Q1 2022 Fiserv Inc Earnings Call

April 27, 2022

Welcome to the Pfizer of 2022 first quarter earnings Conference call. All participants will be in a listen only mode until the question answer session begins following the presentation. As a reminder, today's call is being recorded at this time I will turn the call over to <unk> Senior Vice President of Investor Relations at Fiserv.

Thank you and good morning with me.

On the call today are Frank Bisignano, our President and Chief Executive Officer, and Bob Hau, Our Chief Financial Officer.

Our earnings release and supplemental materials for the quarter.

<unk> on the Investor Relations section of <unk> Dot com.

Please refer to these materials for the next generation of the non-GAAP financial measure discussed in this call along with the reconciliation of those measures to the nearest applicable GAAP measures.

Unless otherwise stated performance references yeah, it 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.

Risk factors.

And now over to track.

Thank you Sue.

And thank you all for listening in as we share our results for the quarter and highlight the progress against our growth agenda.

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

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

Help our clients grow by extending our.

Our platform to capture new services and new money flows.

Our relentless pursuit of innovation for our clients has placed us on the list of the world's most innovative companies by fast company for the second consecutive year.

We've entered 2022 with strong momentum, we delivered 11% total company organic revenue growth in the first quarter.

We expanded adjusted operating margin by 60 basis points to 32%.

We also achieved 20% adjusted EPS growth to $1 40.

We obtained $40 million of action and the revenue synergies in the quarter, reaching 520 million since the merger.

87% of the increased commitment of 600 million.

Five year period, following the merger and now expect to hit that goal by the end of this year.

As we shared with you on our year end 2021 earnings call. We included our cost synergy program.

Any actions the promised one 2 billion of synergies since the closing of the merger.

As we invested to accelerate growth free cash flow came in at $638 million.

The outperformance on the top and bottom line versus our full year guidance ranges.

It's in a good position to meet or exceed our full year outlook.

As we evaluate the year ahead, we believe it is prudent to leave.

Our 2022 guidance unchanged given the uncertain macroeconomic backdrop with high inflation rising interest rates and geopolitical issues looming.

Accordingly, we are maintaining our 2022 outlook for organic revenue growth of 7% to 9% and adjusted earnings per share in a range of $6 40.

The $6 five rep.

Representing growth of 15% to 17% for 2022.

Now turning to our business strategy.

<unk> solutions are geared towards merchants and financial institutions, including syntax.

Starting with margins, we are transforming from selling merchants individual point solutions to offering operating systems Clover for small to medium sized merchants and carrot for large enterprises. This operating systems approach.

<unk> the size of our total addressable market and makes us more valuable to our customers.

We grow and create value in three ways first attracting more merchants to our operating systems.

Expanding the relationship we have with al merchants by encouraging adoption of more software and services modules.

And third benefiting from the organic growth of our existing customer base.

Turning to our financial institution clients, we remain steadfast in our commitment to continuously innovate for our clients and broadening our total addressable market.

In early April we closed the acquisition of <unk>, a leading developer of cloud native banking solutions.

We have already seen a tremendous amount of interest in the platform from existing and new clients.

We believe this acquisition will augment our ability to enrich and accelerate the delivery of digital solutions to existing clients as well as broaden our client base to include large financial institutions and pantex through banking as a service.

And embedded finance opportunities.

We advanced our strategic focus on data and analytics.

This quarter, we announced partnerships with Equifax finish city, and Amex, which will utilize our vast and highly valuable real time data to create insights to strengthen and create new offerings across fraud risk and marketing.

While early in the journey, we expect data and analytics to be a new growth driver for us.

Next.

Diving deeper into our performance in the quarter by business segments, Let me start with merchant acceptance, we posted a very strong organic revenue growth of 28% year over year.

Global merchant volume and transactions grew 11% and 8% respectively.

Our global active merchant accounts grew 6% year over year and reverse split continuing.

Continuing a positive trend since the start of 2021.

Results were strong across all regions North America was led by strength in Smbs, particularly within the restaurant vertical as well as strength in enterprise verticals, such as travel and Petro.

Spending across EMEA was strong in the quarter as restrictions were lifted in the U K and then the other ones in early January .

<unk> by Ireland, Poland, and Germany later in the quarter.

Travel was particularly strong followed by restaurants and hospitality.

Our merchant business into a Tam was also very strong in the quarter.

We've made significant progress in on boarding merchants right exclusive merchant acquiring mandate from kasha and Brazil with a 140000 merchants currently onboarding.

And just one year since signing the agreement.

We are also expanding our presence rapidly in Mexico and Colombia.

Spending trends in APAC.

Very strong as key markets, such as India, and Australia continue to resume normalcy.

Fueling discretionary spend in verticals, such as travel retail and restaurants.

In addition to the cyclical rebound the region has continued to win and implement new business.

Moving to our merchant operating systems, Clover, and carrot continue to gain significant traction with clients.

Global revenue grew 39% in the quarter driven by volume growth of 39% as well as close to 200 basis points of sequential growth in software and services penetration of revenue to 15%.

We continue to make progress on our vertical focus.

Starting more restaurants, the integration of Bento box into Clover is well underway and the early proof points in both lead conversion rate and our blue are all very positive.

Within the services and retail verticals.

Our offering merchants, leading solutions to address key business functions through a combination of pre installed apps and tailored vertical SaaS offerings.

Garrett.

Omni commerce operating system for enterprise clients grew revenue 20%.

We saw broad based growth across verticals, including travel.

<unk> technology and quick serve restaurants.

In the quarter, we had some impressive wins across omni and E com acquiring including.

Our card not present acquiring mandate for the leading fantasy sports player Draft Kings.

And extension of our longstanding Omnichannel partnership with Chipotle.

Mandy for fast food brand Jersey, Mike's subs.

Within new payment flows carrots leadership and digital payouts continues with a doubling of disbursement volume processed in the quarter during.

During the quarter, we extended our contract with coinbase to support their launch of in App marketplace.

We are making rapid inroads into the high growth markets, such as payment facilitators and platforms.

The November acquisition of net pay gives us a differentiated solution in the market, including fully managed onboarding risks and funding services to support these high growth platform businesses, we have seen rapid growth in this end market with new clients.

<unk> nearly doubling transactions in the past year.

Finally, before closing out the merchant segment and update on the progress of our point of sale lending offering.

Our strategy all along has been to leverage our position as the operating platform for businesses small medium and large to offer a range of buy now pay later options.

We are simplifying the merchant experience through an integration into the current operating system for large enterprises and enabling the NPL app downloads through the clover at market for small and midsized businesses by enabling our clients to easily connect to.

The NPL providers of their choice, we're making it possible for them to offer their customers in demand payment options and an easy to manage cost effective way.

Moving to payments and network segment organic revenue grew 5% in the quarter. This growth was enabled by a variety of drivers across our business lines.

Our North American credit active accounts on file grew 10% versus Q1 of last year.

This growth was driven by new business on boarding and our favorable credit environment.

We fully ramped Genesis financial onto our platform in the quarter.

Along with the on boarding of Atlantic, Yes last year, partially onboarding of two of the three major credit processing mandates were announced in 2020.

We had solid growth as debit networks star at XL and debit processing business driven.

Driven by new wins, despite the stimulus induce tough growth comparisons in the year ago.

We've seen impressive growth in engagement metrics across all size driven by our market, leading digital solutions like card hub spend track our loyalty platform.

And al Aib's fraud system.

These surrounds not only greatly enhance the competitiveness of our credit and debit card processing offering, but also serve to drive more cards debit network and more opportunities for flash serve whoever risk and fraud digital banking and account processing solutions.

Women's training and attractive flywheel effect.

We continue to see growth in digital payments, driven by zelle, which posted transaction growth a strong 40% in the quarter.

Finally.

While we still see softness in our bill payments business sequential growth rates continue to improve as we create new use cases like bill pay for Fintech, including crypto digital wallets and enter long term renewals with large clients, notably.

U S bank and regions Bank.

Additionally, this summer we will launch a revamp bill pay interface to elevate the customer experience.

Looking ahead, our sales and product pipeline gives us confidence in our ability to grow the payments segment in the 5% to 8% medium term organic revenue range.

Our client wins in the quarter support this momentum.

We signed a long term renewal with a highly valued clients synchrony spanning across issuer processing bank services and merchant acquiring reinforcing our commitment to providing best in class solutions to our clients. We continue to win credit processing mandates globally.

And the vertical there.

And a new installment loan provider <unk> financial in Canada.

The debit wins in the quarter included.

Our processing win extending our relationship with Keybank.

And in integrated debit processing network.

And digital surround solutions win with heritage Federal credit Union.

$900 million asset size client.

These wins showcase the breadth and reach of our debit processing capabilities spanning from smaller credit unions to some of the nations largest financial institutions.

We also continue to show the power of our enterprise offering.

And our competitive advantage when working with fin techs.

This quarter, we signed an enterprise agreement with a new digital financial services company across bank services credit and debit processing and output services.

We will also fully onboard bread financial previously known as the alliance data for card processing in the second quarter of this year.

The tailwind from a large great implementations recent debit wins like Keybank this quarter chime in great Southern over the last couple of quarters any investments had digital surround solutions gives us confidence and continued growth in payment.

And network segment.

Moving to the financial technologies segment, we posted strong organic revenue growth of 6% in the quarter.

We had 12 core wins in the quarter, including four competitive takeaways sales of digital surround solutions continue to grow at a healthy clip.

And by the increased digital focus of valve financial institution clients and the success of our ability.

Modern online and mobile banking platform.

Sales to existing clients help us deepen the penetration of our fully integrated digital surround such as card hub zelle and spend track, thereby creating stickier client.

The competitive landscape continues to evolve quickly and we believe that our fintech strategy combined with Zacks modern core capabilities positions us uniquely to offer a full stack of offerings aimed at expanding the addressable market for embedded finance and banking.

As a service.

The linchpin of our Fintech strategy is all open finance initiative.

In the third quarter of 2021, we launched our new developer portal called the developer studio.

Last one for exposing our micro service API is for the developer community with the goal of becoming the destination of choice for the best finance ecosystem, including card issuing and processing merchant and core banking integrations.

Our banking as a service capability enables financial institutions to expose modern fintech solutions to their client base to increase engagement and relevance, while extending our reach into new market segments.

Our banking as a service capability is also a turnkey solution for Mantech and merchants wanting to offer banking and payment services.

We believe we are best positioned to power the ongoing revolution in banking as a service and embedded finance due to our footprint of community financial institutions, and breath of banking and payment capabilities.

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

Thank you Frank and good morning, everyone.

Some additional operating detail on our three segments.

If youre following along on our slides, starting with our financial metrics and trends on slide four.

As Frank said, we started off the year strong.

Total company organic revenue was up 11% in the quarter with growth across all segments led by the merchant acceptance segment, which grew 20%.

Total company adjusted revenue grew 10% to over $3 9 billion.

Operating income was up 12% to $1 2 billion and adjusted operating margin expanded 60 basis points to 32% in line with our expectations.

As a reminder, we.

We delivered 360 basis points of margin expansion in the year ago quarter, resulting in 420 basis points of expansion over the last two years.

We reaffirm our outlook to deliver at least 150 basis points of adjusted margin expansion for the year.

First quarter adjusted earnings per share increased 20% to $1 40.

Free cash flow was $603 million for the quarter, resulting in a conversion rate of 65% driven by a combination of first increased capital expenditures in the areas of technology and integration of newly acquired capabilities.

Second increased working capital investment driven by revenue growth, including growth in anticipation revenue in Latin America.

Third increased hardware inventory to minimize any potential disruption to our clients given the supply constraints in.

And finally timing factors impacting cash from one quarter to the next.

We reaffirm our outlook to achieve 95% to 100% free cash flow conversion for the full year.

Now looking to our segment results starting on slide five.

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

Adjusted revenue growth was 18% year over year.

Global merchant volume and transactions grew 11% and 8% respectively.

Excluding the loss of a processing client mid last year.

<unk> merchant volume and transactions grew 15% and 10% in the quarter respectively.

Our operating system for small and medium sized businesses continues to build on the strength of its product offering to attract and retain more merchants and expand relationships with them.

In the quarter <unk> posted a strong 39% revenue growth.

Quarterly GPP was 49 billion.

Or 197 billion.

On an annualized basis.

39%.

Our ISP volume in the quarter through <unk> connect grew 51% year over year.

44, <unk> this quarter.

Carey, our omni commerce operating system for enterprise clients grew revenue, 20% in the first quarter.

Adjusted operating income and the acceptance segment increased 21% to $470 million.

And adjusted operating margin was up 70 basis points to 28, 4% as we balanced efficiency gains with continued investments for growth.

In the quarter, we completed the sale of certain merchant contracts from an alliance joint venture that we disclosed last year.

As we shared with you in the fourth quarter of 2021 earnings call. The impact of the sale is estimated to be under 50 basis points of total company adjusted revenue and is fully contemplated in our full year 2022 outlook.

Turning to slide six with Davidson network segment posted organic revenue growth of 5% in the quarter.

Is there a guided range of 5% to 8% for the year.

As expected our credit issuer solutions business saw strong growth driven by the growth in credit active accounts on file as well as the impact of new clients coming on board.

Our debit processing and network businesses continued to perform well driven by the compelling value proposition of our digital surrounds even as debit transaction growth decelerated to 3% year over year against a very difficult year ago comparison.

Consumer demand for account to account and PDP offerings continued resolve transactions up 40% and the number of clients live on cell was up 57% in the quarter.

The offsets in the quarter, where the prepaid business, which faced very tough stimulus driven year ago comps and bill pay.

Adjusted operating income for the segment was up 7% $625 million.

The adjusted operating margin was up 110 basis points to 42, 5% in the quarter.

Turning to slide seven the financial Technology segment organic revenue grew 6% in the first quarter, including 100 basis points from periodic revenue.

Adjusted operating income was up 12% in the quarter to $275 million, resulting in adjusted operating margin expansion of 200 basis points to 35, 4%.

The adjusted corporate operating loss was $122 million in the quarter in line with the average of the law.

Last four quarters.

Adjusted effective tax rate for the quarter was 17, 3% 10 basis points higher than last year.

The 2022 adjusted effective tax rate should continue at the same quarterly pacing as last year and is expected to be approximately 21% for the full year.

Additionally, we returned $500 million to shareholders through share repurchases. This quarter, we have more than 37 million shares of repurchase authorization remaining.

Total debt outstanding was $21 billion on March 31, and the debt to adjusted EBITDA ratio decreased to 3.0 times as we approach our targeted leverage level.

Turning to our new slide slide eight.

Highlight our balance sheet performance and capital allocation results overtime.

We've made meaningful strides to lower our debt to adjusted EBITDA ratio by over half a turn from Q1 last year and a full turn since the merger.

Over the last two years, we've generated $7 billion of free cash flow and have allocated $4 9 billion.

Towards a combination of M&A and share repurchases, representing 5% of shares outstanding.

Additionally, we have deployed $2 $1 billion over that time towards debt repayment and integrations.

Both of which are expected to significantly decline as we completed the integration of first data and fiserv merger at the end of last year and approach our goal of under three times debt to adjusted EBITDA leverage.

This will allow us to allocate even more capital to value, creating acquisitions and share repurchase.

Finally, turning to slide nine although we outperformed on adjusted revenue and EPS for the first quarter, we feel it's prudent to keep our 2022 outlook unchanged given that it is still early in the year and the macroeconomic backdrop remains uncertain.

Let me turn the call back to Frank.

Thanks, Bob.

Very proud of the results we've accomplished this quarter.

As diversity and inclusion continues to be at the top of our CSR agenda.

We're focused on ensuring alignment and investment into our employee and community engagement strategies.

In the first quarter. In addition to the fast company's most innovative recognition I mentioned earlier.

<unk> was named as a 2022 great place to work in Argentina, Uruguay, Colombia and Mexico.

This second consecutive year Pfizer has been designated by events indexes.

Five star employer.

In addition.

Nanotechnology Center in Ireland has been recognized as a great place to work for the fourth consecutive year.

I assume has activated several initiatives in response to Russia's invasion of Ukraine, including financial grants for all associates.

Donations to local not for profit organizations and other humanitarian programs for civilians displaced in the region.

We've also activated our matching donation campaign in support of American Red Cross efforts.

A quick note.

2020 , one CSR report will be finalized and published in the coming weeks.

As I close I would like to thank all 40000, plus hard working associates.

Around the world for working relentlessly to service our clients and you our shareholders.

With that operator.

Please open the line for questions.

Thank you we would now like to open the 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 Star two our first question will come from the line of Tien Tsin Huang from Jpmorgan. Please go ahead.

Hey, thanks, so much.

I had a couple of questions first of all of them, except this segment, obviously very strong there it looks like volume growth matched visas.

But the revenue growth did exceed that so what's driving the higher revenue spread to volume.

This quarter.

Should we expect here going go through the balance of the year.

And a quick follow through the line.

Yes, Tim said I think there is.

What we saw in previous quarters, there are a number of differences between our volumes in business volumes in the international mix in cross border mix et cetera et cetera. So.

As you said we're in line from a volume standpoint, we had good revenue growth overall.

As we've talked yield is met.

A metric that ebbs and flows quarter to quarter the last couple of quarters.

<unk> has been a little bit weaker this quarter, it's quite strong I think theres a lot of variation in there and it's one of the things we continue to point to that.

<unk> focused on revenue growth and margin expansion, a little less so on the yield because of that quarterly variation.

Clearly very pleased with the performance of our merchant segment with very strong growth continuing in <unk> good growth in carrot and across the board, having a 20% organic revenue growth for the segment in the quarter a great start to the year.

Yes.

Bob Let me ask my quick follow up if you don't mind just on the free cash conversion that I heard.

The capex and Opportunistically buying some some terminals here, but you're keeping the full year.

If I heard the same so what's the what's the outlook for some of the moving pieces here to drive that confidence in getting to that 95 to 100 for the full year.

I think it's Frank first of all.

It was way more than physical terminals.

Parts also.

And we thought it was.

Put it in a smart move to buy ahead.

Supply chain given the volume.

The opportunities we have across the board, which drive growth so that would be clearly.

One timer inventory category.

Obviously, we see as well.

We reiterate our confidence on margin also when you say the ability to grow.

Margins as part of the call.

<unk> story going forward.

And obviously these are ebbs and flows quarter to quarter also.

And timing of capital So I would think about it.

Those manners.

We feel great about the growth we feel good about our ability to expand the margin. So I just feel good about the ability of what we want to add to actually drive growth.

Not have that expenditure going forward.

Understood. Thank.

Thank you.

Thank you. Our next question comes from Lisa Ellis from Moffett Nathan. Please go ahead.

Good morning, Thank you.

I'll take payments in networks, I guess, which came in at the lower end of your long term outlook of 5% to 8% there I know there's a lot of.

Moving pieces within payments and networks, you highlighted I think both from lapping effects of stimulus hitting the prepaid business in the debit business. But then also the bill payment business, which has been a bit of a struggle coming out of the pandemic can you just parse those apart a little bit meeting what was sort of one timer lapping issues related to stimulus in the quarter.

Versus.

There, we might see more of a protracted drag as we go throughout the year and then I have a quick follow up as well. Thank you.

Certainly so within the payments segment stimulus certainly created a tough compare.

Two Q1 of last year with our prepaid business.

And.

As we saw really late 'twenty and into 'twenty, one a consumer shift.

Credit to debit, which we think was stimulus driven and we're now starting to see that kind of revert back to meet or to norm with more move to credit that is debit and of course as you know we get paid on a per transaction base.

Basis on the debit side, but on our credit processing side in the payments segment.

Paid on gross active accounts and so that we're seeing a nice lift in the number of accounts, but the transaction ship from credit doesn't manifest itself into revenue.

So good growth in our credit business this quarter versus Q1.

Still had growth in debit, but not as high as we had.

All of last year debit Q1 of last year was quite weak and came back.

Throughout the year and the bill pay and Biller side, we've actually seen an improvement of headwinds so its still.

An issue for US we've talked to a couple of things that we see things beginning to improve.

Probably the last two quarters the rate of growth decline has improved quite a bit and as we go.

Go live with the number of new clients, particularly in the Fintech space and as we launch the new user interface. This summer we see continued opportunity to improve both on the bill pay pillar business, but also in payments overall and of course as we now have.

Momentum two of the big three credit issuers with a third one going live here late second quarter Youll see accelerating growth from from the credit issuer side of the business.

Got it okay.

Follow up maybe for Frank on the <unk>.

New I guess, you highlighted around advanced data and analytics with these partnerships with equifax and fitness to be et cetera. Can you just give us maybe a little bit of color are examples of the types of types of offerings, there and if it's a new.

New revenue stream or is this more of a win rate.

Taking this dynamic in the bank space.

Elaborate.

It's a new revenue stream.

We've always believed that we had a data advantage.

And we will.

We did some things organizationally, maybe you remember.

At the top of the house.

Good.

Talent against it and it is manifesting itself.

We have a pretty good road map to capabilities to offer to our clients and then to jointly offer with partners and combining capabilities that.

This is why we believe when we come into the latter part of this year and then going into next year.

Completely new revenue stream with high margins and those capabilities and providing real time data.

And providing decisioning data.

Yes.

That's what we have right now we do see the opportunity.

And as we said in marketing and other information.

Yes, Kevin proved out that proof of concept, but the others have improved.

We expect to be a market that the latter part of this year.

Terrific. Thank you.

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

Hey, Thanks, guys.

First on the growth side on the top line I just wanted to touch on first the Fintech segment, when we look at the <unk>.

It does seem like mid single digit seem pretty resilient now.

On top of the <unk> acquisition, and what that can do I'd love to hear more thoughts on what that can actually do to add to business given the pipelines you are seeing but.

CPI price escalators potentially built in.

What extent do you expect to push those through this year and can that can then also contribute.

So I wanted to talk about.

I think the team in Fintech.

Theyre maniacal focus on how to serve the client and growth is showing up.

We had an expectation that.

We will get to these type of levels.

When we laid it out.

December of 2020, and I think the action plan that team and the product innovation.

Bringing all the components of the company.

Well, we think we have a strategic advantage.

Okay.

I think all digital assets play very very well, so when I talk about the surroundings.

<unk>.

It really is a strategic advantage.

And then you saw a steep things like.

Bringing on dot into mobility, which also.

One of our client offering and when that all comes together in the clients' office.

It gets us to where we are today.

I think thinking beyond today.

Fintech is very strategic.

As we had said we think it expands our Tam capability.

And we think over the long haul that combo of al assets plus.

Allow us to get to other markets.

Before so when you look at it we feel great about the job the team has done.

In fact acquisitions.

20, plus city is closed.

That's that's moving along.

Very very well the integration of the team and the ability to deliver what we expect over the next few years from that.

We have clear line of sight, we believe that.

I think that's how we think about the totality of the current business digital offering set up future digital offerings, expanding the total addressable market that we were.

Dressing around.

Around around that segment.

Darrin in terms of CPI.

Do get particularly in our core account processing business typically contract does allow for.

Annual CPI.

Changes those are very typically annual item. So at the end of the year, we calculate the CPI index and apply it to the next year's billing.

And contracts vary some have caps somehow full CPI and it varies across the board, but that is fully baked into the two first of all our guidance Youre seeing it in the Q1 results and because it's an annual bill it's locked for the year.

Okay.

One quick follow up that's helpful. Thanks, but Frank just from an M&A standpoint, when we think about what you just said the leverage level now below three.

Obviously.

Opportunistic buybacks make a ton of sense, but at the same time, there's definitely valuations coming in across the market. So can you just revisit your preference in terms of capital allocation going forward and what types of assets. Thanks again guys.

Yes, I think.

We've demonstrated a pretty balanced approach.

Two our capital allocation.

If you look at what we did with exactly you can look at.

Yes.

Bento box or on Dod and it's fine to all of them really leaning into helping our clients.

Grow their business with their clients digital framework, so I put that out there.

Yes, it is largely about.

Dressing.

Markets, new opportunities and Hal and in fact, we helped our clients grow their business, which in fact, it becomes a beneficiary also.

And you should expect that mindset around future acquisitions, which is just another form of investment.

Investing for growth.

Yes.

And Bob talked through.

Debt.

29% over the last 24 months.

Our capital allocation plan too.

Merger and integration expense and debt pay down that capital is now deployable and obviously, we will continue to have a better growth rate.

And I think you should expect that.

We'll use the same methodology.

Investing for growth.

We believe we can leverage.

Assets inside the house to bring other market opportunities and won't be buying back the shares Opportunistically and returning.

Those dollars shareholders, we all.

These have been a tried and true methodology.

And we felt great about what we've done so far on capital allocation.

You guys stick to and we feel even stronger about acknowledge.

Thank you. Our next question comes from Dave Koning from Baird. Please go ahead.

Yeah, Hey, guys great job.

And I guess, yeah, Yeah, I guess my first question you had the Investor meeting a few handful of weeks ago and talked about 11, 5% growth in merchant should over time should we expect that every quarter of the year and I guess kind of behind that it seems like we're entering a period, maybe we'll get into smaller tickets.

Inflation pricing seems to be getting better in the industry now all of those things contributing.

Are those fair assumptions in that 11, 5% question.

So from.

Quarterly flows to obviously first quarter closing after going through that merchant conference we put up.

20% numbers. So we certainly don't expect 11, five every year or 11 five every quarter.

Obviously.

First quarter out of a five year projection.

<unk> left to do in very good shape in terms of.

Executing on the multiple elements of growth that we talked about during that conference Clover and carrier continued to perform well and we continue to invest in new capabilities. There. So I feel like we're off to a great start of course the conference I think it was in early March so.

We're early into the process.

But we're in very good position and we think we've got a great set of assets in terms of operating systems to bring to both our enterprise and small business clients.

Got a great distribution system are.

Global reach and geography.

Talked about his prepared remarks, well cautious going into strength.

Latin America so.

We're hitting on all cylinders.

Quite pleased with where we are so far but plenty more to go.

Great Great and then just one follow up the margin cadence through the year Q1 was a little slower than the guidance Q2 little slower too is that fair and then the back half is when you get maybe above the full year guidance.

Yes, that's exactly where we're at and I believe we said in prepared remarks, we're up 60 basis points for the first quarter, that's right in line with our internal expectations and obviously all your internal expectations that was achieving the $150 for the full year.

And we continue to execute and it's not really.

Sort of hockey stick its a matter of the tempo of the business. We did as you know a significant amount of integration work. The last couple of years we ended.

Merger and integration treatment I E. We're no longer adding back.

To our adjusted results for merger and acquisition and integration spending and we still have some of those projects going on here as we finish up.

The two plus years now since we merged that will ease in over the next couple of quarters those costs will be reduced.

And we will continue to get good growth fall through to the business. So you'll see the 150 come in over the course of the year.

Sounds great. Thanks, guys good job.

Thanks Peter.

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

Good morning, guys. Thanks, I just wanted to come back to the payments segment for a second it sounds like Youre seeing some positive signals there you've got some newer wins coming coming down the pike, but just so that our expectations are calibrated properly I know you were talking about the medium term range of 5% to 8% being good for this year.

Year, but.

Should we think about more of the lower half to maybe the midpoint just given that we're starting the year at five just wanted to make sure that we've kind of got the right cadence in our thought process because I know the comps get tougher from here on out.

Comps do get tougher but pipeline.

No.

It comes in over time too.

And.

I think we talked about the elements of it.

Obviously.

We've talked a whole bunch of moving into this year about 120 million.

Sure.

Getting to see.

Numbers.

We also feel the assets are very very strong assets and you heard us talk about it.

Engine direction on that.

On page from where we were a year ago. So we felt we don't feel at all that.

John .

Going forward.

Okay, that's good to hear for sure.

Alright, just to follow up on the spin thins out the acquisition.

Revenue do you expect it to contribute to the Fintech segment. This year and can you just go a little deeper maybe into the go to market strategy, there and the kind of synergy that fiserv is going to bring to this asset.

Yeah well.

Mark can talk about but you won't see anything.

This year's numbers that would change structurally our.

Growth rate, obviously these are long cycle sales.

But the go to market strategy has multi pronged one is the ability to bring too.

Our clients today are digital sidecar and want to if they want to build the crypto or digital bank capability, we have the ability to do that so that expands the tam.

Having doing that given the fact that Jean Paul you won't see anything in the economics for this year, but thats one element of it.

That element.

Combination.

And Zach.

Act together being able to bring it more offline.

Clients are different.

All right manner.

Third is standing up Fintech digital banks.

Although I've been in finance and you hear us talk about open finance initiatives.

Well finish compliments.

And then.

Thank god for that.

Great demonstration.

Client base that they've sold into that in some cases.

The larger than where it may be a lifetime sweet spot was.

You should expect that to me.

Or Tam opportunity.

We believe.

The market together.

Larry.

Fashion.

And when the assets.

Sorry, Alex I'll come to it becomes a very very strong.

I think youll see.

That growth in the outer years not in this year, but.

You should expect to be.

Great.

Over time.

Okay, that's great.

You hit the point online revenue this year of course, it would all be inorganic so it wouldn't impact our <unk>.

7% to 9% for the total company or the 4% to 6% for the Fintech segment.

Thanks, Bob but overall very small from unadjusted revenue standpoint also.

Okay. Thank you.

Next we will go to the line of Ramsey El <unk> from Barclays. Please go ahead hi.

Thanks, So much for taking my question this morning.

Can you guys share your updated view on consumer spending trends are you seeing any sign across the business that inflation or higher fuel prices or other macro factors are sort of tipping from from tailwind or headwind any kind of clues that.

Spending levels that we've seen will prove.

Sustainable.

Well I mean.

I would say if you looked at April .

It's fundamentally looks the same with maybe some places have been a little more.

Some places have I'll ask.

Yes.

Obviously areas like Petro services and restaurants are holding up.

Sure.

At this point level.

Maybe a little bit on travel and retail.

But clearly.

We've been conscious.

<unk>.

The consumer end.

And as we think about the future we factored in.

What would happen if this slowdown did occur naturally.

Our prepared remarks, we talked about our prudence.

And prudently.

Management around around the thought process, so very little change right now.

But.

We're very guarded and we're managing it.

Fashion.

Okay.

And I also was wondering if you could.

Give us a little more color on the revamped to bill pay interface that you mentioned that would be rolling out I believe in the <unk>.

Summer.

What kinds of things can you do.

With that business to kind of continue the nice inflection that I think youre seeing.

Back in the right direction.

Yes, I think it's I think it's really about the user experience. It's all about the user experience about giving them capabilities that.

We're refreshing in that environment allows our bank.

And then being able to actually increase their bill pay capabilities.

Their clients. So remember, we're always focused and you hear it in my M&A comment you hear it.

And how we run the business on how we give our clients.

And the opportunity to do more business with their clients, so think about it as a.

A very good usable front and that actually will be the most modern.

It can touch that will allow us much more ability.

For that and is sure to be able to navigate versus what they had before.

Our banks and us believe that changed because it's completely built it without that in my conversation I believe.

That would allow us.

<unk> allows them to get point of use or mortgage insurer.

Capability, which will equal more usage and higher engagement.

But by the client base.

Got it alright, thanks, so much appreciate it.

Yeah.

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

Thank you very much wanted to touch on the Fintech segment first just.

Obviously, the and try to get a sense of appetite of banks to spending and continue to upgrade their systems, especially given what looks to be a.

Strong earnings period and potential for them.

Interest rates change et cetera. So just what's your feel right now for opportunity sets there and are you seeing any changes or improvements and appetite.

Yes.

Having having spent a fair amount of time.

In charge of the spending of banks around these assets now.

And here.

What I find is that the appetite is very very strong.

The appetite being strong means if they can get digital capabilities. If they can serve their clients better if they believe that the change is actually going to help them grow and do a better job they're completely committed we've seen a lot.

Are those DNA wins.

We have seen.

From.

Small to tall as I would like to say.

And.

The addition of Fintech in my mind, just has opened a lot of our current bank size.

And a lot of.

Non banks.

Not serving in that space is towards the capabilities, we can bring to them in the here and now so to speak so I find it.

Can be a tremendously encouraging time for that business.

Got it got it and as you think about obviously there as well.

Lots of focus always on the merchant business in that kind of thing, but consistent with the Fintech acquisition and when you think about M&A.

As their play.

Where do you feel like okay, we need to prioritize if we're going to look at potential acquisitions on merchant versus fintech or.

Based on what Youre, where youre seeing traction and where you feel like theres opportunity.

Are you leaning one direction or another as youre evaluating acquisitions.

Well I think since that was a very very big acquisition.

Which gave us in my opinion, the most modern platform in the industry that can tremendous scale.

So I think that that was very important and sets us up for the <unk>.

Long haul.

If you go back to my comments earlier I think we're very focused on helping.

Our clients grow in places, where not warrant or not in the manner. If youll look at Bento box. It allows us to move can be the front of the store capability.

That does to our approved for us at all restaurant businesses.

Terry.

Strong and so you shouldn't expect us to deploy our capital into acquisitions.

Q1 2022 Fiserv Inc Earnings Call

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