Q4 2021 Fiserv Inc Earnings Call

Please standby the conference will begin in just a couple of minutes again. Please standby the conference will begin in just a minute. Thank you.

Okay.

[music].

Welcome to the Fiserv 2021 fourth 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 would like to turn the call over to <unk> Senior Vice President of Investor Relations at Fiserv.

Thank you and good morning.

On the call today of strength is Mcdonnell President and Chief Executive Officer, and Bob Hau, Our Chief Financial Officer.

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

Please refer to these materials for the next the nation of the non-GAAP financial measure discussed in this call.

Along with the reconciliation of those measures to the nearest applicable GAAP measure.

Unless otherwise noted.

Performance references a yard will be up comparison.

Our remarks today will include forward looking statements about among other budget expected operating and financial results.

Strategic initiative.

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.

As a reminder, from our last earnings call. These will now be using the term organic revenue reaches replaced in terms of revenue and is calculated on a constant currency basis.

Now over to Jack.

Thank you Sue.

Thank you all for joining us this morning.

As you know we serve as the operating system for Commerce and money movement across our client base of.

Credit unions, fintech and businesses ranging from SMB to mid market large enterprises.

We help our clients grow by extending our platform to capture new services and new money flows.

As we exit the second year of a pandemic, we had another successful year of delivering on our growth agenda.

We delivered 11% organic revenue growth for both the fourth quarter and full year at the high end about 7% to 12% outlook that we originally provided.

December 2020 Investor day.

We expanded full year adjusted operating margins by 250 basis points.

We also achieved 26% growth year over year and adjusted earnings per share to $5 58.

Well above our original outlook of $5 25 to $5 45.

Our merchant platforms, Clover, and Clover, Kinect for small and medium size businesses.

Where enterprises are showing very strong growth.

We are winning in Omnichannel and seeing strong growth in value added services, such as Clover software.

Rod risk lending and payment flows, including disbursements and cross border.

Our acquisitions of Bento box and net.

Give us the assets to enhance our services service offerings and verticals like restaurants and will allow us to power a new flows.

Backs.

We are successful in meeting our <unk>.

Clients goal of driving digital engagement for our best in class online and mobile banking platform ability.

As well as integrated mobile first surround solutions.

There's card hub.

Featuring all got for our retail customers.

Span labs for small business customers.

Recall that we bought on an.

<unk> labs in 2021 and are already seeing great traction with that.

We expect these solutions will have a positive effect.

Trends in our client value proposition across core banking.

Payment processing and the network business.

We made outstanding progress on the integration of Pfizer and first data.

Fourth quarter marks the completion of our cost synergy program.

We achieved our target of one $2 billion 300 million above our original commitment two years ahead of schedule.

We action $480 million of revenue synergies and are now at 80% of the increased commitment of 600 million.

We anticipate obtaining the full $600 million of revenue synergies by the end of this year.

18 months ahead of schedule.

Strengthening leadership as our clients' partner of choice yesterday, we announced the definitive agreement to acquire the remaining ownership interest in transact.

We were initial investor and transact.

Leading developer of cloud native banking solutions that is powering digital transformation across financial services.

This is an investment in the next generation financial technology that supports our strategy to continuously innovate for our clients and broaden our total addressable market.

Zach will not only augment our ability to enrich and accelerate the delivery of digital solutions, we offer to our existing clients, but also broaden our solutions to include large financial institutions Fintech banking as a service.

And embedded finance opportunities.

We worked closely with <unk> and look forward to welcoming Frank Sanchez his leadership team and the entire <unk> organization to buy shares when the deal closes later this year.

Our business momentum.

<unk>, thus far position us very well for the future.

Accordingly, we have good visibility into accelerating our organic growth to a rate of seven 9%.

Above our average for the last three years and in line with our medium term outlook.

We expect 2022, adjusted EPS to be $6 40 to $6 55.

Which is a growth of 15% to 17%.

This when combined with the 26% growth we delivered in 2020 , one will generate a two year compounded annual growth of 21% above the high end of our medium term outlook range of 15% to 20%.

Turning to the business segments, let me start with merchant acceptance.

We continue to focus on investing in our leading merchant operating systems Clover and Karen.

To provide products and services and expand our addressable market as you drive growth for our clients and the SMB and enterprise space.

These operating systems continue to perform well and were key drivers of merchant acceptance organic revenue growth of 19.

8%.

For the quarter and year.

Year, respectively.

However continues to be the commercial business management platform of choice for Smbs in the U S and around the world.

In 2021, and small business recovery took hold merchant turn to clover for leading in store payment solutions.

e-commerce capabilities, and new vertical services to grow their business.

We completed our acquisition of Bento box, a leading digital ordering and delivery management platform to help our close to 200000 restaurant owners on our platform reach more customers and.

In addition to Bento box, we signed a variety of strategic partnership.

Enhance the tools restaurants need to be successful.

One such example is our new partnership with Google to enable customers to more easily find an order from Clover restaurant locations.

As we rollout these ballistic SaaS based solutions, we are seeing notable increases in the average revenue per merchant.

We are very excited about continuing this success.

Locating it across other verticals.

Closing out 2021 cover is better positioned than ever as the leading operating system for Smbs.

Carey.

Omnichannel ecosystem, serving enterprise clients continued to grow across the board.

We saw particular strength in Omnichannel transactions, which were up 51% in 2021.

As the demand for Omnichannel solutions persisted through 2021 demand for our integrated solutions, such as disbursements payback enablement.

And other digital capabilities rose to an all time high.

Disbursements have become an important part of the consumer experience in many verticals during the pandemic.

Tumors and businesses want simple fast access to their money digitally.

Karen is well positioned to drive growth and disbursements as evidenced in its expanded relationships with a number of companies within the insurance and ride sharing sectors as well as digital wallet companies, including marquee brands such as point base.

Turning to our course cross border capabilities, we continue to see strength from the recovery with double digit cross border transaction growth in 2021.

Looking forward into 2022, we will continue to push deeper into key priority areas, including Omnichannel disbursements and cross border joint span the breadth and depth of services for our enterprise clients.

Moving to the payments and network segment organic revenue grew 8% in the quarter and 6% for the full year.

Within the issuer business, we saw notable strength in general purpose active accounts now ahead of pre pandemic levels.

Card business continues to provide growth above the segment average from strength in digital risk solutions debit network volumes and debit transaction growth.

Market, leading innovative solutions like part of and spend labs are both enhancing revenue and reducing churn.

In fact span labs product market fit is stronger than we had originally anticipated and this offering along with card.

Notably contributing to our expanded presence with mid market.

As for card processing solutions.

These are not.

Not only greatly enhance the competitiveness of our credit and debit card processing offerings, but also serve to drive more cars into our debit network and more opportunities for <unk> to offer risk and fraud digital banking and account processing.

<unk>, yet again, demonstrating our ability to harness the power of our unmatched distribution platform.

Looking to 2022, we expect to see continued momentum from the ramp of a large credit issuer wins in 2020 in 2020 , one including alliance data Atlantic guests and Genesis three top 25 issuers strengthen.

Our digital offerings with card hub, and sped labs and strengthened zale.

Moving to the financial technologies segment, the fourth quarter was in line with our expectations posting organic revenue growth of 4% closing out the year up 4%.

With very strange way on strong on sales with 48, new core wins, including competitive takeaways with marquee names such as Valley Bank and dollar bank.

Not only are we way in core account processing, but also seeing success in cross selling pan Pfizer capabilities to clients.

As demonstrated in our competitive takeaway agreed.

Southern Bank.

The fusion with more than 5 billion in assets with disagreement great Southern Bank, we will be moving to a complete suite of Pfizer offerings across core account processing.

Digital banking surrounds card processing and output solutions.

We are continuing to win in the higher growth, 1% to $50 billion asset segment.

Clients continue to choose Pfizer as their strategic technology partner to power combined entities into the future.

Key wins in 2020 . One include NYSE. These merger with Flagstar and first Interstate bank merger with great Western.

Sales of digital surround solutions grew strong double digits in 2021, driven by the increased digital focus about financial institution clients.

In the success of ability our modern online mobile banking platform.

We finished the year with 434 sales to existing and new logos.

Sales to existing clients helped deepen the penetration of that.

<unk> fully integrated digital surround such as card hub zelle and span labs.

It is clear that our solutions are already winning in the market.

We will accelerate this momentum through our announced agreement to acquire <unk> Zack.

Will enable clients to quickly deploy modular banking services, including deposits loans cards as well as launch new banking solutions, including a digital bank.

Bank as a service and embedded finance.

We have already made strides in the category.

Development in the market is recognizing our leadership in 2020 . One we are proud to accept an award for the best Finance API is proud communicator advantage API platform and the API World Awards.

And for all data connect.

Our data aggregation portal at the business intelligent groups 2022, Big Innovation Awards.

Going into 'twenty, two 2022 and beyond the powerful combination of our market, leading banking Coors, along with Vince at which enables clients to launch modern flexible and highly personalized digital banking experience is.

And ability our industry, leading online and mobile banking platform will position us to better serve our existing clients and a broader array of customers.

Now, let me pass the discussion to Bob for more detail on our financial results.

Thank you Frank and good morning, everyone.

I'll cover some detail on each of our segments. If you are following along on our slides I'm starting with slide five.

We feel great about our performance for both the quarter and the full year and we are well positioned to achieve a strong 2022 and beyond with sustained value for our clients and our shareholders.

As Frank said, we are projecting 7% to 9% revenue growth for 2022, which is 150 to 350 basis points above our average growth over the last three years.

Total company organic revenue was up 11% in the quarter with growth across all segments led by the merchant acceptance segment, which grew 19%.

For the full year total company organic revenue grew 11% also led by the merchant acceptance segment, which grew 20%.

Total company adjusted revenue also grew 11% to over $4 billion in the quarter and for the full year adjusted revenue grew 11% to $15 4 billion.

Fourth quarter adjusted operating income was up 11% to $1 4 billion.

And adjusted operating margin was in line with the prior year very strong 35, 6%.

For the full year adjusted operating income increased 19% to $5 2 billion.

And adjusted operating margin expanded 250 basis points to 33, 9%.

We expect 2022 margin to expand an incremental 150 basis points or more above last year.

This is driven by strong organic revenue growth of seven 9% on a scale business and a continued focus on productivity.

All while we continue to make meaningful investments for organic growth.

In addition, as you heard earlier from Frank we're proud to announce that we reached our $1 2 billion action cost synergy goal in the quarter, which is a result of our disciplined execution to drive value.

Fourth quarter adjusted earnings per share increased 21% to $1 57.

And through December 31, adjusted earnings per share grew 26% to $5 58.

Free cash flow was $1 2 billion for the quarter up 18% from fourth quarter last year, resulting in the conversion of 119%.

For the full year free cash flow was $3 $5 billion with a conversion to net income of 94% driven by strong revenue growth and increases in working capital.

Capital investment and organic innovation for our clients.

The integration of our acquisitions and investment in technology infrastructure and real estate to create world class collaborations space for our associates.

We returned to offices.

For 2022, we expect free cash flow conversion to be between 95 and 100% of net income.

<unk> and products and services to accelerate growth in the tail end of technology infrastructure and real estate investments, particularly our new technology and innovation hub in North Central New Jersey, which we will occupy later this year.

Now looking to our segment results starting on slide seven.

<unk> revenue growth in the merchant acceptance segment was a very strong 19% in the quarter and 20% for 2021.

Global transactions and volume grew 13% to 16% in the quarter and 13% to 19% for the year respectively.

Excluding the impact of the exit of our processing client, we discussed last quarter.

Global transaction volume grew 18% and 22% in the quarter, and 17% and 24% and the year respectively.

Building off one of the best years for merchant location growth. We ended the fourth quarter with 10% higher global merchant locations versus the comparable quarter a year ago.

Clover continues to build upon the momentum and strength of our product offering as opposed to the very strong, 50% GP growth year over year or $201 billion on an annualized basis.

We've seen exciting opportunities for call for this quarter, including our partnership with the University of Notre Dame and the UBS Arena in New York. These.

These wins further strengthen our positioning with sports arenas globally and highlight our success in integrating the bypass mobile business, we acquired in 2020.

Carey our platform for enterprise clients, So omnichannel transaction growth of 26% in the quarter driven by 59 client wins, including notable wins such as the pilot gave me and expanded relationships with weapons are regional supermarket chain with 106 stores and with the leading home.

Improvement clients to serve their clients end to end.

Our highest volume in this quarter through corporate connect grew 64% year over year and 53% on a two year CAGR.

We signed 45, Isps this quarter, bringing our total signings to 187% for the year and we are winning both Isps that are new to payments as well as competitive takeaways.

We had several notable international wins in the quarter, including an expanded partnership with Union pay international one of the world's largest payment networks to broadened the acceptance of union pay cards across <unk> global footprint.

Dan with first Caribbean International Bank for merchant processing across its banking footprint in the Caribbean region.

Additionally, we executed on an agreement with National Australia Bank merchant processing in Australia.

Adjusted operating income and the acceptance segment increased 20% to $533 million in the quarter and adjusted operating margin was up 60 basis points to 31, 3% driven by continued top line strength.

Through December 31.

The operating income improved 45% to $2 billion.

And adjusted operating margin grew 540 basis points to 38%.

Before I leave the merchant segment as you may have noticed in our third quarter 10-Q filing we anticipate the sale of a portion of our back book to a merchant Alliance partner. This is fully contemplated in our outlook and we will have less than a 50 basis point impact on adjusted revenue for the company in 2022.

We expect the transaction to close in the current quarter.

Turning to slide eight the payments and network segment posted organic revenue growth of 8% in the quarter, resulting in a full year growth of 6% for.

For the quarter card services and digital payments outperformed the segment organic revenue growth rate credits came in slightly under the segment average and Bill pay continues as a headwind.

Within card services debit transactions grew 14% in the quarter.

The strength of our credit offerings for financial institutions was manifested in a notable win in the fourth quarter, an agreement with Randolph Brooks Federal credit and.

An institution with over $14 billion in assets and over 1 million members to provide our credit processing capabilities.

Within issuer solutions.

Well underway with 40% to $120 billion of new business, we announced at our December 2020 Investor Day.

Well as other mandates awarded.

We have completed the Onboarding of Atlantic is a competitive takeaway and BBVA on M&A consolidation win.

On boarding is well underway for Genesis another competitive takeaway.

And for Alliance data.

This momentum continues in addition to the merchant processing wins I mentioned earlier, we also saw an exciting long term card issuing agreements with both National Australia Bank and Union pay international.

These wins demonstrate our ability to serve our clients on multiple fronts.

Consumer demand for our concert Com and PDP offerings continued with zelle transactions up 71% in the number of clients live on Zelle was up 57% in the quarter.

Finally within Bill pay with two notable fourth quarter wins in the healthcare vertical demonstrating our strength in this high growth segment of the market is broadening our client base from what has traditionally been utilities telecoms focused offerings.

Luciano Blue Shield of California, a leading health plan in California has chosen to extend our relationship with Pfizer as part of their enterprise wide process of digital transformation.

Additionally care source, a nationally recognized nonprofit health care plan competitively selected Pfizer to improve their member experience through our robust technology platform.

Adjusted operating income for the segment was up 8% to $713 million and adjusted operating margin was down 20 basis points to 46, 2% in the quarter given tough comps Q.

Q4 operating margin was the second highest margin reported for the segment second only to Q4 of last year.

For the full year adjusted operating income was up 8% to $2 6 billion and adjusted operating margin was up 80 basis points to 44, 1%.

Turning to slide nine.

Financial Technology segment organic revenues grew at 4% in the fourth quarter and for the full year within our medium term outlook for this segment.

Our digital banking capabilities and digital solution offerings continue to win in the marketplace.

In the fourth quarter, we added 14, new core account processing clients.

<unk> us to 48 core wins in the year more than half of which were takeaways.

Mobile deposits in Q4 grew 9% over the prior year.

All service ATM deposits grew 52% over last year.

Adjusted operating income was up 6% in the quarter to $287 million.

And up 9% year to date to $1 1 billion.

Adjusted operating margin in the segment increased 80 basis points in the quarter to 37, 3%.

For the full year adjusted operating margins expanded 160 basis points to 35, 8%.

The adjusted corporate operating loss was $102 million in the quarter in line with our expectations.

The adjusted effective tax rate for both the quarter and full year was 20% in line with our expectations.

We expect 2020 twos effective tax rate to be approximately 21% up slightly as 2021 benefited from a few discrete tax planning items.

2021 was another demonstration of our disciplined capital allocation strategy.

Which includes fortifying our strong balance sheet, returning value to shareholders through share repurchases driving organic growth through investment and pursuing high value acquisitions.

We invested approximately $850 million in M&A to acquire capabilities that we are best positioned to deploy across our scalable platform.

We completed our acquisition of Bento box net pay and integrity payments, bringing our total transactions to seven in 2021.

And as Frank mentioned, we further strengthened our portfolio through the announced acquisition of Fintech developer of cloud me the banking solutions.

Additionally, we returned $2 $6 billion to shareholders through share repurchase this year, including $1 billion in the fourth quarter for $9 9 million shares.

We have more than 42 million shares of repurchase authorization remaining.

And finally total debt outstanding was 21 billion on December 31.

Debt to adjusted EBITDA ratio decreased to three one times down nearly a full turn since we merged.

With that let me turn the call back to Frank Thanks, Bob.

I'm very proud of the results, we've accomplished with another quarter of double digit adjusted revenue growth and double digit adjusted EPS growth.

Given the breadth and depth of that portfolio as well as our history of strong operational performance, we believe will deliver 7%, 9% organic revenue growth and 15% to 17% adjusted earnings per share growth to a range of $6 four.

<unk> to $6 55 sets, we expect each of our business segments to deliver organic revenues.

Within the range of our medium term outlook.

Finally, I invite you to participate in an investor call, we will be hosting in the next several weeks focused on our merchant acceptance business with a particular emphasis on clover as a key driver of growth for the segment in the company.

In addition to delivering on our financial results, we continue to focus on our associates and our communities our.

Our approach to corporate social responsibility is designed to incorporate our philanthropic associate and community engagement to deliver thoughtful strategic decisions, where we invest our time and talent.

<unk> inclusion remains on the top of our ESG agenda and the resultant about efforts speak for themselves in January of the current year <unk> was named to the 2020 to Bloomberg gender equality index, marking our sixth consecutive year for this recognition.

For the second consecutive year.

<unk> has been designated a best place to work for LGBTQ, plus the quality and the human rights campaign Foundation's 2022, corporate equality index.

Now in its 20th year, the CGI as their national benchmarking tool on corporate policies practices and benefits pertinent to LNG.

Q plus employees.

Since 2020, we have allocated $35 million of the $50 million commitment designed to help small minority owned businesses.

<unk> by the COVID-19 pandemic and associated initiatives.

Q4, <unk> was ranked number four on military times best for vets employers less so.

It's the fifth year in a row and the top five and number one rank in our category.

Continuing elegant ships to support veteran affiliated businesses. This quarter, we announced an extension of our partnership with the Institute for Veterans and military families at Syracuse University.

And during our fourth quarter season of giving campaign associate donations along.

Along with corporate matching donations from Pfizer contributed to over 1200 community groups globally.

I am proud of the positive impact of electronic and community programs have had in 2021.

Look forward to us doing more in 2022 to help businesses and communities.

I'll close by thanking all 40000, plus hard working five serve associates around the world for working relentlessly to serve our clients and you our shareholders.

With that operator.

Please open the line for questions.

Thank you we would now like to open the phone lines for 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 press start to our first question comes from Lisa Ellis from Moffett Nathanson. Please go ahead.

Hey, good morning, guys.

I had a question about just hoping to drill in a little bit on your outlook for merchant acceptance for 2022.

I know you mentioned youre expecting it to return to the medium term range I think that's nine to 12. So are you expecting merchant acceptance to get back to double digit growth and then could you drill in a little bit on two of the big drivers in there what you're looking for out of Clover, and then maybe what youre looking for out of your international business as you look out into 2022.

To give you confidence in that outlook. Thank you.

So first of all yes nine to 12.

And yes, we're driving the business to double digit.

I think there is a.

Our multi pronged effort here.

And obviously, we have a lot of assets in our portfolio that are performing very very well.

Whether it be LSP business, whether it be carrier.

But specifically the growth in Clover.

We believe will happen both in the U S and then in our global expansion on that also.

And we continue to see that have very very strong visibility.

Climate will happen outside the U S. During the course of this year and then you layer on top of that.

The cost shift partnership the <unk> partnership and you can see us extending out.

And all we can materially so you should expect to see Clover growth you should expect to see geographic expansion, but you should also expect to see strong E com.

Trajectory along with ISP trajectory.

We continue to invest in co brand carried in the ISP business and continue to fuel al International growth.

Terrific. Thank you.

Thank you Lisa.

Next we will go to the line of Tien Tsin Huang from JP Morgan. Please go ahead.

Alright, thanks, so much really happy to see the 7% to 9% organic revenue growth for this year.

Just on the on the margin outlook to get there for the segments, where are you investing more aggressively I know you had some integrations and information implementation to do as.

As well plus productivity so any color there would be terrific. Thank you.

Yeah, Tien tsin, I'll start and Frank can jump in.

I think you'll see continued investments in all three of our segments.

Obviously, each one of them that have a slightly different growth trajectory as Frank just talked to answering leases comment about the 9% to 12% merchant growth. We expect all three of our segments to perform in.

Medium term outlook range four to six four.

Fintech segment, and 5% to eight prepayments and you're seeing us focus on.

Bringing new solutions to our clients wherever they want us to meet obviously really across the board. The continued drive for digital for mobile.

Expanding out.

Our capabilities to integrate all of our solutions.

Heard me in my prepared remarks talk about the new wins with Unionpay.

With National Australia Bank to individual contracts that both had merchant and payments.

Corporate and that and so we'll continue to.

Best in building out those capabilities, we continue to invest in our digital capability around our card hub acquisition with <unk>.

We spent labs our ability solution are baked your digital banking.

Solution that we launched earlier this year.

Cloud Native online banking solution will continue to expand in the marketplace.

And then obviously once we close with thin Zach will be a focus of ours as we build out that capability.

Yes, maybe I'd say, one or two other things.

We have tremendous visibility due to the.

Amount of wins, you've heard us talk about.

You can see that.

Momentum in the sales cycle.

And that's all about future growth I also think the investments we are making for future growth. So the seven to nine we're talking about here in the immediate medium term is what's right in front of us and we are a pure visibility to it but we also are integrating a lot of products building for the future being variable.

So towards how we're going to build and so when you think about our spending it's really not against this year.

Revenue for future years revenue.

Yes.

Thank you for that.

Thanks Vincent.

Next we will go to the line of Jason Kupferberg from Bank of America. Please go ahead.

Thanks, Good morning, guys I wanted to see what color you might give us just an omicron impacts you may have felt in December and January , particularly and merchant, but maybe a little bit on the issuer processing side too and then just how that translates into how we should be thinking about first quarter revenue growth by segment.

I know you generally have some pretty easy comps there in Q1. Thank you.

I'll start Bob can fill in.

I mean, it's definitely had an effect.

We saw it.

As we came through December .

You definitely felt it and outside the U S.

And then even inside the U S. I would say, but and then it has spilled into January .

Across basically debit and credit.

When you think about it.

Okay.

The spending in general.

I view that as a short term issue nothing systemic there Bob anything J.

Jason.

Thank you.

January consistent to how we kind of closed out December a little bit light, obviously, the U S. Europe .

Yes.

The globe is dealing with <unk>, we're starting to see the restrictions in Europe lifted, particularly as U K, Ireland, Germany has still got a number of restrictions in various regions. It is not a country wide program it's region by region.

And we're starting to see those lift.

And so we expect things to improve as we progressed through the quarter.

I do expect each of the four quarters to be within that 7% to 9% range. So I don't think we have any quarter thats well below that in another quarter well above that.

But with January being a little bit lighter there could be some impact to Q1 there.

Okay, great color. Thank you guys.

Next we'll go to the line of Dave Koning from Baird. Please go ahead.

Hey, guys nice here.

Hey, Dan. Thanks, Yeah. Thanks, Hey, So I guess a couple of questions first of all on payments 2021, it looks like full year about five 5% organic and youre kind of saying five to eight would be 2022.

So I'm just kind of thinking through the accelerating and decelerating factors like I would think debit probably decelerates, but then what what should accelerate to kind of.

Propel growth in 'twenty, two to offset the debit deceleration.

Yes, we have seen some of that deceleration in debit again that was part of the December to January dynamic.

Certainly see some nice lift from the credit issuer wins.

That started going live really the second half of 2021.

That good lift from those in the full year of 2022, and with Atlantica and eds yet to on.

Board here in early 2021 that will give us a nice lift so I think our our credit issuing business will perform nicely.

The improvement or the new contract wins that we talked about in bill pay will help stem some of that headwind that we dealt with in 2021.

And broadly.

The contract wins in the implementations and new services card hub is certainly having an impact on both.

Our debit and credit business as we bring a more fulsome solution, where a digital state of the art capability into our clients, but we see some real opportunity there.

Got you thanks and just.

Currently the acceptance segment I was kind of looking back it looks like the last few years, mostly were down kind of 3% to 5% sequentially. In Q1, you also mentioned selling the back book I don't know how much impact that has.

Are we in kind of a pretty normalized like maybe down three 5% sequentially.

Yeah.

Yes, so first the sale of the back book will we expect to take place this quarter, we're almost halfway through the quarter. It isn't closed yet, but we do expect it soon so it will be a modest.

It's a modest impact to the year less than 50 basis points to the adjusted revenue for the company for the year, so pretty small impact to Q1, particularly.

Given that it is not yet closed, but I think you're largely in line I don't expect any different than in terms of the seasonality as you go from Q1 Q4 to Q1.

Got you thanks, guys.

Next we'll go to the line of James Faucette from Morgan Stanley . Please go ahead.

Great. Thank you very much I wanted to ask quickly on capital allocation and you seem to have stepped up the pace of acquisitions recently and I am wondering with the <unk>.

Swoon in valuations that we've seen at least in public markets is that creating a.

Incremental opportunities for acquisitions, do you think and how dynamic or flexible can you be on capital allocation, especially beats.

Between acquisitions buybacks and debt reduction just wanted to get kind of your sense of color around those topics. Thanks.

Yeah I mean.

We talked about.

$850 million.

And then.

Kidney care Oi.

Also I mean, we feel very very very combat out ability to deploy capital.

Where appropriate and all of that to further accelerate growth rate.

Accentuate further it center accelerate.

Q.

We think were darn good integrated niche properties.

And the properties that we've acquired.

We've also.

<unk> had invested we invest in properties early.

Watch them grow with them nurture them and integrate them.

So I think.

You should expect that these things are all strategically thought about.

Whether it was the restaurant segment, whether it's our ability to.

Complementary product across our core our ability is without scale to be able to acquire.

Some of these founder led companies and then utilize them across our scale I mean, you look at it on and Thats already completely deployed integrated.

<unk> in the clients' office, so we feel good about our ability to deploy capital.

We feel good about the platform's ability to scale is.

<unk>.

They're all.

To us middle of airway of warehouse business model is and that's how you should think about us deploying the capital or against acquisitions obviously.

At a very strong year and repurchasing.

So because we thought it was appropriate to retirement.

Shareholders are that fashion to $2 6 billion.

So I think it's a very balanced approach.

James just to kind of put an emphasis on that last point from Frank.

Either or it isn't an M&A or share repurchase.

In 2021, we deployed capital across the board, we spent $850 million on it on M&A, we repurchased $2 $6 billion. So returned $2 6 billion to shareholders.

Highest we've done.

Fiserv, including a $1 billion in the fourth quarter.

<unk> continued to invest organically and all of that done at the same time, we lowered leverage at three one times down half a turn in the year.

Nearly a full turn since our merger. So it really is about deploying what is significant free cash flow across the portfolio in a variety of different ways.

That's great. Thank you so much guys.

Thank you.

Next we will go to the line of Timothy Chiodo from Credit Suisse. Please go ahead.

Great. Thanks, a lot for taking the question I wanted to talk about inflationary impacts to the topline across a few of the segments within the acceptance segments. Obviously, there is a there's a little bit of hardware revenue, but with the rest of the revenue maybe you could just remind us all on the proportion of that becomes via AD valorem fees or basis points, how much of that is.

On a cents per transaction or other and then also within Fintech, maybe you could just touch on the CPI based pricing escalators worked into the contracts there for core banking. Thanks a lot.

Sure.

You had a lot of elements to that question make sure I hit all of them first and foremost.

You pointed out.

We have a variety of different.

Methods for revenue generation in our merchant business.

Certainly our mix of.

Volume driven as well as.

Transaction, driven and of course, the other elements of that is a variety of different.

Distribution channels, whether it's a direct channel or through our partners or or through a joint venture. So lots of different ways that that revenue comes to us ultimately.

We feel good about the pricing dynamic of market inflation in 2022.

We will give us a natural lift.

The activity that is volume based as volume goes up on.

A higher volume of transactions, which can be higher volume activity will get a lift on that.

And roughly in the merchant business.

65% of our revenue was volume based pricing in about 35%.

As transaction based if you turn to them the Fintech segment.

Segment that we probably have the highest level of CPI.

Clauses in our contracts.

And certainly will be a lift for us in 2022 as those CPI increases go in I don't have a percentage for you off the top of my head but.

It's a good portion of the Fintech or excuse me the core account processing portions of Fintech.

The CPI index.

Great. Thank you so much for sharing those splits within acceptance really appreciate that.

Sure.

Next we'll go to the line of Darrin Peller from Wolfe Research. Please go ahead.

Hey, Thanks, guys can we just touch on the investments of the capital intensity you are putting into the business. Obviously, it's with the strong growth you have.

Probably begs the question of whether or not Youre free cash conversion should stay in this 95% to 100% range versus the historic medium term, which I think we kind of anticipated but would.

I, just hope that Youre, a little more color on what your thought processes on that and then also whether or not we still feel good about the $25 billion of free cash over the next few years $30 billion of capital deployment capabilities.

And then just really one quick follow up I thought it was interesting that you guys are hosting this call in the next few weeks on merchant and Clover any kind of preview on what the goal is for that is it just to give us more comfort and color on sustainability and the breakdown of the business given how strong growth has been thanks guys.

Yes.

Why don't we start with the first.

The concept done that is to really get you to better understand.

The value being created.

For each client.

Debt.

When you think about average revenue per merchant.

Covers impact to give you a real good to look at the growth rate and we talked to you about the E com business to what we said.

Ted Colbert with both so when you look at it you could see what that long term ramp we have in here and the power of both of those platforms. So that would be answering the last part first.

We had talked about $30 billion of capital.

Play.

That number hasnt changed for us at all.

In.

Ill felt changing in conversion rate here.

And if you want to think about what we're doing.

I think it's about delivering integrated solutions as we acquire products, it's about delivering a change the experience ultimately in the clients' office all designed at long term accelerated growth.

So you know in many cases, we're also building functionality, which is giving us a greater total addressable market as we approach it so it's complete.

Completely offensive in terms of us leaning into the opportunity.

The beauty of this platform is it size and scale in its client base and that size and scale of that plan.

Avails us more opportunities and we actually I imagine with what the two companies together and the complementary nature of the assets and the ability to invest in is really the outgrowth.

Above that.

The two pieces I'd add I guess is one that the 95 to 100 that we have for 2022 and the 94, what we did in 'twenty one.

<unk> is in part driven by our increased spending on really three things.

We are moving with a faster speed than we traditionally have around integrating new acquisitions.

A classic example is we acquired on Dot.

The first part of 2021.

And within a few months, we have that integrated and some of our mobile banking capability and started showing it as a truly integrated solution, where traditionally we might have taken a bit longer.

Actually into a great we might sell it as a bundle.

But really integrated into the software into the software offering we're moving at a much faster speed.

Lee you heard us talk in this on the prepared remarks about technology infrastructure spending that's really associated with the merger of Fiserv first data and finishing the swing on that capital spending we're doing across our technology infrastructure and then the third piece is building up some real estate because we bring.

Our organization back into the office after what's been a couple of years of working from home. We are building out what we think are world class collaborations spaces.

To respond to what employees want to need now to enhance that collaboration you heard us early in the year announce our new technology hub innovation and technology hub in North Central New Jersey that will be built out and occupied later this year, so that technology infrastructure associated.

With the Fiserv first data merger and some of this real estate spend youll see kind of tail off at the end of this year.

A shift in our free cash flow going forward.

Really helpful. Thanks, guys.

Thank you and our last question comes from David Toga from Evercore ISI. Please go ahead.

Thanks, Good morning, just bridging to the earlier question on inflationary impacts on revenue could you walk through the impact of inflation on your cost structure and what's built into the adjusted operating margin expansion guidance for 2022.

Yes, I would say first of all you know there is definitely a war on talent and there's definite inflation.

And when you look.

And Omar we've accounted for the World we live in.

Within that guide.

We are very maniacally focused on how to create each work environments that attract the best talent retain the best talent and continue driving innovation in a manner that gives us the outcome that we've been getting and continue to.

Drive slower Bob.

I'll, just punctuate, saying number one with 7% to 9% topline growth on a scale business that provides some nice operating leverage that will improve operating margin, but also allows us to continue to invest in the company. We also have a long track record of good strong productivity.

The last couple of years Thats been called integration savings or synergy, but we continue to have real opportunities for productivity as such we feel comfortable that we will have at least at 150 basis points of margin improvement.

'twenty two.

Understood and then is the 95% to 100% free cash flow conversion target for 2022.

The new normal going forward as opposed to the 105% plus which we saw historically.

No I would not say that obviously at this point, we're not ready to update 2023, but given some of that technology infrastructure spend in the real estate spend that I talked about I talked about earlier I expect that to drift down as we exit 2022 and beyond.

Thank you.

Great. Thank you very much.

Thank you everyone for their attention today, please feel free to reach out to our IR team with any questions and have a great day.

Thanks for your time today. Thank.

Thank you.

Thank you all for participating in the Pfizer of 2021 fourth quarter earnings Conference call that concludes today's conference. Please disconnect at this time and have a great rest of your day.

[music].

[music].

Welcome to the Fiserv 2021 fourth 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 would like to turn the call over to shoot Mukherjee Senior Vice President of Investor Relations at Fiserv.

Thank you and good morning.

With me on the call today are Fred.

I think Donald our President and Chief Executive Officer, and Bob Hau, Our Chief Financial Officer.

The earnings release, and supplemental makita has fallen quarter aren't available on the Investor Relations section of Fiserv Dot com.

Please refer to these materials for the next to the nation as a non-GAAP financial measure discussed in this call.

Along with the reconciliation of those measures to the nearest applicable GAAP measures.

Unless otherwise noted.

Performance references a yard will be a comparison.

Our remarks today will include forward looking statements about among other matters expected operating and financial results and strategic initiatives.

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.

As a reminder, from our last earnings call. We will now be using the term organic revenue, which has replaced in terms of revenue and it is calculated on a constant currency basis.

And now over to Craig.

Thank you Hugh.

And thank you all for joining us this morning.

As you know we serve as the operating system for Commerce and money movement across our client base of banks credit unions, gentex and businesses ranging from SMB to mid market large enterprises.

We help our clients grow by extending our platform to capture new services and new money flows.

As we exit the second year of a pandemic, we had another successful year of delivering on our growth agenda.

We delivered 11% organic revenue growth for both the fourth quarter and full year at the high end about 7% to 12% outlook that we originally provided.

December 2020 Investor day.

We expanded full year adjusted operating margins by 250 basis points.

We also achieved 26% growth year over year and adjusted earnings per share to $5 58.

Well above our original outlook of $5 25 to $5 45.

Our merchant platforms, Clover, and Cologuard Kinect for small and medium sized businesses and turret for enterprises are showing very strong breasts.

We are winning and Omnichannel and seeing strong growth in value added services, such as Clover software.

Risk lending and payment flows, including disbursements and cross border.

Our acquisitions of Bento box and that gave us the assets.

And South services service offerings, and verticals like restaurants, and allow us to power new flows via paybacks.

We are successful in meeting our clients' goal of driving digital engagement around best in class online and mobile banking platform ability.

As well as integrated mobile first surround solutions such as card hub feature.

Featuring on dot for retail customers.

Span labs for small business customers.

Call that we bought.

And spend labs in 2021 and are already seeing great traction with that.

We expect these solutions will have a positive effect.

Strengthening our client value proposition across core banking.

Payment processing and the network business.

We made outstanding progress on the integration of Pfizer and first data.

The fourth quarter marks the completion of our cost synergy program.

We achieved our target of $1 $2 billion 300 million above our original commitment and two years ahead of schedule.

We actually had $480 million of revenue synergies and are now at 80% of the increased commitment of 600 million.

We anticipate obtaining the full $600 million of revenue synergies by the end of this year.

18 months ahead of schedule.

Strengthening leadership.

Our clients' partner of choice yesterday, we announced the definitive agreement to acquire the remaining ownership interest in transact.

We were in initial investor in Fintech.

Leading developer of cloud native banking solutions that is powering digital transformation across financial services.

This is an investment in the next generation financial technology that supports our strategy to continuously innovate for our clients and brought in our total addressable market.

Zach will not only augment our ability to enrich and accelerate the delivery of digital solutions, we offer to our existing clients, but also broaden our solutions to include large financial institutions.

Texts banking as a service and embedded finance opportunities.

We worked closely with depends acting.

And to welcoming Frank Sanchez his leadership team and the entire <unk> organization to buy or when the deal closes later this year.

Our business momentum and investments, thus far position us very well for the future.

Accordingly, we have good visibility into accelerating our organic growth to a rate of seven 9%.

Above all average for the last three years and in line with our medium term outlook.

We expect 2022, adjusted EPS to be $6 40 to $6 55.

Which is a growth of 15% to 17%.

This when combined with the 26% growth we delivered in 2020 , one will generate a two year compound annual growth of 21% above the high end of our medium term outlook range of 15% to 28%.

Turning to the business segments, let me start with merchant acceptance.

Continue to focus on investing in our leading merchant operating systems Clover and Karen.

To provide products and services and expand our addressable market and Youre right growth for our clients and the SMB and enterprise space.

These operating systems continue to perform well and were key drivers of merchant acceptance organic revenue growth of 19.

8%.

For the quarter and year, respectively.

However continues to be the commerce and business management platform of choice for Smbs in the U S and around the world.

In 2021, and small business recovery took hold merchant turned to clover for leading in store payment solutions.

e-commerce capabilities, and new vertical services to grow their business.

We completed our acquisition of Bento box, a leading digital ordering and delivery management platform to help our cost at 200000 restaurant owners on our platform reach more customers and.

In addition to Bento box, we cited a variety of strategic partnership.

Enhance the tools restaurants need to be successful.

One such example is our new partnership with Google to enable customers to more easily find and order from Clover restaurant locations.

As we rollout these ballistic SaaS based solutions, we are seeing notable increases in the average revenue per merchant.

We are very excited about continuing this success.

<unk> caving it across other verticals.

Closing out 2021 cover is better positioned than ever as the leading operating system for Smbs.

Alright.

Any channel ecosystem, serving enterprise clients continued to grow across the board.

We saw particular strength in Omnichannel transactions, which were up 51% in 2021.

As the demand for Omnichannel solutions persisted through 2021.

And for our integrated solutions, such as disbursements payback enablement.

Fee and other digital capabilities rose to an all time high.

Dispersements have become an important part of the consumer experience in many verticals sort of the pandemic consumers and businesses, one simple fast access to their money digitally.

Karen is well positioned to drive growth and disbursements as evidenced minutes expanded relationships with a number of companies within insurance and ride sharing sectors as well as digital wallet companies, including marquee brands such as point base.

Turning to our course cross border capabilities, we continue to see strength from the recovery with double digit cross border transaction growth in 2021.

Looking forward into 2022, we will continue to push deeper into key priority areas.

Adding omnichannel disbursements and cross border joint span, the breadth and depth of services for our enterprise clients.

Moving to the payments and network segment organic revenue grew 8% in the quarter and 6% for the full year.

Within the issuer business, we saw notable strength in general purpose active accounts now ahead of pre pandemic levels.

Card business continues to provide growth above the segment average.

Strength in digital risk solutions debit network volumes and debit transaction growth.

Market, leading innovative solutions like card and spend labs are both enhancing revenue and reducing churn.

In fact span labs product market fit is stronger than we had originally anticipated and this offering along with card.

Notably contributing to our expanded presence with mid market for card processing solutions.

<unk> not only greatly enhance the competitiveness of our credit and debit card processing offerings, but also serve to drive more cars into a debit network and more opportunities for fiserv to offer risk and fraud digital banking and at <unk>.

<unk> processing solutions, yet again, demonstrating our ability.

Harnessed the power of our unmatched distribution platform.

Looking to 2022, we expect to see continued momentum from the ramp of a large credit issuer wins in 2020 in 2021, including alliance data and Atlantic guests and Genesis three top 25 issuers strengthen out.

Digital offerings with card hub and spanned labs and strengthened sale.

Moving to the financial Technology segment, the fourth quarter was in line with our expectations posting organic revenue growth of 4% closing out the year up 4%.

We finished 2021 strong on sales.

48, new core wins, including competitive takeaways with marquee names, such as Valley Bank and dollar bank.

Not only are we winning core account processing, but also seeing success in cross selling pan Pfizer capabilities to clients. This.

This is demonstrated in our competitive takeaway agreed southern bank.

An institution with more than 5 billion in assets.

This agreement Great Southern Bank, we will be moving to a complete suite of advisor offerings across core account processing.

Digital banking surrounds card processing and output solutions.

We are continuing to win in the higher growth $1 billion to $50 billion asset segment.

Clients continue to choose <unk> as their strategic technology partner to power combined entities into the future.

Key wins in 2020 one include NYSE These merger with flagstar.

At first Interstate bank merger with great Western.

Sales of digital surround solutions grew strong double digits in 2021, driven by the increase digital focus about financial institution clients.

In the success of ability our modern online mobile banking platform.

We finished the year with 434 sales to existing and new logos.

<unk> to existing clients help deepen the penetration of our fully integrated digital surround such as card hub zelle and spend less.

It is clear that our solutions are already winning in the market.

Accelerate this momentum throughout announced the agreement to acquire <unk>, which will enable clients to quickly deploy modular banking services, including deposits.

Loans cards, as well as launch new banking solutions, including a digital bank.

Bank as a service and embedded finance.

We have already made strides in the category.

Hi development in the market is recognizing our leadership in 2020 . One we are proud to accept an award for the best financing.

Crowd communicator advantage API platform and the API World Awards.

And for all data connect.

Our data aggregation portal at the business intelligent groups 2022, Big Innovation Awards.

Looking into 'twenty, two 2022 and beyond the powerful combination of our market, leading banking cores, along with bad debt, which enables clients to launch modern flexible and highly personalized digital banking experience is.

And ability our industry, leading online and mobile banking platform will position us to better serve our existing clients and a broader array of customers.

Now, let me pass the discussion to Bob for more detail on our financial results.

Thank you Frank and good morning, everyone.

I'll cover some detail on each of our segments. If you are following along on our slides I am starting with slide five.

We feel great about our performance for both the quarter and the full year and we are well positioned to achieve a strong 2022 and beyond with sustained value for our clients and our shareholders.

As Frank said, we are projecting 7% to 9% revenue growth for 2022, which is 150 to 350 basis points above our average growth over the last three years.

Total company organic revenue was up 11% for the quarter with growth across all segments led by the merchant acceptance segment, which grew 19%.

For the full year total company organic revenue grew 11% also led by the merchant acceptance segment, which grew 20%.

Total company adjusted revenue also grew 11% to over $4 billion in the quarter and for the full year adjusted revenue grew 11% to 15 4 billion.

Fourth quarter adjusted operating income was up 11% to $1 4 billion and adjusted operating margin was in line with the prior year very strong 35, 6%.

For the full year adjusted operating income increased 19% to $5 2 billion.

And adjusted operating margin expanded 250 basis points to 33, 9%.

We expect 2022 margin to expand an incremental 150 basis points or more above last year.

This is driven by strong organic revenue growth of seven 9% on a scale business and a continued focus on productivity.

All while we continue to make meaningful investments for organic growth.

In addition, as you heard earlier from Frank.

We are proud to announce that we reached our $1 $2 billion action cost synergy goal in the quarter, which is a result of our disciplined execution to drive value.

Fourth quarter adjusted earnings per share increased 21% to $1 57.

And through December 31, adjusted earnings per share grew 26% to $5 58.

Free cash flow was $1 2 billion for the quarter up 18% from fourth quarter of last year, resulting in the conversion of 119%.

For the full year free cash flow was $3 $5 billion with a conversion to net income of 94% driven by strong revenue growth and increases in working capital as well as capital investment and organic innovation for our clients.

Integration of our acquisitions and investment in technology infrastructure and real estate to create world class collaborations space for our associates as we return to offices.

For 2022, we expect free cash flow conversion to be between 95, and 100% of net income investments.

Investments in products and services to accelerate growth in the tail end of technology infrastructure and real estate investments, particularly our new technology innovation hub in North Central New Jersey, which we will occupy later this year.

Now looking to our segment results starting on slide seven.

Organic revenue growth in the merchant acceptance segment was a very strong 19% in the quarter and 20% for 2021.

Global transactions and volume grew 13% and 16% in the quarter and 13% to 19% for the year respectively.

Excluding the impact of the exit of our processing client, we discussed last quarter global transaction volume grew 18% to 22% in the quarter, and 17% and 24% and the year respectively.

Building off one of the best years for merchant location growth. We ended the fourth quarter with 10% higher global merchant locations versus the comparable quarter a year ago.

Clover continues to build upon the momentum and strength of our product offering as opposed to the very strong, 50% GP growth year over year or $201 billion on an annualized basis.

We've seen exciting opportunities for corporate this quarter, including our partnership with the University of Notre Dame and the UBS Arena in New York.

These wins further strengthen our positioning with sports arenas globally and highlight our success in integrating the bypass mobile business, we acquired in 2020.

Karen our platform for enterprise clients, so omnichannel transaction growth of 26% in the quarter.

Driven by 59 client wins, including notable wins, such as PAPAYA gave me and expanded relationships with weapons for regional supermarket chain with 106 stores and with a leading home improvement clients to serve their clients end to end.

Our highest volume this quarter through corporate connect grew 64% year over year and 53% on a two year CAGR.

We signed 45 Isps this quarter.

Our total signed to a 187% for the year.

We are winning both Isps that are due to payments as well as competitive takeaways.

We had several notable international wins in the quarter, including an expanded partnership with Unionpay International one of the world's largest payment networks to broaden the acceptance of union pay cards across <unk> global footprint.

And with first Caribbean International Bank for merchant processing across its banking footprint in the Caribbean region.

Additionally, we executed on an agreement with National Australia Bank for merchant processing in Australia.

Adjusted operating income in the acceptance segment increased 20% to $533 million in the quarter and adjusted operating margin was up 60 basis points to 31, 3% driven by continued top line strength.

Through December 31, adjusted operating income improved 45% to $2 billion.

And adjusted operating margin grew 540 basis points to 38%.

Before I leave the merchant segment as you may have noticed in our third quarter 10-Q filing we anticipate the sale of a portion of our back book to a merchant Alliance partner. This is fully contemplated in our outlook and we will have less than a 50 basis point impact on adjusted revenue for the company in 2022.

We expect the transaction to close in the current quarter.

Turning to slide eight the payments and network segment posted organic revenue growth of 8% in the quarter, resulting in a full year growth of 6% for.

For the quarter card services and digital payments outperformed the segment organic revenue growth rate credits came in slightly under the segment average and Bill pay continues as a headwind.

Within card services debit transactions grew 14% in the quarter.

The strength of our credit offerings, where financial institutions was manifested in a notable win in the fourth quarter, an agreement with Randolph Brooks Federal credit Union.

Cities with over $14 billion in assets and over 1 billion members to provide our credit processing capabilities.

Within issuer solutions, we are well underway with their on boarding the $120 billion of new <unk>.

We announced at our December 2020, Investor day, as well as other mandates awarded.

We have completed the Onboarding of Atlantic is a competitive takeaway and BBVA and M&A consolidation win.

Onboarding is well underway for Genesis, another competitive takeaway and for alliance data.

This momentum continues in addition to the merchant processing wins I mentioned earlier, we also saw an exciting long term card issuing agreement with both National Australia Bank and Union pay international.

These wins demonstrate our ability to serve our clients on a multiple fronts.

Consumer demand for our concert count and PDP offerings continued with zelle transactions up 71% in the number of clients live on Zelle was up 57% in the quarter.

Finally within Bill pay with two notable fourth quarter wins in the healthcare vertical.

<unk> our strength in this high growth segment of the market.

Broadening our client base from what has traditionally been utilities and telecom focused offerings.

Blue Shield Blue Shield of California, a leading health plan in California has chosen to extend our relationship with Pfizer.

Part of their enterprise wide process of digital transformation.

Additionally care source, a nationally recognized nonprofit health care plan.

<unk> selected Pfizer to improve their member experience through our robust technology platform.

Adjusted operating income for the segment was up 8% to $713 million and adjusted operating margin was down 20 basis points to 46, 2% in the quarter given tough comps.

Q4 operating margin was the second highest margin reported for the segment second only to Q4 of last year.

For the full year adjusted operating income was up 8% to $2 $6 billion.

Operating margin was up 80 basis points to 44, 1%.

Turning to slide nine.

The financial technologies segment organic revenues grew at 4% in the fourth quarter and for the full year within our medium term outlook for this segment.

Our digital banking capabilities and digital solution offerings continue to win in the marketplace.

In the fourth quarter, we added 14, new core account processing clients.

Bringing us to 48 core wins in the year more than half of which were takeaways.

Mobile deposits in Q4 grew 9% over the prior year.

Self service Atms deposits grew 52% over last year.

Adjusted operating income was up 6% in the quarter to $287 million and up 9% year to date to $1 1 billion.

Adjusted operating margin in the segment increased 80 basis points in the quarter to 37, 3% for.

For the full year adjusted operating margin expanded 160 basis points to 35, 8%.

The adjusted corporate operating loss was $102 million in the quarter in line with our expectations.

The adjusted effective tax rate for both the quarter and full year was 20% in line with our expectations.

We expect 2022% effective tax rate to be approximately 21% up slightly as 2021 benefited from a few discrete tax planning items.

2021 was another demonstration of our disciplined capital allocation strategy, which includes fortifying our strong balance sheet and returning value to shareholders through share repurchases.

Driving organic growth through investment and pursuing high value acquisitions.

We invested approximately $850 million in M&A to acquire capabilities that we are best positioned to deploy across our scalable platform.

We completed our acquisitions of Bento box net pay and integrity payments, bringing our total transactions to seven in 2021.

And as Frank mentioned, we further strengthened our portfolio through the announced acquisition of Fintech developer of cloud me to banking solutions.

Additionally, we returned $2 $6 billion to shareholders through share repurchases this year, including $1 billion in the fourth quarter for $9 9 million shares.

We have more than 42 million shares of repurchase authorization remaining.

And finally total debt outstanding was $21 billion on December 31.

Debt to adjusted EBITDA ratio decreased to three one times down nearly a full turn essentially March.

With that let me turn the call back to Frank Thanks, Bob.

I'm very proud of the results, we've accomplished with another quarter of double digit adjusted revenue growth and double digit adjusted EPS growth.

Given the breadth and depth of that portfolio as well as our history of strong operational performance. We believe we will deliver 7% to 9% organic revenue growth and 15% to 17% adjusted earnings per share growth to a range of $6 four.

<unk> to $6 55 sets, we expect each of our business segments to deliver organic revenues.

Within the range of our medium term outlook.

Finally, I invite you to participate in an investor call, we will be hosting in next several weeks focused on our merchant acceptance business would have particular emphasis on clover as a key driver of growth for the <unk>.

Segment in the company.

In addition to delivering on our financial results, we continue to focus on our associates and our communities.

Our approach to corporate social responsibility is designed to incorporate our philanthropic associate and community engagement to deliver thoughtful strategic decisions, where we invest our time and talent.

Firstly, an inclusionary remains on the top of the ESG agenda and the resultant about efforts speak for themselves in January of the current year <unk> was named to the 2020 to Bloomberg gender equality index, marking our sixth consecutive year for this recognition.

For the second consecutive year.

<unk> has been designated a best place to work for LGBTQ, plus the quality and the human rights campaign Foundation's 2022, corporate equality index.

Now in its 28th year.

<unk> is the national benchmarking tool on corporate policies practices and benefits pertinent.

LNG Q plus employees.

Since 2020, we have allocated $35 million of the $50 million commitment designed to help small minority owned business is affected by the COVID-19 pandemic and associated initiatives.

In Q4, <unk> was ranked number four on military times best for Vets employers list.

The fifth year in a row and the top five and number one rank in our category.

Continuing validation to support veteran affiliated businesses. This quarter, we announced an extension of our partnership with the Institute for Veterans and military families at Syracuse University.

And during our fourth quarter season of giving campaign associate donations.

Along with corporate matching donations from Pfizer contributed to over 1200 community groups globally.

I am proud of the positive impact of pellets or Opex and community programs have had in 2021.

Boy to us doing more in 2022 to help businesses and communities.

I'll close by thanking all 40000, plus hard working five serve associates around the world for working relentlessly to serve our clients and you our shareholders.

With that.

Operator.

Please open the line for questions.

Thank you we would now like to open the phone lines for 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 press start to our first question comes from Lisa Ellis from Moffett Nathan. Please go ahead.

Hey, good morning, guys.

I had a question about just hoping to drill in a little bit on your outlook for merchant acceptance for 2022.

I know you mentioned youre expecting it to return to the medium term range I think thats, 9% to 12. So are you expecting merchant acceptance to get back to double digit growth and then could you drill in a little bit on two of the big drivers in there what you're looking for out of Clover, and then maybe what youre looking for out of your international business as you look out into 2022.

To give you confidence in that outlook. Thank you.

So first of all yes nine to 12.

And yes, we're driving the business to double digit.

I think there is a.

Our multi pronged effort here and.

And obviously, we have a lot of assets in our portfolio that are performing very very well.

Whether it be.

The business, whether it be caret.

But specifically the growth in Clover, we believe will happen both in the U S.

And then in our global expansion on that also.

And we continue to see that have very very strong visibility.

<unk>.

Employment will happen outside the U S. During the course of this year and then you layer on top of that.

The cost shift partnership.

Ratio partnership and you can see us extending out.

All we can materially so you should expect to see Clover growth you should expect to see geographic expansion, but you should also expect to see strong E com trajectory along with ISP trajectory.

As we continue to invest in co brand caret, and the ISP business and continue to fuel.

International growth.

Terrific. Thank you.

Thank you Lisa.

Next we'll go to the line of Tien Tsin Huang from JP Morgan. Please go ahead.

Alright, thanks, so much.

Happy to see the 7% to 9% organic revenue growth for this year.

That's just on the margin outlook to get there for the segments, where are you investing more aggressively I know you have some integrations and information implementations to do.

As well plus productivity so any color there would be terrific. Thank you.

Yes, Tien Tsin I'll start and then Frank can jump in.

I think you'll see continued investments in all three of our segments.

Obviously, each one of them that have a slightly different growth trajectory as Frank just talked at answering leases comment about the 9% to 12% merchant growth. We expect all three of our segments to perform in <unk>.

Medium term outlook range four to six four.

Fintech segment, and 5% to eight for payments and you're seeing us focus on.

Bringing new solutions to our clients.

Where do they want us to meet obviously really across the board. The continued drive for digital for mobile expanding out.

Our capabilities to integrate all of our solutions.

You heard me in my prepared remarks talk about the new wins with Unionpay and with National Australia Bank to individual contracts that both had merchant and payments incorporated in them and so we will continue to invest in building out those capabilities.

We continue to invest in our digital capability around our card hub acquisition with our dot with spend labs, our ability solution are baked your digital banking.

Solution that we launched earlier this year.

Cloud Native online banking solution will continue to expand in the marketplace.

Obviously, once we close with thin Zach will be a focus of ours as we build out that capability.

Yes, maybe I'd say, one or two other things.

We have tremendous visibility due to the.

Amount of wins, you've heard us talk about.

You can see.

We've had very good momentum.

Momentum in the sales cycle.

That's all without future growth I also think the investments, we're making for future growth. So the seven to nine we're talking about here in the immediate medium term is what's right in front of us and we are a pure visibility to it but we also are integrating a lot of products building for the future being various sensor.

Troy tell we're going to build and so when you think about spending it's really not against this year.

Revenue for future years revenue.

Yes.

I think a good detail guys. Thank you.

Thanks Vincent.

Next we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.

Thanks, Good morning, guys I wanted to see what color you might give us just an omicron impacts you may have felt in December and January , particularly and merchant, but maybe a little bit on the issuer processing side too and then just how that translates into how we should be thinking about first quarter revenue growth by segment.

You generally have some pretty easy comps there in Q1. Thank you.

I'll start Bob can fill in.

I mean, it's definitely had an effect.

Hum.

Sorry.

As we came through December .

Definitely felt it and outside the U S.

And then even inside the U S. I would say, but and then it has spilled into January .

Across basically debit and credit.

When you think about it.

Correct.

Spending in general.

I view that as a short term issue.

Nothing systemic there Bob anything.

Jason I think.

January .

We're a consistent to how we kind of closed out December a little bit light, obviously, the U S. Europe .

So the globe is dealing with omicron, we're starting to see the restrictions in Europe lifted, particularly as U K, Ireland, Germany has still got a number of restrictions in various regions. It is not a country wide program it's region by region.

And we're starting to see those lift.

And so we expect things to improve as we progressed through the quarter.

I do expect each of the four quarters to be within that 7% to 9% range. So I don't think we have any quarter thats well below that in another quarter well above that.

But with January being a little bit lighter there could be some impact to Q1 there.

Okay, great color. Thank you guys.

Next we'll go to the line of Dave Koning from Baird. Please go ahead.

Hey, guys nice here.

Hey, Dan. Thanks, Yeah. Thanks, Hey, So I guess a couple of questions first of all on payments 2021, it looks like full year about five 5% organic and youre kind of saying five to eight would be 2022.

So I'm just kind of thinking through the accelerating and decelerating factors like I would think debit probably decelerates, but then what what should accelerate to kind of.

Propel growth in 'twenty, two to offset the debit deceleration.

Yes, we have seen some of that deceleration in debit again that was part of the December to January dynamic.

Certainly.

Some nice lift from the credit issuer wins.

That started going live really the second half of 2021 .

<unk> got good lift from those in the full year of 2022.

With atlantica and eds, yet too.

Onboard here in early 2021 that will give us a nice lift so I think our our credit issuing business.

<unk> nicely.

The improvement or the new contract wins that we talked about and bill pay will help stem some of that headwind that we dealt with in 2021.

And broadly the contract wins in the implementations.

New services card hub is certainly having an impact on both.

Our debit and credit business as we bring a more fulsome solution, where a digital state of the art capability to our clients, but we see some real opportunity there.

Got you Thanks, and just secondly, the acceptance segment I was kind of looking back it looks like the last few years, mostly were down kind of 3% to 5% sequentially. In Q1, you also mentioned selling the back book I don't know how much impact that has.

Are we in kind of a pretty normalized like maybe down three 5% sequentially.

Okay.

Yes, so first the sale of the back book.

We expect to take place this quarter.

Almost halfway through the quarter it isn't closed yet, but we do expect it soon so it will be a modest.

It's a modest impact to the year less than 50 basis points to the adjusted revenue for the company for the year, so pretty small impact to Q1, particularly.

Given that it is not yet closed, but I think you're largely in line I don't expect any different in terms of the seasonality as you go from Q1 Q4 to Q1.

Got you thanks, guys.

Next we will go to the line of James Faucette from Morgan Stanley . Please go ahead.

Great. Thank you very much I wanted to ask quickly on capital allocation and you seem to have stepped up the pace of acquisitions recently and I am wondering with the <unk>.

Swoon in valuations that we've seen at least in public markets is that creating.

Incremental opportunities for acquisitions, do you think and how dynamic or flexible can you be on capital allocation, especially.

Between acquisitions buybacks and debt reduction just wanted to get kind of your sense and color around those topics. Thanks.

Yeah I mean.

We talked about.

$850 million.

And then.

We have 10 Jack here.

Also I mean, we feel very very very confident in our ability to deploy capital.

Where appropriate and all of that to further accelerate growth rate.

Accentuate further it center accelerate.

Q.

We think we are darn good integrated niche properties.

And the properties that we've acquired.

We've also.

And invested we invest in properties early.

Watch them grow with them nurture them and integrate them.

So I think.

You should expect that these things are all strategically thought about.

<unk>.

Whether it was the restaurant segment, whether it's our ability to.

Complementary product across our core our ability is without scale to be able to acquire.

Sunday is founder led companies and then utilize them across our scale I mean, you look at it on and Thats already completely deployed integrated.

<unk> in the clients' office, so we feel good about our ability to deploy capital.

We feel good about the platform's ability to scale is.

<unk>.

There are all.

To us middle of airway of warehouse business model is and that's how you should think about us deploying the capital or against acquisitions obviously.

At a very strong year and repurchasing.

<unk>.

We thought it was appropriate to return money to our shareholders in that fashion <unk> 6 billion.

So I think it's a very balanced approach.

James just to kind of put an emphasis on that last point from Frank.

Either or it isn't an M&A or share repurchase.

In 2021, we deployed capital across the board, we spent $850 million on it on M&A, we repurchased $2 $6 billion, So returned $2 $6 billion to shareholders.

Highest we've done.

Fiserv, including a $1 billion in the fourth quarter.

<unk> continued to invest organically and all of that done at the same time, we lowered leverage at three one times down half a turn in the year.

Nearly a full turn since our merger. So it really is about deploying what is significant free cash flow across the portfolio on a variety of different ways.

That's great. Thank you so much guys.

Thank you.

Next we will go to the line of Timothy Chiodo from Credit Suisse. Please go ahead.

Great. Thanks, a lot for taking the question I wanted to talk about inflationary impacts to the topline across a few of the segments within the acceptance segments. Obviously, there is a there's a little bit of hardware revenue, but with the rest of the revenue maybe you could just remind us all on the proportion of that becomes via AD valorem fees or basis points, how much of that is.

On a cents per transaction or other and then also within Fintech, maybe you could just touch on the CPI based pricing escalators worked into the contracts there for core banking. Thanks a lot.

Sure.

You had a lot of element to that question make sure I hit all of them first and foremost.

You pointed out.

We have a variety of different.

Methods for revenue generation in our merchant business.

Certainly our mix of.

Volume driven as well as.

Transaction, driven and of course, the other element of that is a variety of different.

Distribution channels, whether it's a direct channel or through our partners or or through a joint venture. So lots of different ways that that revenue comes to us ultimately.

We feel good about the pricing dynamic of market inflation in 2022.

We will give us a natural lift.

The activity that is volume based as volume goes up on.

Higher volume transactions, which can be higher volume activity will get a lift on that.

And roughly in the merchant business.

65% of our revenue was volume based pricing in about 35%.

As transaction based if you turn to them the Fintech segment.

Segment that we probably have the highest level of CPI.

Clauses in our contracts.

And certainly will be a lift for us in 2022 as those CPI increases go in I don't have a percentage for you off the top of my head but.

It's a good portion of the fintech or can be the core account processing portions of Fintech.

The App with CPI index.

Great. Thank you so much for sharing those splits within acceptance really appreciate that.

Yeah.

Next we'll go to the line of Darrin Peller from Wolfe Research. Please go ahead.

Hey, Thanks, guys can we just touch on the investments of the capital intensity you are putting into the business. Obviously, it's with the strong growth you have.

Probably begs the question of whether or not Youre free cash conversion should stay in this 95% to 100% range versus the historic medium term, which I think we kind of anticipated but would.

I'd just love to hear a little more color on what your thought processes on that and then also whether or not we still feel good about the $25 billion of free cash over the next few years $30 billion of capital deployment capabilities.

And then just really one quick follow up I thought it was interesting that you guys are hosting this call in the next few weeks on merchant and Clover any kind of preview on what the goal is for that is it just to give us more comfort and color on sustainability and the breakdown of the business given how strong growth has been thanks guys.

Yes.

Why don't we start with first.

The concept done that is to really get you all to better understand.

The value being created.

For each client.

Debt.

When you think about average revenue per merchant.

Kroger's impact to give you a real good look at the growth rate and we talked to you about the E com business to what we said.

Third cohort with both so when you look at it you could see what that long term ramp we have in here and the power of both of those platforms. So that would be answering the last part first.

We had talked about $30 billion of capital.

<unk>.

That number hasnt changed for us at all.

In.

Ill felt changing in conversion rate here.

And if you want to think about what we're doing.

I think it's about delivering integrated solutions as we acquire products, it's about delivering a change experience ultimately in the clients' office all designed at it long term accelerated growth.

So in many cases, we're also building functionality, which is giving us a greater total addressable market as we approach it so it's complete.

Completely offensive in terms of us leaning into the opportunity.

The beauty of this platform is it size and scale in its client base and that size and scale in that plan.

<unk> us more opportunity than we actually I imagine with what the two companies together and the complementary nature of the assets and the ability of investment it's really about growth.

Bob Yes.

Two pieces I'd add I guess is one that the 95 to 100 that we have for 2022 and the 94, what we did in 'twenty. One is in part driven by our increased spending on really three things.

We are moving with a faster speed than we traditionally have around integrating new acquisitions.

A classic example is we acquired on Dot.

First part of 2021 and within a few months, we have that integrated and some of our mobile banking capability and started showing it as a truly integrated solution, where traditionally we might have taken a bit longer to actually integrate we might sell it as a bundle but really.

Integrated into the software into the software offering.

Moving at a much faster speed secondly, you heard us talk in this on the prepared remarks about technology infrastructure spending that's really associated with the merger of Fiserv first data and finishing the swing on that capital spending we're doing across our technology infrastructure and then the third piece.

As building up some real estate, because we bring our organization.

Back into the office after what's been a couple of years of working from home who are building out what we think are world class collaborations spaces to respond to what employees want to need now to enhance that collaboration you heard us early in the year announce our new.

<unk> hub innovation and technology hub in North Central New Jersey that will be built out and occupied later this year, so that technology infrastructure associated with the.

<unk> Fiserv first data merger and some of this real estate spend youll see kind of tail off at the end of this year and you can see it.

A shift in.

Free cash flow going forward.

Thats really helpful. Thanks, Thanks, guys.

Okay. Thank you and our last question comes from David Toga from Evercore ISI. Please go ahead.

Thanks, Good morning, just bridging to the earlier question on inflationary impacts on revenue could you walk through the impact of inflation on your cost structure.

What's built into the adjusted operating margin expansion guidance for 2022.

Yes, I would say first of all you know there is definitely a war on talent and there's definite inflation and.

When you look.

And Omar we've accounted for the World we live within.

Within that guide.

We are very maniacally focused on how to create these work environments that attract the best talent retain the best talent and continue driving innovation in a manner that gives us the outcome that we've been getting and continue to.

Drive slower Bob just.

I'd punctuate, saying number one seven.

7% to 9% topline growth on our scaled business that provides some nice operating leverage that will improve operating margin, but also allows us to continue to invest in the company. We also have a long track record of good strong productivity. The last couple of years Thats been called integration savings.

Our synergy, but we continue to have real opportunities for productivity as such we feel comfortable that we will have at least at 150 basis points of margin improvement.

<unk> 2022.

Understood and then.

The 95% to 100% free cash flow conversion target for 2022.

The new normal going forward as opposed to the 105% plus what we saw historically.

No I would not say that.

At this point, we're not ready to update 2023, but given some of that technology infrastructure spend in the real estate spend that I talked about I talked about earlier I expect that to drift down as we exit 2022 and beyond.

Thank you.

Great. Thank you very much.

Alright. Thank you everyone for their attention today, please feel free to reach out to our IR team with any questions and have a great day. Thanks very good.

Thanks for your time today.

Thank you.

Thank you all for participating in the Pfizer of 2021 fourth quarter earnings Conference call that concludes today's conference. Please disconnect at this time and have a great rest of your day.