Q3 2024 Fiserv Inc Earnings Call
Speaker Change: Welcome to the 5th or 3rd quarter, 2024 earnings conference call. All participants will be in a list and only mode until the question and answer session begins following the presentation. As a reminder, today's call is being recorded.
Speaker Change: I would now like to turn the call over to Julie Chariell, Senior Vice President of Investor Relations at Pfizer.
Julie Chariell: Thank you and good morning. With me on the call today, our Frank Bisignano, our Chairman, President and Chief Executive Officer, and Bob Hau, our Chief Financial Officer.
Julie Chariell: Our earnings release and supplemental materials for the quarter are available on the Nestor Relations section of fizer.com.
Julie Chariell: Please refer to these materials for an explanation of the non-gap financial measures discussed on this call, along with the reconciliation of those measures to the nearest applicable gap measures. Unless otherwise stated performance references are year over year comparisons.
Julie Chariell: Our March today will include forward-looking statements about, among other matters, expected operating and financial results in strategic initiatives.
Julie Chariell: So we're looking statements made differently from actual results and are subject to a number of risks and uncertainties.
Julie Chariell: You should refer to the earnings release for discussion of these risk factors.
Julie Chariell: and now I'll turn the call over to Frank. Thank you Julie, and thank you all for joining us today.
Frank Bisignano: As we share out third quarter results this morning, it is increasingly clear that our position at the intersection of merchant and financial solutions is a strategic advantage.
Frank Bisignano: By term delivers another strong quarter.
Frank Bisignano: with adjusted earnings for share of $2.30.
Frank Bisignano: of 17%
Frank Bisignano: Driven by strong revenue growth and further operating mortgage expansion across our businesses.
Frank Bisignano: But Justin revenue growth was 7%.
Frank Bisignano: and adjusted operating margin rose on 170 basis points to 40.2%.
Frank Bisignano: Organic revenue growth was 15% Our free cash flow was $1.9 billion in the quarter And 3.3 billion dollars a year to date
Frank Bisignano: and we returned $1.3 billion to shareholders via sharing purchase.
Speaker Change: This is, if financial institutions are increasingly interconnected, and Pfizer has a key role to play here, given an out unmatched set of assets across software, data, technology, and of course.
Speaker Change: Scale and experience in moving money. Here are two examples in just the past month. First.
Speaker Change: We announce this morning with Door-Dash, we began implementing a comprehensive and vetted finance application for you to be a best and class solution for a gig economy company.
Speaker Change: The solution able door-nash to offer its delivery contractors a full range of financial services.
Speaker Change: Within a single app, they can get instant access to wages and rewards.
Speaker Change: as well as deposit accounts, debit cards, and more. Our real-time weather capability from Finzac manages the transactions and was a key reason why Finzac was chosen. A Finzac banking client rounded out the solution as a requisite sponsor.
Speaker Change: Second, we completed a proof of concept with Walmart, where we enabled a real-time baby by bank transaction at the point of sale over an Albuquerade Dairy Nile Network.
Speaker Change: A growing number of merchants are adding pay-by-bank capability to maximize choice for consumers. An emerging capacity for handling such payments, in real-time offers advantages for high-serve merchants and consumers.
Speaker Change: This capability will be more widely available next year, they are out now network. Additionally, we came to Apple's Walmart Business as a referral partner for Clover as a business management platform.
Speaker Change: Helping Walmart fulfill its goal with helping small businesses and non-profit to better run their businesses.
Speaker Change: in a separate, but related testament to our product strength and physician as a partner of choice. Today, Inc. Magazine named Clover to its 2024 Power Partners List.
Speaker Change: which recognizes the best B2B providers for SMBs.
Speaker Change: Let me share some of the many highlights of the quarter.
Speaker Change: It was another strong quarter of growth in the Merchant Solutions segment with organic revenue up 24%. At Clover, revenue grows 28% and value added services penetration reach 21% Upper percentage point from 2 to 2.
Speaker Change: In O'Anne America, weeks vended the friends and family clover pilots in Brazil and Mexico as planned.
Speaker Change: With a full-scale launch coming in December, in Asia Pacific, we went live without first clover pilots in Australia in September.
Speaker Change: We also had a vlog!
Speaker Change: the Enterprise Commerce Control Center.
Speaker Change: which allows merchants to monitor and analyze their business.
Speaker Change: and Transaction Rebornments.
Speaker Change: Across locations, regions, and operating segments in a single view. In financial solutions, we posted another quarter of strong organic revenue growth at 6%. The build out of Caslow Central was completed in September , and we have our first client hearing up to implement the solution in the next few months.
Speaker Change: and we continue to migrate clients to experience digital or ex-duty, our new digital banking solution.
Speaker Change: As we integrate additional solutions into this unique digital ecosystem, including Casual Central, Real-Time Payments, Clover, and more, we expect to see a multiplying effect on the average revenue for XDU's over time.
Speaker Change: It was another quarter of more key wins that demonstrate the power of Pfizer's integrated and value added offerings.
Speaker Change: We're chosen to provide merchant-acceptance services for a major e-commerce marketplace.
Speaker Change: and expanded a long-standing partnership with Costco to launch a stored valued digital wallet. The service enables new payment and reward redemption experiences, whether the retailers, customers, or shopping online, or in the warehouse.
Speaker Change: We continue to sign other enterprise merchants onto our value-added solutions.
Speaker Change: Another longtime enterprise client, Exxon, signed on for a data as a service offering.
Speaker Change: This solution is used to extract insights from integrated vendor payments.
Speaker Change: Consumer royalty and wallet data, and because it runs in a cloud, we can reduce implementation time from months to days. Also, in Q3, our whole day has a global retailer whose portfolio includes shopping shop and the US, so I think it's visor as a provider of pay-by-bank services.
Speaker Change: Alex Lee, a large privately owned operator of multiple food companies, chose out smart routing technology, academic cost of efficiency. We've celebrated our sightings of my actual institutions as merchant acquiring referral partners.
Speaker Change: He's included banks of all sizes, as well as credit unions, golden one credit union, and America first credit union, were two of the larger signings in 2003.
Speaker Change: and out three regions, we continue to see strong climate momentum.
Speaker Change: We expanded out partnership with NETO, a major grocery chain in Europe, will provide several value-added services, including dynamic currency conversion, customer cashback, and encryption solutions.
Speaker Change: In addition to supplying thousands of new震ned震ned ads to accelerate transactions speed across their 700 stores in Poland.
Speaker Change: in Asia Pack.
Speaker Change: Pfizer was chosen by Food Panda
Speaker Change: The subsidiary of Delivery Hero and the world's leading local delivery companies to provide payment services across multiple markets in Asia.
Speaker Change: this strategic partnership.
Speaker Change: Spanned online, mobile, and digital wallet.
Speaker Change: Positioning Bicerv, as Food Pandas primary acquirer, in Singapore and Hong Kong, processing over $1 billion in annual spent. We want to clover sport at Bomba Nera in Argentina. This is one of the country's largest soccer stadiums.
Speaker Change: and home to one of the top teams in the league.
Speaker Change: Colbert's presence there can add to awareness in a region to optimize the fan experience for fasting easy-concession services. The stadium through our ISD partner chose to cover platforms to accept payments in three ways, through QR flows, self-service chaos, and mobile handheld devices.
Speaker Change: Moving to the financial solution statements.
Speaker Change: Orbank signed on for Casual Central in the past three months.
Speaker Change: including our first credit union for a total of ten since we announced the initial year ago. Avidix change will be using the Czech Free Bill or directorie to support faster bill payment on its mid-market BDV exchange.
Speaker Change: In September, we want a competitive bid with Palm Credit, Mid-America, a cooperative that reaches across six states. We'll be converting their loan portfolio to DNA and integrating several other value added solutions.
Speaker Change: PNC signed up for AI-enabled advanced defense product for enhanced fraud detection in their hearted showing business.
Speaker Change: Ecuador's small finance bank was the least India-ishierer to go live on our India processing hub.
Speaker Change: successfully launching a new retail and corporate current product with a full stack offering, including loyalty, offers, and real-time broadband management, as well as credit on UBI, in this real-time account to account payment system.
Speaker Change: and we continue to build out capability gear as a market leader with seven of the 10 largest credit card issuers in India, I have brought for him. In September, we hosted 3,000 Pfizer clients in Brostrix and I'll annual client conference forum.
Speaker Change: This group of attendees represent nearly 50% of our North American institutional revenue across the merchant and financial solution segments, and nearly 60% of our new business pipeline through 2020.
Speaker Change: after three days of demos across 75 booths in our experience at this.
Speaker Change: Over 100 well attended product and technology information sessions, and thousands of client meetings we strengthen our relationships.
Speaker Change: and Horker ships expanded out pipeline of opportunities and generated enthusiasm for out offerings.
Speaker Change: Setting the stage for continued strong growth in the future.
Speaker Change: One of the many highlights of foreign this year, with our SMB bundle. The previously-hyenous suite of products, is that small and medium-sized businesses have a complex landscape to navigate, for managing their businesses, and they prefer a single easy-to-use system.
Speaker Change: With our own product of partnerships, Pfizer is the only financial technology expert with solutions that cut across the entire SMB value chain.
Speaker Change: Since the products and the clients, Rall, SMB Bundle, Spiderman, Merchant, and financial solutions segments. We have the unique opportunity to win business through the integration of solutions across both about ecosystem.
Speaker Change: from Merchant ecosystem, we provide acceptance and processing, the COVID-19 virus platforms, COVID-19 virus, including vertical and horizontal business process software, capital, loyalty and give solutions.
Speaker Change: and the small business index for localized insights from our financial ecosystem.
Speaker Change: We provide cash flow central because cash management is a fundamental requirement for business success at SMBs.
Speaker Change: We also provide office for business current issuance, spend track for expense management, sell for small businesses, and core banking account management, and digital banking.
Speaker Change: While we sell each of these separately now, next year they will be integrated on our leading platforms.
Speaker Change: For FIs, the SMB Bundle will integrate into digital banking environment such as five serves experience digital or XD platform.
Speaker Change: For Small Businesses, the SMB Bundle will integrate into the Clover Dashboard and be sold through all Clover Challenge.
Speaker Change: Lastly, I want to come back to something I said last quarter.
Speaker Change: Merchett related services.
Speaker Change: from Pfizer, or back as an opportunity for financial institutions to compete and win.
Speaker Change: What's all this is urgent? Based on our innovations across the SMB bundle, it gives FIs a deeper view into an SMB's full financial position.
Speaker Change: With this knowledge and breadth of product, they can better grow and retain SMB clients and generate deposit and launch interest beads. We come on this capability with tools to help deadlines readily blind merchant goes through leads and on board them digitally.
Speaker Change: Chocating our integrated SMB capability is generated a lot of interest in ongoing engagement and we expect the SMB bundle to start contributing to growth next year.
Speaker Change: Turning to our guidance as a rest of the year, we are raising organic revenue growth.
Speaker Change: from 15 to 17% to 16 to 17% and raising our guidance for adjusted earnings for share to $8.73 to $8.80.
Speaker Change: As I look across all the new initiatives we're rolling out, I have pleased with how the vision and investment we put into motion five years ago has brought by a service to a strong position today. When it's clearly hard to replicate.
Speaker Change: Results show that we're executing a mandate for each of our two ecosystems.
Speaker Change: Merchants and Financial Institutions.
Speaker Change: This will continue in many ways.
Speaker Change: as we add to our COVID-19 video, extend services to enterprise merchants.
Speaker Change: Expand issuing to new verticals and geographies, enable more real-time payments, modernize core banking systems, add partners, grow internationally, and continue to use distribution data, and more. With this foundation of leadership and steady growth firmly established, we are moving to the next generation of solutions that answers the needs across both ecosystems.
Speaker Change: and the only provider serving both merchants and financial institutions with product breath and technological scale, we serve at the intersection between merchants and
Speaker Change: Issures and Vintex.
Speaker Change: Aquiring and Cash Management.
Speaker Change: Digital Wallets and Card Services.
Speaker Change: Spending and Banking Data and many other combinations.
Speaker Change: This is not a vision.
Speaker Change: It is here today in Alanish's with Door Dash, Apple, Walmart, US Bank, Palantir and others.
Speaker Change: Of course, these integrated opportunities are in their early stages.
Speaker Change: As excited as we are about them today, our major of success will be strong sustainable growth for Pfizer, over the medium and longer term.
Speaker Change: and now I'll turn it over to Bob for more detail on our financial performance.
Bob Hau: Thank you, Frank, and good morning, everyone. If you're following along on our slides, I'll cover additional detail on total company and segment performance, starting with our financial metrics and trends on slide four.
Bob Hau: Third quarter, again, demonstrated our capability to maintain strong gravity growth and margin expansion.
Bob Hau: 3rd quarter total company adjusted revenue grew 7% to $4.9 billion and adjusted operating income grew 12% to $2 billion.
Bob Hau: Resulting in adjusted operating margin of 40.2% an increase of 170 basis points versus the prior year.
Bob Hau: Year today, adjusted revenue grew 7% to $14.2 billion in adjusted operating income, grew 12% to $5.4 billion, resulting in an adjusted operating margin of 38.2%, an increase of 170 basis points versus the prior year.
Bob Hau: Organic Revenue Group 15% in the quarter, driven by strength in both segments.
Bob Hau: The transitory contribution from excess inflation in Argentina was 3 points to our total organic growth in the quarter down from 5 points in due to.
Bob Hau: As mentioned during last quarter's earnings call, Delaware Theresa extended into Q3 and contributed less than half a point of total company where Gannig Growth in the quarter.
Bob Hau: 3rd quarter adjusted earnings per share was $2.30 compared to $1.96 in the prior year of 17% on the high end of our Fuller Guidance provided last quarter of 15 to 17%.
Bob Hau: Here today, our just earnings per share increased 18% to $6.29 compared to $5.34 in the prior year. We cash flowed for the quarter was $1.9 billion, and here today, we cash flowed was $3.3 billion.
Bob Hau: As mentioned in prior earnings calls, we expected free cash flow to be much higher in the second half of this year, after a lighter first half, due to the timing of cash flows for the Green Tax Credit Program, that we later refund came through in the third quarter.
Bob Hau: 32 performance by segment.
Bob Hau: Starting on slide five, organic revenue growth in the March and Solution segment was 24% in the quarter, and 29% year-to-date. This includes a six-point benefit from above average inflation in Argentina in the quarter, and a 10-point benefit year-to-day.
Bob Hau: Well, inflation remains high, interest rates in Argentina eased in late second quarter, and are back to historical averages, and therefore did not contribute to excess growth this quarter. The continuation of dollar treestead contributes nearly 1% to merchant organic revenue growth in the quarter, in three points year today.
Bob Hau: On slide 6, we've again included a summary of the impact of the excess Argentine inflation interest on total Pfizer and Merchant Segment revenue, along with the offsetting headwind from currency devaluation, which impacts adjusted revenue.
Bob Hau: Adjusted revenue growth for merchant solutions was 9% in the quarter and 10% year-to-day.
Bob Hau: The quarterly results include a 15 percentage point currency headwind largely from the Arts of Time Pacell after our served evaluation in late December last year.
Bob Hau: Similar to Q2, the currency had went to a adjusted revenue growth, with much higher than the inflation and interest tailwind in the quarter.
Bob Hau: 24 has been an outstanding year for new clover hardware launches.
Bob Hau: Early this year, we brought to market the kitchen display system, or KDS XL, to manage orders and improve efficiency in a 24-inch form factor that larger restaurants demand.
Bob Hau: We also launched the Kiosk, which allows for cell service ordering, reducing weight times, and increasing average tickets.
Bob Hau: In Q3, we introduced a new version of the Flex handheld device called the Flex Pocket, which is 25% lighter, 15% thinner and oriented towards restaurant and weight staff in retail.
Bob Hau: In most recently, we launched the Clover Compact, an entry-level solution that will help drive Ham expansion and create new-bass revenue opportunities.
Bob Hau: and moving to the business finds.
Bob Hau: Small Business, Organic, and Adjusted Revenue Growth in the Quarter, was 25% and 9% respectively. I'm Payment Volume Growth, a 4%.
Bob Hau: This volume growth was similar to Q2 levels.
Bob Hau: According to a variety of external macro indicators, overall consumer spending growth is slower than last year, but appears stable at a comfortable pace.
Bob Hau: Fiser Small Business Performance was ahead of our Small Business Index results, which showed you where your sales volume growth of 2.3% compared to 3.7% for Q2 and 2.8% for Q3, 2021.
Bob Hau: The difference is likely attributable to our international presence and a slightly different mix of business.
Bob Hau: Fire Service, more heavily weighted to non-discursional categories, such as food and services, which have been growing faster.
Bob Hau: Global Revenue, 28% in the third quarter on an annualized payment vine growth of 15%.
Bob Hau: Fast penetration increased sequentially by 1.2 to 21% in Q3 driven by growth in Clover Capital and the Clover Sass Package.
Bob Hau: In Q4, we will be rolling out new vertical software plans for retail and services.
Bob Hau: With this progress, we remain on track to achieve our 206 quiver targets, a $4.5 billion in revenue, and fast penetration of 27%.
Bob Hau: Enterprise Organic and Adjusted Revenue Growth in the Quarter was 37% and 17% respectively.
Bob Hau: Driven by transactions growth of 12% in higher vast penetration. As with small business, organic growth and enterprise includes some transitory benefit in Argentina.
Bob Hau: Above average growth in enterprise business, we flex the ramping of a large pay fact from a processing customer to a direct client.
Bob Hau: Commer Self continues to see ongoing traction and is now processing almost seven times the daily transactions versus Q1 and two times when compared to Q2.
Bob Hau: and clients are increasingly connected to enhanced solutions.
Bob Hau: Much of the Commerce Sub-Transaction Growth comes from existing clients migrating to the commerce up. And in fact that they are now on the platform, gives us the opportunity to sell more vass going forward.
Bob Hau: Finally, processing organic revenue in the quarter decline by 1 percent, while adjusted revenue decreased 2 percent.
Bob Hau: This business represents the back end processing we do for our bank and certain ISIL partners, where they own the merchant relationship.
Bob Hau: You're today, processing organic and adjusted revenue growth, we're both flat, consistent with our expectation.
Bob Hau: Adjusted Operating Income in the Merchants Solutions segment increased 19% to $9,3 million in the quarter, with adjusted the operating margin of $290 basis points to 37.7%. Here today, adjusted operating income increased 22% to $2.6 billion, with adjusted operating margin of $330 basis points to 36.2%.
Bob Hau: As noted in prior quarters, interest expense from anticipation revenue is recorded below the operating income line.
Bob Hau: If the interest cost from anticipation were included in the operating income, merchant adjusts to operating margins would have expanded 190 basis points for the quarter, and 260 years today.
Bob Hau: 30-thousand 7 on the Financial Solutions segment.
Bob Hau: Organic Revenant, whose 6% in the quarter and year today, in line with our full year outlook of 5% to 7%.
Bob Hau: Looking at the business lines, digital payments organic and adjusted revenue each group by 5% in the quarter.
Bob Hau: Growth and Zelda transactions continue to be strong at 35%.
Bob Hau: We continue to see demand from clients for digital payments products, such as FedNow and RTP integrations.
Bob Hau: Chariell Central are integrated ARAP solution for SMBs, continues to see high interest from financial institutions.
Bob Hau: In the last three months, we've signed two nearly $10 billion institutions, and we're going to go to the National Bank and try County's Bank.
Bob Hau: In total, we had four wins in the last three months, bringing the total to 10 since product announcement.
Speaker Change: In issuing organic and adjusted revenue through 7% and 4% respectively in the quarter. Through them by demand across various verticals including government and health care.
Speaker Change: During the quarter, we converted the remaining health equity HSA and FSA card accounts to office our issuing processing platform, solidifying our leadership in the health care card vertical.
Speaker Change: Banking Organic at adjust to revenue, 5% in the quarter.
Speaker Change: Last quarter, we spoke about signing a merchant agreement with Connecticut Online Computer Center, known as COCC, which is a client-owned provider of thinking technology.
Speaker Change: In the third quarter, we expanded our relationship to include experienced digital or XD, which is our online and mobile banking solution.
Speaker Change: FC will now be available to the 150 community banks and credit unions on COCC's solution.
Speaker Change: 3rd quarter adjusted operating income for the financial solution segment with a 5% to 1.1 billion dollars and adjusted operating margin came in strong at 47.4%.
Speaker Change: You're today adjusted operating income to the segment was up 6% to 3.2 billion dollars with adjusted operating margin up 60 basis points to 45.8%.
Speaker Change: Now let me wrap up with some remaining details on the financials.
Speaker Change: The corporate adjusted operating loss was $112 million in the quarter, and $394 million a year today, in mind with their expectations.
Speaker Change: The adjusted effective tax rate in the quarter was 18.8% and 19.0% year today.
Speaker Change: We respect the full year rate to be slightly below 20%.
Speaker Change: Total debt outstanding was $25.3 billion on September 30th. Our debt to adjust to the evita ratio went down from 2.8 times in the second quarter to 2.7 times in the third quarter, in line with our target leverage range.
Speaker Change: During the murder, we repurchased $8 million shares for $1.3 billion, bringing our total cash return to shareholders for the last 12 months to $5.3 billion, and over $16 billion, since the 2019 merger.
Speaker Change: We have 24 million shares remaining authorized for repurchase at the end of the quarter.
Speaker Change: Turning this slide nine, this Frank said earlier, we are raising our full year adjuster rings per share all look to arrange a $8.73 to $8.80 up from $8.65 to $8.80.
Speaker Change: This is an acceleration that's forecasted that Justin DPS growth is 16 to 17% from 15 to 17%.
Speaker Change: This is also a four-cent raise at the midpoint from prior guidance and 14 cents from our original guidance.
Speaker Change: We are raising our 2024 organic revenue growth outlook from 15 to 17% to 16 to 17%. Additionally, we are raising our adjusted margin expansion outlook from more than 135 basis points to at least 150 basis points.
Speaker Change: Lastly, we are updating our free cash flow guidance from above $4.7 billion to above $4.7 billion. Drivers by the strong free cash flow in the third quarter and year today.
Speaker Change: Given the current environment in Argentina, we continue to assume four points of benefit from access inflation and interest this year for the total company and nine points for merchant solutions.
Speaker Change: We now see the Dollar Tourista program continuing into the fourth quarter, but easing through the end of the year.
Speaker Change: Our full-year outlook of 15-17 percent total company organic growth includes a 4-point transitory benefit from inflation and interest in our Argentina and just over 1.0 growth from Galer Teresa.
Speaker Change: Excluding these combined transdory factors, 2024 organic revenue growth would be 11-12 percent at the upper end of our medium term guidance of 9-12 percent.
Speaker Change: The forecasted impact from foreign currency exchange remains eight and a half percent, and we anticipate will continue to be a stronger, though declining, headwind to adjusted revenue growth. Well, it's up to the tailwind from excess inflation and interest.
Speaker Change: Finally, in the past month, we made progress on three items that many of you have been asking about over the last month.
Speaker Change: Well, these do not have an outsized impact on our financials, given the scale of our business. They demonstrate our ability to navigate ongoing change in our business in a way that is not disruptive and always open to opportunity.
Speaker Change: First, as previously reported, we expect Wells Fargo to take ownership of our 40% own joint venture, Wells Fargo works in services, on April 1st, 2025, at which time we will receive cash or assets for our portion of the business.
Speaker Change: By a serve we'll continue to provide processing services to wells existing and new merchants, along with other related services.
Speaker Change: As a result, we see no change to our medium-term outlook of 9-12% adjusted revenue growth, and 15-17% adjusted the EPS growth from this transaction.
Speaker Change: Secondly, we extended our merchant processing joint venture with PNC for the fifth time.
Speaker Change: The relationship dates back to 1996 supporting PNC Small Business and Enterprise clients with Hardware and Processing Services from Pfizer.
Speaker Change: and we'd expect Clover to have a growing presence from here. In third, the State of Georgia approved our application for a merchant acquire limited purpose bank charter. This approval from the State allows Pfizer to apply for direct acceptance into the card networks.
Speaker Change: and is anticipated to be operational in 2025.
Speaker Change: This is a special purpose charger that enables the optionality for sponsorship from Merchant Aquarine.
Speaker Change: It's important to clarify that Pfizer is not becoming a bank. Pfizer will not open branches, take deposits, or write loans as traditional banks do. We have no intention of doing that, and in fact the charter itself is not permit these traditional banking activities.
Speaker Change: With that, let me turn the call back to Frank for some closing remarks. Thanks Bob.
Frank Bisignano: I'd like to take a few minutes to discuss our corporate social responsibility initiatives.
Frank Bisignano: Not because these are investment parameters, but because they represent who we are as company. Her chance to lean and Milton, we're devastating for millions of people and businesses.
Frank Bisignano: Including Manning Fischer Appliance.
Frank Bisignano: Hauers funds, as always, is to take action.
Frank Bisignano: and we quickly set support to the red cross and personally deliver supplies to the affected areas.
Frank Bisignano: As part of our partnership with the U.S. Chamber of Commerce Foundation and our investment to support its disaster preparedness and recovery efforts for small businesses, we provided the Chamber with Fiserv Small Business Index data on the impact of the hurricanes.
Frank Bisignano: These granular insights on commerce levels, leading up to during and after these natural disasters, are being used to educate policymakers and stakeholders.
Frank Bisignano: Guide Targeted Responsive Essence.
Frank Bisignano: and its warm philanthropic support efforts that create and boost small business recovery also in the quarter by search of a score of a hundred on the disability equality index and was recognized as a top veteran friendly company by US veterans magazine.
Frank Bisignano: Each for the third year in a row.
Frank Bisignano: The National Bankers Association
Frank Bisignano: a trade organization that represents all minority depository institutions.
Frank Bisignano: Presented Pfizer with its corporate excellence award.
Frank Bisignano: Making us the first large-scale tech provider to receive this honor. Finally, we continued advance our sustainability and green-building design strategy. Al Milwaki headquarters recently achieved lead gold status following a Dublin Island and New Jersey Innovation Centers which achieved lead platinum status previously.
Frank Bisignano: These are just some examples of how our hard work and dedication show up in many quarters.
Frank Bisignano: But most importantly, it showed up in a strong financial performance, you're just heard. This was at the top of the IDC FinTech rankings for a second straight year. And our story today is about how we intend to stay there.
Frank Bisignano: I'd like to thank Elmore than 40,000 boys for their contributions to these significant achievement and for the day-to-day blocking and tackling that has produced consistently strong results.
Frank Bisignano: That's 40 years of building trust, scale, experience, and five years since the merger of achieving innovation through unmatched investment across our merchant and financial ecosystems.
Frank Bisignano: So now operator, please open the lines for questions.
Speaker Change: Thank you. We would now like to open the phone lines for questions. As a reminder for today's call, please limit yourself to one question to ensure ample time to answer as many questions as possible. If you would like to ask a question, you may press star 1 on your phone. If you need to withdraw your question at any time, you may press star 2. Our first question comes from Tinging Wong from JP Morgan. Please go ahead. Thank you very much.
Speaker Change: Good morning, thanks for the update here. I want to ask on enterprise. It did accelerate nicely, more than the transaction growth that you put up there. So I heard Bob you've mentioned his transitory part of it, and then there was a pay fact.
Speaker Change: Diversion to a retail relationship at SoundSize, so it can just maybe go through that and what's a good sustainable level as we think about the fourth quarter.
Speaker Change: Yes, it's a good morning. So you're right. We get to see an increase in transactions.
Speaker Change: Transaction Growth in the quarter was up 12% of a prior year.
Speaker Change: That actually matches what we saw on G1. It's up from the 8% we saw in G2.
Speaker Change: We definitely see some variation, particularly when we bring on new clients, some of them in the center price space can be quite large.
Speaker Change: And as I said in my prepared remarks, we did have a large payback, begin to really ramp in the third quarter. We'll see a little bit of that, continue in fourth quarter as they get to full capability or full volume, and then it will return to quote unquote more normal levels. Overall for that business line, we obviously saw a very good organic growth well ahead of the overall company average. On an adjusted basis, which again, that has also impact from Argentina in it, we feel great about the year to date at 11%.
Speaker Change: and an adjusted basis.
Speaker Change: Christian.
Speaker Change: line of very pller from will research please goahead guyys thanks and nice results can we just start with over all the business is showing really strong signidze of crosssell you know reg lead to vvent your prepared remarks and how really pxing together more and more between segments maybe just in the very specific examples of where you see that shaavinging up and then just if you can reiterate your conviction around the financial solions segment accelerating into twenty five and if you said going a sixty eight five to just just a riterate why in what the driving forces and what you're see guys
Speaker Change: I think we'll back about to say the construction of the company.
Speaker Change: Right? You know, I always believe that this was a very strategic.
Speaker Change: Ben of the asset, we put together a highly compliment, very high here as you go.
Speaker Change: and one quick place to say by is then merchant in FI, just.
Speaker Change: In total, our ability to be the strategic partner of choice.
Speaker Change: and deliver a merchant and a side put clove at FI and put clove around the front end of that.
Speaker Change: and then brothers are the power of owning a debit network and the ability of what to bring to our largest institutions.
Speaker Change: and to our client based across merchant.
Speaker Change: and then you go a step further and you know the future of growth and issues.
Speaker Change: and terms of us talking about the SMB bundle and the ability to take you know all the assets we have and integrate them technically now.
Speaker Change: Right, you see I found the front line there with Apple Pay, and then you can see us with issuers and another spot and then it's this.
Speaker Change: We've been the place together, you know, in the ability of the crossroads of merchants and allies. I think Walmart is a great example of it. And so, I just think about okay, you have been back over bringing things back in as a handless core to be actually a ledger here for all of the famous dashers.
Speaker Change: and you know, then you go okay, you put XD and clover together and deliver a capability to every financial institution on that runs on us.
Speaker Change: and you take a look at our international expansion and you'll look at the work on commerce cells now showing up in the enterprise segment.
Speaker Change: So, I think the construction of the company with financial institutions all the way through from the largest to, you know, a credit union or a local community bank, and then you take on top of that the assets we bring to it. So, I mean, you're seeing it, and then we brought 3,000 people to form. And I think you were there to, if I'm right, to hand, I mean, you saw the power, the franchise first hand. So, we think that's why we see such a sustainable growth for the long term. And you know, we always think we can do a job better too.
Speaker Change: Thank you, next we'll go to the line of her sheet of robot from Bernstein. Please go ahead.
Speaker Change: Hi, good morning. Frank, can you talk about the car in the cell, especially given some of the changes happening in the U.S., maybe talk about, you know, there have been less capabilities, all three, signature capabilities, I'll start a position because thank you.
Speaker Change: Yeah, so I think one of the things I think about is how I believe that we wanted the capability to compete for transactions for our client benefit.
Speaker Change: Right? Well, client benefit. And, you know, that window opened up. Sorry, Excel is clearly a strategic asset to sit at the crossroads of merchants and financial institutions.
Speaker Change: We've always had the technology capability, we do have dual messaging capability and we, you know
Speaker Change: Give our merchants and issuers choices to compete for transactions at every level. So that's the strategy, right? The strategy is to support our client base. We believe it too is one of these, you know, steady opportunity. You're not going to see this meteoric rise of transactions. But you'll continue to see volume share gains and we'll continue to have an asset in our repertoire to help both our merchants and our financial institutions.
Speaker Change: Thank you, next we'll go to line of Jason Cups for Burke from Bank of America, Maryland. Please go ahead.
Jason Cups: Good morning, guys. Just a couple of questions on Clover. I know Revenue Growth was steady here, volume growth. Tick down a little bit. Just any thoughts on Q4 expectations for those metrics. I think the volume comps get a little bit harder. Revenue also next quarter. So just wanted to get a sense of how we should be thinking about near-term trajectory there. I know you've got some new country launches, product launches to support it. Thank you very much.
Speaker Change: Good morning. So, yes, we continue to see good overall revenue and volume growth.
Speaker Change: As you know, we've got a target to be $4.00 billion.
Speaker Change: by 2026.
Speaker Change: That gets us sort of we're needed about a 28% compound growth rate to achieve that, to exactly where we were for the quarter, it's where we are on a year to date basis.
Speaker Change: A key part of that is continuing to add value added services that checked up a point to 21 percent of revenue. Overall volume remains good. It obviously isn't as strong as it was last year. Some of that is very strong last year. So a little bit of a quote, difficult comp, but also the consumer. Well, still strong, still spending has certainly eased a bit. We saw that last quarter. We saw that continue again this quarter, but we feel good about where that spending is right now and what we see going into the future.
Speaker Change: Thank you, next we'll go to Line of Dave Coning from Beard, please go ahead.
Dave Coning: Yeah, hey guys, thanks, good job. I guess my question in the SMB segment for many quarters you had kind of teens growth kind of 13 to 17%. This quarter was 9%, despite clover being in the high 20s for many quarters in a row. So maybe what kind of what's happening outside a clover and then how should we should we expect that to re accelerate going forward or maybe just kind of talk through that. Yeah.
Speaker Change: Yes, so there's a number of things going on, obviously Argentina, tailland has eased quite meaningfully since last year, beginning of this year even.
Speaker Change: where we saw in first quarter, 15% benefit to the merchant segment, using down in second quarter, 10% now down to 6%. And that impacts.
Speaker Change: Both three of our segments, but certainly a good portion of SMB revenue. The other thing that does play out is anticipation has been quite strong. And there is a mixed differential between or benefit differential between SMB and Enterprise. [inaudible]
Speaker Change: We've seen particular strength out of the large enterprises down in Argentina. We see that kind of shifting a bit into the next couple of quarters.
Speaker Change: Bit difficult to predict exactly what's going to happen into Argentina in the future. So I think we've gotten pretty right over the last several quarters, and we see that excess or that tailwind continuing to ease. You may have noticed in our presentation in our charts.
Speaker Change: Inflation continues to be a tailwind, although easing meaningfully, but interest has actually returned back to more normal or historic levels. And so that tailwind is subsiding quite meaningfully. And of course, if you get to an adjusted revenue basis, FX continues to be a real headwind for us in the quarter for the segments. For the merchant segment, we saw 15-point impact, negative impact to our adjusted revenue from FX. So all of those play out in SMB, both in clover and non clover.
Speaker Change: Thank you, next we'll go to line of Tim Geodo from UBS, please go ahead.
Tim Geodo: Great. Thank you for taking the question. I also want to revisit the financial solutions revenue guidance for next year, which is set to slightly accelerate, so from five to seven this year to six to eight next year. When we think about the reasons there appears to be a good long list of very clear bullets, so there's the target business, there's Desjardin, there's Verizon, I believe all of those are expected to go live with their incremental revenue streams next year, and then of course there's the cash flow central. So it's hoping you could touch on or maybe elaborate on any of those particular projects, and or maybe just talk a little bit about the confidence that you have in that re-acceleration for next year.
Speaker Change: Yeah, so um
Speaker Change: I thank you.
Speaker Change: We were a great player in force.
Speaker Change: Only for a couple of weeks ago, out at our client conference.
Speaker Change: where you heard me talk about, you know, the added pipes, the added interest and the amount of opportunity we see to grow at a client business.
Speaker Change: That was not unexpected, that was exactly what we expected.
Speaker Change: for the outcome.
Speaker Change: Today's our year to meet with you to, you know, we're a 6% growler.
Speaker Change: Edge, Edward War and the Quarter. I think when you think about, you know, the repertoire, you know, Finsack is growing clients right now, you know, and that will continue to add. You saw us talk about, you know, what we're doing with DoorDash, creating another...
Speaker Change: Fundamental as I use in a simple language bundle.
Speaker Change: which has been its planer.
Speaker Change: Right, then you'll look at this SMB bundle, which I am, I am Ben Deep in every other week reviews for over a year. So my conviction on the depth of that pipeline will be bringing that online and will be within the numbers. You know, we talk about merchant and FI, but you know, and that merchant part shows up in the merchant PNL, but the reality is that also is bringing along other opportunity within the banking segment.
Speaker Change: and then we do and we'll continue to have.
Speaker Change: Opportunities, even within the banking segment, outside the U.S.
Speaker Change: that we see more of than we did before because of the nature and the construct.
Speaker Change: of this company.
Speaker Change: and you'll be top to be a tantatonic item that you said to me that we're bringing in. I did one, other one.
Speaker Change: We believe our long-term opportunity around AI and data for our financial institutions. But I've said to, you know, medium-sized to smaller banks, we need to be there data and AI engine.
Speaker Change: And that's our natural position with them. Now, that's not in a forecast today. We don't have a number in a box, but we have demand and we have the best data in the industry and data drives AI. So I would think about it, you know, that the fact we're posting a six.
Speaker Change: and we have these engines behind us has such a conviction of what we could do and we could do all of it better as I say every day, just in the base business, you know, so that's why we've been able to produce at the level we have even if you would get out five year margin look. What we've done there and you know I'm not saying we're going to have never ending margin expansion, but I sure work on it regularly.
Speaker Change: Thank you, next we'll go to the line of the end olives from Miss Uho Securities, please go ahead.
Speaker Change: Hey guys, great results again. Frank, you know, Clover Go and Clover Compact, they look like great solutions from micro sellers. You may be given a little bit of an update on the strategy and in terms of initial traction that you see on these new products. Thank you.
Speaker Change: Yeah, we also see those products
Speaker Change: and Augmentation Products.
Speaker Change: for how client-based, right?
Speaker Change: So, you know, I just want you to think about that way, we talk about our ability.
Speaker Change: to expand calm, you know, in our own client base by bringing more, you know, we definitely should come back playing.
Speaker Change: and the Fulman Space.
Speaker Change: Obviously, you know, we're early, but you should also think about international.
Speaker Change: Wright, that we're going to be bringing those products outside the US, so if any cases, where yes, we will still have software and math on top of them, but they may be catering to a different market, and we're going to have different forms of challenge distribution.
Speaker Change: So, you know, it gets us, you know, more software, come and down a little bit, scale in terms of merchants, but also augment the current client base to have a product that can work with a more mobile to them at times too.
Speaker Change: Thank you, next we'll go to line of James Fossett from Morgan Stanley, please go ahead.
James Fossett: Thank you so much. I wanted to follow up on the SMB bundle and this ties a little bit into Dan's question but you know it seems like there's a lot of capability expansion that's happening within the Clover ecosystem and then looking at new ways to go to market. How should we be thinking about, I know you gave some targets for backbook and some of those things to get to the 4.5 billion target but how should we be thinking about like the roles that those will play and if there's been any change in your thinking in terms of max or type of customers and sets within that Clover target.
Speaker Change: Thank you.
Speaker Change: Yeah, I know there's only one question about, but that's not like five. It's not like James. But let me try it, like first of all, you know.
Speaker Change: and some ways, they're not really...
Speaker Change: inside this company.
Speaker Change: that there's a ton of new thoughts. We always have a lot of R&D going on that, you know, historically and the R&D don't always love me for it, but you know, that I'm more apt to talk to you about when we're getting to market.
Speaker Change: then what's in the R&D shop?
Speaker Change: So this idea about us bringing more capability.
Speaker Change: to the SMB space.
Speaker Change: has always been there. I think if you go back to our acquisition of Laundot and us embedding it.
Speaker Change: and Mobility, and that became what's think about XD and a new product.
Speaker Change: but then you start saying to yourself, we can deliver this.
Speaker Change: Waved beyond Clover and XD, we can't degrade it all, we could put out Spend Labs.
Speaker Change: At a position there, oh boy, we can end up helping out FIs.
Speaker Change: Grow and other channel partners, and future partners.
Speaker Change: To be signed up, that's why we are ultimately a partner of choice for people who want to partner in the SMB space because of our capability.
Speaker Change: So I think you guys think about it, and yes, there may be more back book.
Speaker Change: swept up in there, because there's a reason beyond switching out.
Speaker Change: You know, your FD150 for a Clover station, now you have a much broader capability.
Speaker Change: None of this back book, if it happened, was ever more than a natural, kind of rate which we talked about, of merchant insurance going from an older device to a newer.
Speaker Change: But I think you're seeing the size of the opportunity to actually impact over more than we might have because of the full capabilities.
Speaker Change: Thank you. I think you're on the right track there.
Speaker Change: Thank you, and for a final question, we'll go to the line of Ramsey L.A.S.L. from Barclays. Please go ahead.
Ramsey L.A.S.L.: Hi, thanks for taking my question. On Clover International Expansion, how long does it take to ramp a new country or region from the time you enter the market to when you reach peak run rate? And also, should we expect sort of a steady rhythm of new markets for a while here, or are you going to kind of, should we expect some pauses where you build out and sort of spool up in the country's eBordy launched in?
Speaker Change: Yeah, you know, so I'm a funny guy. I think we're going to get to peak run rate never, you know, because we're just going to keep driving more. So, you know, and that's kind of the journey we're on.
Speaker Change: But if you want, take a country like Brazil.
Speaker Change: I'll be down there on the kickoff of it in December for the launch in Brazil in Mexico. I remember us launching Argentina, you know, college four years ago. So first of all, it's the full build to get to market.
Speaker Change: As we launch it, you know, we expect it in Brazil for a big example to, you know, capture more merchants and more revenue opportunities that we do today.
Speaker Change: Immediately. Now, you know, our ability to scale it to peak, you know, we have great partners. I think, you know, if you were sitting with our head of Latin America, he would say Kasha is very motivated. Well, that's a huge distribution. Now, we're going to get some trade effects to grow great in...
Speaker Change: in 25, but I see Brazil as a multi-year build and a multi-year ramp, not because we weren't able to get to all the zip codes or towns if you want to think about it, but adoption, and then so it's a multi-year ramp, but much like Casua Central, Brazil's in next year's number at some level, you know, nowhere near where I'll be three years from now.