transaction growth and I realize there of some pandemic headwinds, perhaps and credit.
Can you offer some insight as to when some of the digital solutions PDP and I'm thinking in particular really start to move the needle from a top lines the perspective and that business.
Yes, Andrew.
As you pointed out we saw some very nice.
And the Kpis support and the overall payments business as well with both the number of transactions and number of users doubling certainly supports debit.
The processing as well as the debit network performing quite well we continue to look.
The acquisition of bond debt and our ability to provide additional digital services for for card controls and card activation to our overall channel, we see that as the significant growth opportunity and not only into obviously provide that particular capability, but that as an overall.
And part of our solutions.
And we certainly have the benefit of some of the significant wins and the credit issuing business that we talked about over the last.
Full of quarters, beginning to ramp late 2021 and into 2022.
The 2% growth in.
The payment segment and the first quarter here is not an indication of where we see the opportunity for the full year there as some definite of headwinds there from the pandemic debt, we expect to subside and I think we said this at the end of last earnings call, but still believe it today, we expect.
Of the payments segment.
For the full year to be at the upper end of the medium term outlook for internal revenue growth. So we believe 2022 23, the payments segment and can grow 5% to 8% and we think this year will be at the upper end of that as we head into the second half of the year and we see the full year result, So I think we are.
And of Great spot, we'll see some continued growth, particularly in our digital side of the payments.
And we will see improvement and the bill pay and credit issuing particularly the retail private label and the second half.
Thank you.
Thank you. Our next question comes from Tien Tsin Huang from JP Morgan Your line is open.
Hi, Good morning, really appreciate the slide format as real good just looking at the acceptance side here, the 8% internal revenue growth of 13% global volume growth do you see potential for that spread between the revenue volume growth to narrow and or even flip and the second quarter of the second half of the year I'm as.
And because it's based on what Frank said around new business as reforming and hopefully more in store.
<unk> that should help you I think of the spreads so I just wanted to check that.
Yes, I think the I think that's the right way to think about it.
There is certainly opportunity going forward.
And we will see obviously, how the economy moving.
The bonds into the second half of the year all indications right now are quite strong and it's why we lifted the bottom end of our guidance range now twice in a row from 7% back in December to 8% last quarter and now 9%, we see the economy, improving and that helps.
Overall merchant acceptance as it helps the overall company, but merchant acceptance and that spread also.
Okay.
Great.
And then just a quick follow up I wanted to ask about star and.
And your pin less debit.
Initiatives and investments and in light of I.
And I think visa disclosed that the Doj is looking into some of their debit practices of those good time to check in with you on and what's happening with the pin less debit.
Yeah, I mean star and ex <unk>.
Sure.
The standout performers for us and no investment and that business continues to be large.
I think youll continue to see us and.
Invest.
Work hard on.
And let us debit and and.
And then other aspects around signature too and as we had talked about over time, that's the long haul and that's not a short haul it's a lot of infrastructure work, but.
We're investing heavily and the network and we are of deep belief and the growth and network and the power of the network, especially in this kind of many where we have of network business and we have merchants and.
It is good for financial institutions.
And our NFL together and good ground merchants, so long journey, but net.
And we'll continue to be something that we'll talk to you about and we're committed to and show as part of the star performing businesses and the company and no pun intended.
Got it thanks for the update.
Thanks, Tien tsin.
Thank you. Our next question comes from David <unk> from Evercore ISI. Your line is open.
Thank you good morning, looking at the acceleration and Clover TPG growth from 25% and Q4 to 36% and Q1 can you drill down a little bit into the drivers. There for example, how much would of been from Onboarding, new clients versus and improvement in same store sales just trying to understand the sustaining.
<unk> of this higher growth rate for Clover.
Sure.
Yeah, I think the the way to think about it as number one we do think the growth rate of Clover as quite sustainable we've seen very strong growth.
The last several years.
$25 $30 35, 40% and given quarter I think you saw in fourth quarter really the second half of last year.
Some slowing driven the pandemic obviously.
As weak.
Anniversary that and continue to see as Frank pointed out.
New business formation.
And that's certainly as a beneficiary to clover as given the the.
Depths of our channel capability and our distribution system, we think we can.
The benefit very nicely from that new business formation. So I would expect the kovar revenue Jimmy the GPP growth to continue for some time going forward and we continue to invest and capability there.
And continue to enhance our solution set.
Understood just as a follow up looking at the 2% organic revenue growth and the Fintech segment. In Q1 can you call out the headwind that you saw from declining periodic revenue. So we can gauge the underlying internal growth going forward.
Yes for Q1 of the periodic headwind, which again was largely driven by termination fees was about 150 basis points said another way outside of that we would have grown about 350 bps.
We do expect.
The headwind to continue into second quarter, although to a slightly abated level.
And then as we enter the second half of the year that will no longer be of headwind for us going forward as it gets to a diminished level.
And then we will see what happens beyond that in terms of as the economy improves do you see more bank mergers, which tends to be a driver of termination fees, but that headwind subsides a bit in Q2 and then.
The anticipated not being the headwind that we discussed and the second half of the year.
Understood. Thanks, so much for the helpful detail sure. Thank you.
Thank you. Our next question comes from Ramsey El <unk> from Barclays. Your line is open.
Hey, guys. Thanks for taking my question here I wanted to ask about the broader M&A strategy.
Should we expect more deals sort of similar size of the pineapple and non Dod or would you take a swing of something a little larger if the maybe more transformative as the opportunity presented itself.
Well you know.
I think first we feel great about all of the capabilities.
And the total hand, we have.
The tuck ins and it plays very very well for us from a very long time.
I think if you look at on that and Youre going to see that get spread across the product base, the client base that digitally capability and integrated fashion.
Pineapple it takes us and another area of around OIS. The capability I think if you look at radius.
It is about bringing that across this large platforms. So they play very very well for us.
We've been we've been very committed to our capital allocation strategy and I tried and true and all of these acquisitions fit exactly within that.
Envelope.
But of course, you know.
And we pay attention and think about everything and as of the dynamic world and that keeps changing.
No.
Think we're we're pretty committed to the path, we're on and we think about all the things and the market always around the table.
And so.
As it has to work for our shareholders for it to make sense and that's why one of all of that capital allocation strategy.
Alright, great that makes a lot of sense.
Lastly from me.
As at the point of clarification and forgive me if you guys already covered off on it but in the slide deck, you mentioned pressure on the long cycle credit processing and the payments segment.
What is that exactly and the headwind that you expect the persist.
Yes, I would of that as essentially the.
The credit issuer processing business as not transaction driven.
And so as we see the economy improve and more active accounts, we will see an improvement and that revenue and so that's a bit of.
A lagging indicator and we expect that to take place really and the second half as the economy improves we will see more activity. In addition, you'll get different comparisons and so we think that helps lift the growth of the the payments segment and obviously the credit issue of processing.
Got it okay. So that's just the euphemism for credit risk of approximately okay.
Terrific. Thanks, so much.
Thank you.
Thank you and our last question comes from George and me Hello from Cowen Your line is open.
Hey, guys. Thanks, Thanks for squeezing me in.
And just wanted to ask kicking things off on the on the merchant side of the nice momentum you're seeing there as it relates to EMEA, where we're hearing anecdotally of things are getting better.
Throughout the course of April, particularly in the UK and I'm I'm. Just curious if you could share any high level trends that you might be seeing through through the month of April and would you guys expect that region.
To be in the Black and <unk> is there any reason why that's the <unk>.
Not possible.
Well I think the U K the U K.
And as we can feel it and we see it.
And I think I had referred to as potentially somewhere along the line here today.
I think the Ireland still has challenges.
But.
Our expectation is that the second half.
EMEA is and recovery.
And one of them.
The thinking too hard about this quarter itself as much as the full year, and we believe though and the business will perform well and the second half.
I think it's been under pressure and the first half certainly feels like it's in the right trajectory of though as you say the.
The restrictions are beginning to lift U K in particular and hopefully some of the other countries and that regions.
Okay.
Okay. That's that's helpful and just as a as a quick follow up Bob on the.
On the pork segment, and we continue to believe them and include like.
It's properly and the right direction, but.
The court of clicks growth per phone Paul.
You laid out last quarter as that still on the table for 'twenty, one or how are you guys feeling about that range.
Yes, we didn't give guidance for 'twenty, one that 4% to 6% as our medium term guidance.
The we don't give specific in your guidance on <unk>.
Our sub Eric Smit, our segment level.
I'll just reiterate we did we printed it too if you adjust for the periodic revenue of three and a half and the quarter that subsides pretty meaningfully.
In the second quarter and as no longer of headwind in the third and fourth quarter. So we'll see a nice uptick in that segment and and.
And believe we'll be in that range and the second half of the year for sure.
Okay. Thank you guys congrats on the results.
Thank you very much.
I'd like to thank everybody for.
Their time today of Florida and target as you all and we appreciate everything you do have a great day.
Thank you all for participating in today's conference you may disconnect your line and enjoy the rest of your day.
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