Q1 2025 Fiserv Inc Earnings Call
Speaker Change: Welcome to the Fiserv first quarter, 2025 earnings conference call. All participants will be in a listen only mode until the question and answer session begins following the presentation. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Julie Chariell, Senior Vice President of Investor Relations at Fiserv.
Julie Chariell: Thank you and good morning. With me on the call today, our Frank Bisignano, our chairman, and chief executive officer, Mike Lyons, our president, and incoming CEO , and Bob Hau, our chief financial officer.
Julie Chariell: Arne's released and supplemental materials for the corridor are available on investorrelationsectionafiserv.com.
Julie Chariell: Please refer to these materials for an explanation of the non-gavel financial measures discussed on this call, along with the reconciliation of those measures to the nearest possible GAAP measures . Unless otherwise stated, performance references are viewed over your comparisons.
Julie Chariell: Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results in strategic initiatives.
Julie Chariell: So we're looking at statements made during materially from actual results and our subject to a number of risks and uncertainties. You should refer to our orange release for a discussion of these risk factors. And now for the last time I'll turn the call over to Frank.
Julie Chariell: Thank you, Julie. And thank you all for joining us today. It was a particularly active first quarter, but I think you've come to expect that from Fiserv.
First, we were steadfast on execution.
and that worked out well as we exceeded consensus EBS.
Julie Chariell: Expanded a leading client franchise and partner relationships and advanced our new product and market initiatives while making several strategic acquisitions.
We also completed our CEO transition.
Julie Chariell: Mike has exceeded all of my expectations and as a company we haven't missed a beat.
Julie Chariell: While the economic landscape remains dynamic, we're focused on executing, driving our growth in finishes and hitting the commitments we set forth in February .
Speaker Change: As for me, I'll continue to do all I can to extend Pfizer's industry leading position pending the outcome of the both side vote on my nomination to Social Security Commissioner.
Speaker Change: You've often heard me talk about the deep bench we have here at Fiserv, and last month Mike and I to get steps to further advance the organization.
Speaker Change: with the elevation of Togut's Georgia Coppillus, our new Chief Operating Officer.
Speaker Change: August was named as a senior advisor back in June after a successful career at J.P. Morgan, most recently as global head of payments.
Speaker Change: The COO role is a natural next step for Togut, who is an accomplished leader and talented operator with deep expertise in technology and payments around the world.
Speaker Change: He took the baton from Guy Chirol, who became vice chairman and continues to report direct through to Mike. In this role, Guy is focused on developing best-in-class products, deep in client-important relationships and guiding out technology strategy.
Speaker Change: He is also spearheading our efforts to leverage artificial intelligence and data, both within Fiserv and for our clients. The balance of the Management Committee remains in place.
Lastly, I'd like to wrap up with some reflections.
Speaker Change: I am extremely proud of what we have built at Fiserv.
The company's ability to extend its leadership position is clear.
It comes from scale and profitability. The ability.
a strong balance sheet.
Global Footprint, more key clients.
Speaker Change: Broad distribution through a network of partners, vast resources to invest and innovate, and a business model that's durable enough to weather shifts in the economy.
Speaker Change: It is these attributes that led us to outperform on both operating and valuation managers, post-merger, and can extend out track records of 39 consecutive years of double digit adjusted
Speaker Change: The alignment about ecosystems from merchants and financial institutions is driving out growth now and into the future.
Speaker Change: As commerce and banking are increasingly interconnected, we are positioned to help clients on both sides to meet their growth aspirations.
Speaker Change: It is a construct unparalleled in the market today, right with opportunity and clearly hard to replicate.
Mike: And with that, I'll turn the call over to Mike. Thank you Frank for your tireless efforts in guiding Fiserv and me personally through this transition.
Mike: It is truly an honor and a privilege to lead the company going forward. And I feel fortunate to do so alongside Guy, Bob, Togut and the rest of our established and proven management team.
Mike: Over the last 90 days, I've had the opportunity to meet many of our talented employees and partners in over 1000 of our clients.
Mike: These interactions have only further validated my view that Fiserv has an absolutely outstanding franchise with many attractive growth opportunities.
Mike: Some of which we are actively pursuing and some that have yet to be tapped and would bring incremental
Mike: In nearly all of my client discussions, the focus was on what more Fiserv could do for them. It's clear that we are valued, trusted, and that clients recognize our scale, stability, and technical prowess.
Mike: These attributes are even more important in the current environment of macro uncertainty and industry disruption.
Mike: So for Fiserv, commerce and banking activity carry on and our clients continue to engage with us to explore ways to modernize and digitize,
Speaker Change: Turning to first quarter results. Fiserv is off to a strong start for the year, with total company organic revenue of 7%, adjusted earnings for share of 14%, and our adjusted operating margin up 200 basis points.
Speaker Change: As you know, we had anticipated slower revenue growth to start the year and remain confident that growth will accelerate as the year progresses and we execute on existing contracts and key initiatives.
Speaker Change: Confidence in our positioning and prospects as us leaning into opportunities presented in this dynamic environment.
Speaker Change: And in the last 60 days, we announced four strategic acquisitions outside the United States and a new U.S. operating hub.
Speaker Change: Shortly thereafter, we close the acquisition of CCV Group, a prominent player in Omni Channel Payment Solutions that meaningfully expands our footprint in the Netherlands, Germany and Belgium.
Speaker Change: B.C.V. will help us accelerate the deployment of Clover across Europe . Earlier this month we required pinch payments, a payment facilitator serving merchants in Australia and New Zealand.
Speaker Change: And finally, earlier this week, we announced the planned acquisition of money money in Brazil.
Speaker Change: To enhance our capital offering to merchants based on risk scoring capability and integration with the Receivables Registry Infrastructure, regulated by the Central Bank. This past Monday, we were excited to announce the opening of a new Fintech Hub in Overland
Speaker Change: This new location will house 2,000 associates as part of our proven strategy to bring people together in major offices to drive innovation, collaboration, and efficiency. Let's shift to our performance at the segment level.
Speaker Change: Urgent Solutions posted 8% organic revenue growth with a 10 basis point rise in the adjusted operating margin to 34.2%. Bob will discuss the detail so I'd like to highlight our progress in the quarter on three key near-term initiatives.
Speaker Change: First is driving clover growth through new products, new markets, new partners and new geographies.
Speaker Change: Second is signing more financial institutions as merchant referral partners and the third is adding new and existing enterprise merchant clients to our commerce sub-platform in driving vast penetration.
Speaker Change: Let's dig into the starting with Clover. Over the last few months we've made major advances in our international strategy, introducing Clover in four new countries, Mexico, Brazil, Australia and Singapore, and entering Belgium through the CCV deal.
Speaker Change: This brings a total number of clover countries to 13. We are particularly excited about the Brazil opportunity given our size, scale, and momentum in the country and multiple distribution channels, including direct sales, ISBs, or our software express unit.
and our leading financial institutions' partners.
Speaker Change: We've spent you one training and preparing these partners, and they hit the ground selling in April , and we expect results will ramp through the year. In Asia Pack, we launched Clover in Australia on the last day of the quarter, with the full Cloud-based SAS platform, including hardware, processing, and value-added solutions.
Speaker Change: Our deep relationships in Australia mean we are well positioned to scale Clover through partners as well as direct distribution. Shortly after the launch in Australia we kicked off a Clover pilot in Singapore. [inaudible]
Speaker Change: Also in Q1, a leading provider of by now pay later services, Clarna, signed an agreement to enable its payment options on clover devices in the US with initial plans to enable over 100,000 merchant locations.
Speaker Change: Clover Sport continues to win stadiums and arenas with nearly 350 of them in total and growing.
Speaker Change: Denver Broncos, as well as six NCA venues, selecting Clover Sporting Q1 to streamline payment operations throughout these high traffic locations.
Speaker Change: In May, we will be introducing Clover Hospitality, a new point of sale system designed to meet the needs of upper market restaurants, broadening our tams.
Speaker Change: Our advanced technology across hardware, software and payments will create a unique high-end restaurant solution.
Speaker Change: Wilber Hospitality will debut at the National Restaurant Association Conference and we are thrilled to have Sean Phoenix highly regarded Brooklyn-based Lillia as our first client.
Speaker Change: We are seeing strong initial receptivity from small businesses who are increasingly looking for integrated solutions like ours. We are already piloting a two-way referral program and expect leads to multiply as we complete our technical integrations throughout the year.
Speaker Change: Power level of optimism for this partnership is only grown as we apply our best of breed brands and distribution to drive compelling value for small business.
Speaker Change: Turning to our second major initiative, we added 33 new financial institutions as merchant partners in the US and Q1.
Speaker Change: This marks an acceleration from last year when we added just over 100 in total.
Speaker Change: Our pipeline is strong and we expect to meaningfully outpace that number in 2025, driven by financial institutions desire to win in the small business space by using Clover and our broader SMB
Speaker Change: Along those lines, we have standard our joint venture agreement with PNC and Q1, which also included a clover of hardware order
Speaker Change: On April 1st, we transitioned our joint venture with Wells Fargo to a processing agreement, and we look forward to supporting their SMB gross strategy.
Speaker Change: We also enhanced our merchant referral agreement, as well as our card-issue or processing relationship, with ICBA Payments.
Speaker Change: A subsidiary of the Independent Community Bankers of America, whose clients and members together represent $4 trillion in assets. Overall, we now have merchant referral partnerships with 40 but top 100 financial institutions.
Speaker Change: with several other large opportunities in the pipeline. Our emerging FI partnerships also extend beyond the U.S.
Speaker Change: In Q1, we won the merchant acquiring business in Austria for Unicredit Bank, one of the top performing banks in Europe , as they look to bring clover to their small business clients.
Speaker Change: Finally, we added several new enterprise merchants to commerce having Q1 and expanded vass with others.
Speaker Change: We sign Fanatic Sportsbook, one of the largest and fastest growing online sportsbooks.
Speaker Change: which will use a range of services from e-commerce acquiring and value-added solutions, including our authorization,
Speaker Change: and Digital Payouts. Additionally, Cecil, a leader and buy now pay later services, selected to Commerce Hub and has embraced a full suite of Fiserv products for their BMPL payments.
Speaker Change: including Global Merchant Acquiring and Debit Routing via our Star and Excel Networks.
Speaker Change: Texas Roadhouse, an American steakhouse chain with over 700 locations in 49 states.
Speaker Change: expanded vast by choosing Fiserv's gift solutions and shopper data insights.
for Enhanced Customer Engagement in Operational Analytics [inaudible]
Speaker Change: Young Brands, a longstanding marquee client that renewed its contractor in the quarter, expanded vast by signing on for fraud, network tokens, and our authorization optimization tool.
Speaker Change: Client Authorization Metrics using the new optimization tool have been encouraging and we will soon be utilizing our position as the number one merchant acquirer and number one card
Speaker Change: To make it even better. By virtue of these top positions, we have a greater volume and variety of data than other providers.
Speaker Change: We are combining this wealth of data with our AI in order to continually monitor, interpret and suggest improvements to increase authorization rates for our clients.
Speaker Change: During a pilot with one of the magnificent seven tech companies, our off-off tool was able to improve the recovery rate on declines by 30% before the enhanced data solution.
Andrew, which will be available later this year. [inaudible]
Speaker Change: Now let's move to the financial solution segment, which posted organic revenue growth of 6% and a very strong adjusted operating margin of 47.5% up to 340 basis points.
Speaker Change: Fort Bob covers some of the key drivers here. I want to highlight progress in our three key strategies.
Speaker Change: Daning Leadership and Issuing and Banking, Driving Adoption of Casual Essential and Ex-D and Advancing Cross-Spide-Serve Solutions.
Speaker Change: Starting with the issuing business, we converted the target circle car portfolio in Q1, adding one of the largest retailers in the United States to our Optus platform.
Speaker Change: and further cementing our strong lead in the retail issuing space.
Speaker Change: Hina Mia, Banquist Banking Group, a leading specialist bank and a key client for many years with the first to sign on for our next generation cloud-native processing platform, Vigia Next.
Under a new 12 year credit card processing agreement. [inaudible]
Speaker Change: This is kicked off what we believe will be a new growth phase for our international issuing business.
Speaker Change: In the US, we renewed a number of important relationships, including a leading brand focused issuer, Fred Financial, [inaudible]
a servicer and credit card issuer, Card Works.
and a fintech lender above. [inaudible]
Speaker Change: These early renewals and multi-year extensions are a testament to the strength of our relationships, offerings, and product roadmap and the direct result of our prior and planned investment.
Speaker Change: With over 1.7 billion accounts on file, we are now nearly twice as large as our closest competitor.
In banking, we continue to invest in core modernization.
Speaker Change: and Q1. We introduced Core Advanced, our latest investment in providing modern Core technology to the community banking market. With Cloud-based solutions, Core Advanced offers real-time processing, including payments, transactions, and decisioning.
Speaker Change: allowing community banks to serve their customers with technology typically available only to the largest banks.
Speaker Change: For larger financial institutions, DNA remains an attractive upgrade path and we continue to build and expand Finsack as well as signature next outside the U.S.
Speaker Change: In Q1, we signed Republic Bank a $7 billion asset institution onto DNA, while Northwest Bank an existing $14 billion asset client will add many new accounts pending its acquisition of $2 billion PN Wood Bank or $1.00.00.00.00.00.00.00.00.00.00.00
Speaker Change: Moving to a key growth product for us in the coming years, cash flow central.
Speaker Change: We are excited to announce that our first client went live just last week.
Speaker Change: Washington, Federal, $28 billion asset bank. This is a critical milestone for cash flow central as we look to activate the 53 other financial institutions that have already signed up and accelerate the pace of new wins.
Speaker Change: In Q1, we secured 15 new mandates for cash flow central, including one for BECU, a $30 billion asset credit union, and one for a large commercial bank with $50 billion in assets.
Speaker Change: With respect to advancing cross-by-served solutions, we see ongoing opportunities in three main areas.
Speaker Change: First is our star and Excel debit networks, where we provide optimal routing for merchants.
Speaker Change: We've invested here to become the third largest provider and we are excited about our opportunity to expand with synergies across our card issuing and merchant businesses.
Speaker Change: For example, this quarter dominoes a merchant gift card client signed on for routing over star and excel. Second is our SMB integrated suite, which combines multiple products for financial institutions.
Speaker Change: to offer their merchant customers. The solutions use online banking platforms like XD, our digital banking asset as the integration and access point for other SMB products, including Clover and Cash Flow Central.
and Q1, Teachers Federal Credit Union.
Speaker Change: A nearly $10 billion institution purchased the broadest SMB suite yet, including cash rose central, XD, and Zill for business after becoming a Clover referral partner in Q4. Our third key cross-by-serve initiative is Embedded Finance.
Speaker Change: Our marquee win here was DoorDash, and our subsequent acquisition of PayFare added a white label mobile app, a cloud-native orchestration platform, and robust program management.
Speaker Change: These assets have helped us produce an active and high quality pipeline.
Speaker Change: Our Inventive Finance Capabilities allow us to enable banking, lending and payment services in any commerce experience.
Speaker Change: We achieve this by combining our merchant acquiring and card issuing capabilities.
Speaker Change: with bank-grade general-entered processing through FinTech. No other single company offers all of this under one roof.
Speaker Change: with the scale and resources to manage traditional and emerging payment modalities globally.
Speaker Change: In Q1, we signed a strategic partnership with Threadbank, a leading provider of embedded and digital banking services nationwide.
Speaker Change: Red Shoes, Benzac's Cloud-based core platform, the scale it's embedded banking offerings for a broad range of customers.
Speaker Change: Demonstrating Fins' Accessibility to Sport Not Only Banking, but also Payments in Data at Scale.
Speaker Change: As Bobble Detail, we are maintaining our expectations for 2025 with accelerated growth in the back half of the year.
Speaker Change: With that, I'll turn it over to Bob to take you through the financial.
Thank you, Mike, and good morning, everyone!
Bob: If you're following along on our slides, I'll cover the detail and total company and segment performance in the first quarter, starting with our financial metrics and trends on slide four.
Our first quarter results were in line with our expectations.
Bob: As I said during last quarter's call, we anticipated a slower start to the year and are pleased with the progress toward our plan for faster growth in the second half.
Bob: Total company organic revenue growth was 7% with good growth in each of our segments.
Bob: Adjusted revenue growth was 5%, including the impact of currency translation, which had a significantly smaller impact compared to Q1 of last year and was in line with historically average levels of just under 2%.
Bob: We cash low with $371 million, reflex expected Q1 seasonality, mostly related to timing of working capital and green tax credits.
Bob: On a trailing 12 month basis, free cash flow was $5.2 billion, and for 2025, we continue to expect approximately $5.5 billion for free cash flow.
Bob: Revenue Growth this year looks dramatically different from 2024 due to the effects of interest
Bob: The contribution from excess inflation interest rates in the interim dollar trees to program to our organic revenue growth is 0 this quarter compared to 10 of the 20 percentage points of organic growth in the year ago quarter.
Bob: Total company adjusted operating margin was 37.8%, an increase of 200 basis points versus the prior year, and an adjusted operating income growth of 11%.
Bob: Adjusted earnings per share for the quarter was $2.14 up 14%.
Starting to performance by segment, starting on slide five.
Bob: Organic and adjusted revenue growth for the merchant solution settlement was 8% and 5% respectively for the first quarter. This is in line with our expectation and reflects three timing related factors.
Bob: First, the impact of Leapier which contributed an extra day last Q1. [inaudible]
Bob: Second, timing of the Easter holiday, moving from Q1 last year to Q2 this year.
Bob: And third, a difficult year-over-year comparison against the large-term fee that we discussed in Q1-24.
Bob: The sum total of these three items impacted our merchant organic revenue growth by roughly three percentage points.
Bob: Turning to the three business lines of the March and Solution segment.
Bob: Small business, organic and adjusted revenue growth in the quarter was 10% and 7% respectively.
and Payment Vying Growth of 3%
Bob: This slightly slower pace of vine growth reflects the leapier contribution last year and the toughest
Bob: Vice-sector, we saw declines in discretionary categories in Q1, including travel and hotels, as well as restaurants.
Bob: By contrast, volume growth at grocery, services, and QSR establishments held up relatively well.
Bob: To the quarter, we saw a stable January , slightly lighter February in part driven by weather with the rebound in March.
Bob: for April , small business payment volume is tracking in line with March levels.
Bob: Kupfer, Revenant grew 27% in the first quarter. I'm annualized payment volume growth of 8%.
The softer by and growth largely reflects three factors. [inaudible]
First leap year in Easter as I just mentioned. [inaudible]
Bob: Second, a difficult comparison against a gateway conversion that brought new merchants to Cobra in Q124. In third, a slowdown in spending in Canada particularly untraveled. Canada is currently the largest international market for Cobra.
Bob: Excluding these specific factors, Corvine grew at a healthy, double-digit pace.
Bob: Clover Revenue Growth was a solid 27% against the highest growth quarter last year. There are several reasons for the spread between revenue and vine growth, including a two-point gain sequentially in the penetration rate of clover value added services to 24%. Roughly one-third of the spread came from strong clover hardware sales.
Bob: As Mike mentioned, banks in particular added Clover hardware as part of a strategic focus to address the SMB acquiring market.
Bob: Such sales bowed well for our processing and vast revenue going forward.
Bob: Another nearly one-third came from growth in anticipation and clover capital.
Bob: As we added more Clover merchants in Argentina late last year, their anticipation revenue is now ramping in Clover Bass.
Bob: And we continue to see overall strength in other clover vass as well. Enterprise, organic and adjusted revenue growth in the quarter was 12% and 8% respectively.
Derbied by Transactions Growth of 13% [inaudible]
Bob: Enterprise Organic Revenue Growth was mostly driven by new clients and vast penetration, which continues to ramp, in part, held by new offerings such as the data service and our new authorization optimization tool.
Bob: Finally, processing organic revenue growth in the quarter to climb by seven percent, excluding the impact on revenue growth from a termination fee received in the first quarter of last year, processing organic revenue growth would have been up four percent.
Bob: But just an operating income in the merchant solution segment increased 5% for the quarter.
Bob: merchant-adjusted operating margin expanded 10 basis points to 34.2% compared to a particularly strong result in Q1 2024. Over the past two years, merchant-adjusted operating margin increased 450 basis points.
David Togut, Jason Kupferberg, Jason Kupferberg
Bob: Tony DeSlide 6, a financial solution segment, both organic and adjusted revenue grew 6% in the quarter, in line with our 2025 and medium-term outlook of 6% to 8%.
Growth was led by strength in digital payments and issuing.
Bob: Looking at business lines, digital payments, organic and adjusted revenue, each grew by 8% in the quarter, on growth in cell transactions of 22% in the initial revenue from the sale of data.
Bob: You've heard us talk about the vastness of our data in the past. Now, as clients have started to experience the power of that data, we are seeing new revenue streams.
Bob: This long-term initiative is just beginning to bear fruit after years of investment in data science capabilities and governance.
Bob: We expect Revenue to go meaningfully over time, so the near term won't be a steady upward track.
Bob: For Zell, we continue to expand our leading role as an enabler, and our client base has grown to represent two thirds of financial institutions on the Zell Network.
Bob: including six of the top ten credit unions and seven of the top 18 non-owner banks. In issuing, organic and adjusted revenue grew 8% and 7% respectively.
Bob: The strong performance of issuing was driven by a high growth in the international business and continue to momentum in North America.
Bob: Our vertical growth focus continues with positive contributions from healthcare and loan accounts.
Bob: Verizon will begin to contribute to revenue in the second half of the year. An embedded finance related revenue should contribute to growth in this business line as well as in the banking business line.
Bob: Thinking, Organic and Adjusted Revenue, each grew 1% in the quarter
Bob: Cynzac Revenue was a positive contributor with more revenue under contract to contribute later this year. We expect accelerated growth from experienced digital clients as we now have a more automated migration solution in place that will significantly reduce the implementation
Bob: This is expected to help turn recent sales into revenue faster and help close new sales as the year progresses.
Functionality within XD continues to advance. [inaudible]
Bob: In Q1, we integrated cash flow central and clover behind XD as the front door and began offering digital merchant acquiring to automate a merchant's onboarding to clover through XD.
Bob: Adjusted operating income for the financial solution segment was about 14% for the quarter with adjusted operating margin of 47.5%, a 340 basis point improvement.
Bob: The increase in adjusted operating margin resulted from a higher mix of discrete data and license cells and improved operational efficiency.
Bob: Now, let me wrap up our Q1 discussion with some remaining details on the financials.
Bob: The Adjusted Effective Tax Rate was 17.9%. First quarter is historically our lowest tax rate of the year, and this was largely online with Q1 2024.
Bob: We continue to expect our full-year adjusted tax rate to be approximately 19.5%.
Total debt outstanding was $28.3 billion on March 31st.
Bob: Our debt-to-adjusted EBITDA ratio increased to 2.9 times in the first quarter, untiming a free cash flow and share repurchase volume.
Bob: This remains in line with our targeted leverage range of 2.5 to 3 times leverage. During the quarter, we re-purchased nearly 10 billion shares for $2.2 billion.
Bob: Bringing our total cash return to shareholders for the past 12 months to $6.2 billion.
Bob: Average shares outstanding decline 5% since Q1 of last year's result.
Bob: We had 68 million shares remaining authorized for repurchase at the end of the quarter.
Bob: and our robust Sherry Purchase Activity demonstrates both confidence in the outlook for our business and our commitment to returning value to shareholders.
Bob: 20 to slide eight. We are maintaining our full year 2025 guidance of organic revenue growth of 10 to 12% in adjusted earnings per share in a range of $10.10 to $10.30, representing 15 to 17% adjusted DPS growth.
Bob: The forecast impact from foreign currency exchange remains 1.5% for 2025.
Bob: This outlook contemplates an environment where tariffs remain at current levels and can assume or spending remain stable. The cost impact of tariffs at current levels is expected to be minimal, relative to the size of the cost-based of the company, and thus manageable within our guidance range.
Bob: As Mike mentioned, we continue to expect revenue growth to be weighted toward the second half of the year, with some anticipated revenue already under contract and being implemented.
Bob: Additionally, we have a number of newer products and markets that are on track to contribute.
Bob: Our adjusted operating margin expansion outlook of at least 125 basis points is also unchanged, and is ahead of our medium-term target of at least 100 basis points annually.
Bob: From a segment perspective, we continue to see merchant solutions, organic revenue growth of 12 to 15% in 2025.
Bob: Driven in large part by Clover in its international expansion efforts, new product development and increase in vast penetration, as well as commerce hub with its expanding demand and vast capability.
Bob: We remain on track to achieve our targets of $3.5 billion in revenue for Clover and 25% vast penetration by year end.
Bob: In financial solutions, we continue to anticipate organic revenue growth of 6-8% with a healthy pipeline of implementations to drive revenue from cash flow central, XD, Finzac issuing and real-time payment products in the back half.
Bob: Overall, the guidance range does account for some variability, and as you have seen from us over many years, we manage well through economic cycles and have a strong capacity to invest in our people and products.
Bob: Because we can support our clients at a time when others may be struggling, we are leaning in.
With that, operator, let's open the line for questions.
Bob: 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 use star one on your phone. If you need to withdraw your question at any time you may press star two. For our first question, we'll go to the line of Darren Peller from Wolf Research. Please go ahead. Thank you.
Thank you.
Darren Peller: Hey guys, thanks. Maybe we could just start off on the trajectory of the merchant business.
Darren Peller: Obviously, the Clover Growth was very strong at the 27% we're seeing, and so when we build that in, if you could just remind us some of the trends we're seeing and maybe a little bit more quantification of what we'd expect, volume growth, like in Clover as the year progresses, and then more importantly,
Darren Peller: As we build down in Brazil and Australia, and we add these vast, what kind of gravity groups?
Darren Peller: You see in terms of a voyage between volume and revenue growth per clover, final I finally just overall merchant trajectory of the year progresses would be great from the sequential standpoint.
Darren Peller: Good morning. Thanks for the question. Overall, Thank you very much.
Darren Peller: I feel good about the 27th percent revenue growth for the clover business fast moving up to 24 percent.
Darren Peller: As we continue our march and we reaffirmed our commitment to delivering the $3.5 billion for the full year and 25% vast for the full year of this year and Q1 results were right in line with our path towards doing that.
Darren Peller: We certainly continue to expect growth in the latter part of the year, both in terms of further vast penetration reaching that 25% as well as overall volume growth.
Darren Peller: We mentioned then the prepared remarks this morning. Q1 was really impacted by a total of two things.
Darren Peller: Obviously, Leapyear gave us an extra point of growth last year. Easter was in March last year. It's in actually very late April this year. And so we see some acceleration of
with volume, and therefore the revenue growth.
adding to that things like...
Darren Peller: Clover Hospitality Bowling Out, the continued acceleration of our international regions.
Both in Latin America and in Asian Pacific. .
Darren Peller: with new countries going live during the first quarter and early second quarter.
Darren Peller: And then I will also see some benefits from CCB, their new acquisition.
Darren Peller: continued distribution channel expansion in Europe and actually essentially adding a new country with Bell Jump.
having a good distribution channel.
Darren Peller: Bruce C.C.B. and being able to sell clover through that distribution channel. So there's a number of good things, a good thing to have of us that give us confidence and the ability to deliver that three and a half billion dollars of revenue and that includes the performance in Q1.
Darren Peller: And I think probably continue to, in terms of distribution, the merchant and institution partnerships we continue to see good growth on that front and then we continue to enhance, we talked about it in a build throughout the year, continue to enhance the,
Darren Peller: Merchant experience, whether that be with the partnership with ADP, they roll out of a cash flow central and the integration of that and it's to clover over time, but leveraging AI and to clover in the merchant opportunities for new leads, get loyalty, lots of different things around merchant experience.
Speaker Change: Next, we'll go to the line of Tenjin Wong from JP Morgan. Please go ahead.
Tianjin Wong: and how they're unbundling merchant and choosing depth there of a breath and that's clearly in contrast to what Fiserv has done and what you guys have built. So, does that change your thinking on that bet and strategic sort of view on some of the parts for Fiserv?
Alex, I think, uh...
Tianjin Wong: You know, let's talk about what Fiserv is for a second. You have a clover on the front end and now you watch it rolling out globally. So, you know, we then have this partnership model that's unparalleled. You know, you're just talking about what we're saying.
Not 100 banks, but...
Tianjin Wong: FIs, and you know, even if you're going to pay fair, that's going to be a home run for us. You know, to any of that right now in the numbers, but you'll see it in the future. I mean...
Speaker Change: I think this is the best talented management team in the industry. I think it put together the company. I never thought there were three deals that were actually the same.
Speaker Change: Everybody will ask them in. We have a debit network. We have an issuing business that's unparalleled. You know, I love our international franchise.
Speaker Change: Yeah, we've leveraged the ability to cross sell through the best distribution network. I veiled that market opportunity has opened up across the board and that would include in the debit space with deals that were done.
Speaker Change: I mean, I think Michael has his own point of view after 90 days.
But, and I know he's-
You know.
I'm happy to talk about it.
Speaker Change: But if you think about that issue of strength, that $1.7 billion account on file, that's 2X, so I'm just going to better. And you know, we got Finsax coming up, you're going to continue to watch that win.
Speaker Change: Our hand in my opinion is unparalleled, and the reason we did the first day of Vicer of Gil was because that was the deal to do.
Speaker Change: Right, they weren't comparable. David Networks were at the same size, the issuing business was not the same size. The ability to understand has selling the bank.
Speaker Change: or Crossroad companies. I mean, I could go on for the whole call, I won't, but I love it and I love the company.
Speaker Change: I would just add, I met earlier comments that said met with over a thousand clients in the last 90 days and all of those conversations are about how to do more with them and a lot of those conversations are at the intersection of commerce and banking.
Speaker Change: Whether it be transactions in the market, noise around tariffs, noise around the equity raising markets or any markets, whatever it may be, size.
Skale, Resilience
Continuing investment, consistency of strategy, these are all resonating. [inaudible]
Speaker Change: with our clients and you could feel that come through the quarter as people may look at a certain function that they've relied on a smaller fintech without access to capital to provide and then turn to us. On the trust front, again, goes back side scale and just continuous. [inaudible]
Speaker Change: Consistency and Strategy that, frankly, that was in the last several years since that deal. So we see it as a huge advantage for us. And like we do every day, we're out in the market trying to win the share by adding value to our clients that we get greater ability from disruption these deals, and that's great. Thank you.
Speaker Change: Next, we'll go to the line of Ramsey Ellis Hall from Barclays. Please go ahead.
Ramsey Ellisall: Hi, thanks for taking my question this morning. On Clover volumes, Bob mentioned some Canada headwinds.
Ramsey Ellisall: I'm just curious for those headwinds, do you interpret those headwinds as being kind of idiosyncratic to Canada, are they sort of ring fenced in Canada? Is there a risk that we see similar dynamics emerge either here in the US or in other international markets? I think you called out travel for example.
Here at Ramsey, where we really saw it was. [inaudible]
Ramsey Ellisall: and the travel aspect. And for, I would say based on the data we have, it does feel like it is.
Canadian Specific, it's certainly discretionary spending.
Ramsey Ellisall: and we saw that come down. We did talk generally in our prepared remarks that...
Ramsey Ellisall: Broadly across our merchant base, we did see discretionary i.e. travel hotels and restaurants.
Comedown, but given the mix of our overall business.
Ramsey Ellisall: Having the non-discretionary growth in groceries and services and QSR holding up gives us a nice overall balance. We saw that in the first quarter. We saw that in the last many years.
Ramsey Ellisall: and we expect that we'll continue to build wealth for us in any economic outcome.
Speaker Change: Next we'll go to the line of Tim Chiodo from UBS, please go ahead [inaudible]
Tim Chioda: Great, thank you for taking me question. Bob, I think you did a great job outlining some of the delta between the Clover volume growth and the revenue growth. You touched on hardware,
Tim Chioda: There's rapid deposit, but then there's one that you've mentioned on a few of the past earnings calls around the increasing direct mix. That was wondering if you could talk a little bit about how you expect direct mix to play a role in reaching that eventual $4.5 billion revenue number for 2026 for Clover. [inaudible]
Speaker Change: Yeah, Tim, I would say overall, we've got a very broad, deep...
Distribution, set of distribution channels. [inaudible]
and the direct channel with Classly is our newest. Thank you very much.
Speaker Change: Overall Channel, we'll continue to add sales people which we refer to as business consultants or B.C.'s and growing that channel out. We're also seeing great growth in our F.Y. Morton Partnerships.
Speaker Change: So I wouldn't necessarily call any one channel out in particular. We see good opportunities and all of those and the direct channel mix is benefiting overall revenue and margin as we grow that because it's the newest. [inaudible]
and Festus Expanding Channel.
Speaker Change: Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.
Jason Kupferberg: Good morning, guys. Thanks. I wanted to come back to the merchant segment for a minute, so I know we were at 8% organic in the quarter. You said that was in line with plan. You had three points, I believe, of headwind related, some of those calendar factors, the term fee comp. So, you know, if we adjust for that, I guess we're at 11, we're still a little below the full year range. So just help us kind of reconcile from that into, let's say, the middle of the full year range and the stable macro scenario. I know you've got some clover geographies and products ramping. I'm sorry. I'm sorry.
Speaker Change: I also wanted to get a sense there in terms of how much of this is coming from the new acquisition if you could give us a sense of 2025 revenue contribution from those. Thank you.
Speaker Change: Yeah, Jason, I would say first broadly, it would not be from a contribution of the acquisitions, those are certainly will benefit us.
Speaker Change: Those are brand new into the company. You see very, very, very little impact in Q1. Those will accelerate. It's really, you know, it's a late 25, 20, 26, 27 opportunity for those. We'll continue to see good fast penetration growth. [inaudible]
The expansion internationally is certainly a big element for us.
Brazil, Mexico, Australia.
Speaker Change: Singapore. There is an element of CCB giving us international growth.
the new product, Cobra Hospitality.
Speaker Change: that rolls out what in a couple of weeks now for high-end restaurants and generally...
Broad.
Keep Abilities and Continue Growth.
Speaker Change: and a variety of vast capabilities in new software, both in terms of restaurant, as well as service and retail that we continue to build out. Give us good opportunities to deliver the three and a half billion this year and four and a half next year.
Speaker Change: Next, we'll go to the line of Bryan Keane from Deutsche Bank. Please go ahead.
Brian Keene: Hi guys, thanks for taking the question. I want to ask about the 33 signings in the FI and the financial institution site. I guess what's happening in the market that's driving that number higher?
Brian Keene: for you guys to be landing that many financial institutions because I guess I would have thought that most FIs would have already decided who they're partnering with. So I just want to understand the market dynamics that's driving that. Thanks.
I think it was with the sector. Good.
Brian Keene: Like anything we do, and when we approach it, we want to be a great partner in Alhark for our clients to achieve their objectives and...
Brian Keene: serving the small business spaces of the banks, is a very...
Speaker Change: Profitable Enrich Area for the Bank, especially in deposits and caseload transactions.
Speaker Change: So with our, with our abilities and products to help them do that, highlighted by Clover in the merchants appreciation for Clover.
Speaker Change: We're seeing an increasing interest from banks across country. The pipeline is huge here for additional banks to commend to the old and again, we're we're simply helping our clients achieve their objectives by bringing them great products and services and. [inaudible]
Speaker Change: You go to, this is the classic place to go to for cash flow central, which is, you know, it's been most of my life in banking, it's hard to get a scalable AP and effective AP, AR product into a small business.
Speaker Change: Integrated in with their acquiring solutions, and that's exactly what Casual Central is, making great progress on it. We talked about Washington Federal, the first to go alive.
Speaker Change: continue to build out great functionality with our partners at Milio and think we have a solution.
Speaker Change: that can help banks achieve their objectives, and that's what our goal is be the greatest partner that we can be in all five emerging markets in this really epicenter of it. So we're very optimistic about the growth we can put on here and what that will do for global distribution.
Speaker Change: Next, we'll go to the line of Will Nance from Goldman Sachs. Please go ahead.
Will Nance: Hey, thanks for taking the question. Mike, one for you, there have been a lot of data points on the macro environment about a lot of larger enterprises going pencils down on large pap X investments. So, let's move on.
Speaker Change: But I know I know banks tend to beat to their own drum and I was wondering if you could maybe put your PMC hat back on for a second and talk a little bit how the macro environment we entered
Speaker Change: You know, a month ago, it may impact the way banks think about technology and deployments. And maybe what I'm getting at at a higher level is, you know, how would you expect implementation pipelines and a business like Fiserv to perform in a weaker macro environment versus maybe a typical enterprise software company. Thanks.
Speaker Change: Yeah, I think I mentioned it in the earlier comments, at least in the conversations we've had throughout the quarter. It's a question about doing more and those just aren't banks, you know where it is.
Julie Chariell: It's probably an even split between merchants and banks. What we generally provide in is measuring critical systems and capabilities that help them generate revenues.
Julie Chariell: Facility Sales at our merchants and clients and growth clients at the bank, so we have not seen anything of that nature so far this quarter. In fact, I'm at the point that
Julie Chariell: With a little disruption in the market, we've seen a flanked equality, if you will, in terms of people coming to us, around sides, scales, stability, consistency of model, some institutions have...
Julie Chariell: Over relied on a multiple of thin tech solutions patching together different things where as we can bring an end gen solution, significant balance sheet, you know great capability consistency. So so far we've seen the opposite of the question is about doing more.
Speaker Change: Next we'll go to the line of Jamie Friedman from Seth Gujana, please go ahead.
Jamie Freedman: Hi, good morning. Bob, I wanted to ask about merchant as well. My math is that small business and enterprise organic grew 10.3% combined ex-processing.
Speaker Change: and I realized you had message last quarter in prior transcripts. [inaudible]
The challenges in processing, but if you could revisit
Speaker Change: where we are in the processing journey because it sounds like you're expecting that to improve, but if you could talk through why it is and what the logic is, I think that would be helpful to understand the trajectory. Thank you.
Speaker Change: Sure, and first off, the processing line certainly was impacted by a periodic revenue item that we had to recall Q1 of last year. We disclosed we had a large periodic revenue item that accelerated Q1's growth, so we're not growing over that.
Speaker Change: If you take the organic revenue growth and adjust for that periodic item in Q1 last year, that's a group of 4% for the quarter.
Speaker Change: And we generally believe that the processing line will be roughly flat, slightly positive over an extended period of time, what we've seen over the last.
Speaker Change: Several quarters and we expect to see going forward and we seek great opportunities to grow the overall merchant segment processing. So let's see what's going on in the next video.
Speaker Change: is an element of that. It's obviously the smallest of the three business lines and our overall growth as we grow the merchant solutions business processing is a small part of that.
Speaker Change: Next we'll go to line of Dan Dolev from Mizzouho, please go ahead.
Hey guys, great results, and congratulations, Frank and Mike.
Speaker Change: So, really quick, I know you called out dollar trees to impact in, in tandem with interest rates and access inflation, but can you maybe quantify just specifically the dollar trees that impact?
Speaker Change: Yeah, Dan, from a first quarter standpoint, Argentina, broadly, and that's really all three elements.
Speaker Change: Inflation, interest, and color to reach stuff was zero impact to the growth in Q1 of this year.
Speaker Change: Q1 out last year overall, Argentina was about 22 points of growth in the Merchant segment.
And Dollar Trees to a seven points of that. [inaudible]
But now that that.
Argentina, inflation interest has returned to, quote, more normal levels.
Speaker Change: And what we did see some dollar to restore revenue in the first quarter, it actually was down a bit from Q1 out last year.
Speaker Change: and we expect that program to likely go away this quarter, as you may have seen, Argentina reached an agreement with the IMF.
Speaker Change: for a large loan. Their currency, Pag is expanded or enlightened, and we anticipate dollar trees to go away this year. It works for me this quarter.
Speaker Change: Next, we'll go to the line of Andrew Jeffrey from William Blair, please go ahead [inaudible]
Speaker Change: Mike, I appreciate you taking the question. Mike and maybe for Frank too.
Speaker Change: Have the partnerships improved along with product? Is it people in the bank partnerships? I know that's an area that had sort of been little choppy historically, but it sounds like now it's really turning to important growth drivers. I wonder if you could sort of compare and contrast today with you know five or seven years ago perhaps. [inaudible]
Thank you.
Speaker Change: Yeah, I could I get that holy compare and contrast from five to seven years ago.
Yeah, I think that was a much different company.
Speaker Change: You know, so you got to go back to, you know, why we love this franchise and like I like to say the construction of the company.
Speaker Change: Right? So with any of these bank partners, many of them were providing...
you know, account processing, the core base system.
We've got their bill paid. [inaudible]
Speaker Change: That allows us then ultimately to have CFC, Dan Dolev or Clover, I think we've done a great thing that seems unbelievable in building this SMB bundle. And then that's why you see people like ADT coming and you'll see more of those.
Speaker Change: and so I think the bottom line is we had these great JVs with great bank partners, but we've now taking it through the premise of the...
Diel, you know, I always said the synergy went way on, way beyond.
Speaker Change: You know, the reported, we're still getting the benefit of bank partnership. And if you go anywhere from our first citizens to other banks across the country, our ability to just bring them more is very, very strong.
Speaker Change: And I think you're going to continue to fit. So it's a completely different model.
Speaker Change: Um, so, you know, and Mike can talk about the opportunity to have a round of expanding camp.
Speaker Change: It's a, you know, we built this, we executed, we got through the consolidation but we're still optimizing the construction of the company and adding more capability.
All right, I'll state it.
Speaker Change: The success or lack thereof of these partnerships is not an unstructured as much as it depends on our ability to help the bank partners serve their clients with their needs. So that means quality of product into it. And what the small businesses are saying, they're increasing one abundance solution. So that's how we're thinking about.
Speaker Change: DeClover, SAS, Dashboard, and platform that's what I think about ADP, that's what I think about Castle of Central, bring coordinated, simple to turn on.
Speaker Change: Value-added capabilities to small businesses and distributums through our great banking partners, but it's less the structure, it's more the content and our ability to help our banking partners deliver.
Speaker Change: And for our final question, we'll go to the line of James Faucette from Morgan Stanley , please go ahead.
James Fawcett: Thank you very much appreciate all the color today. I wanted to ask about the evolution of margins. You at least relative to our estimates continue to put up very good operating margins. At the same time, we're continue we're seeing the. Thank you very much.
James Fawcett: Increased contribution of growth from international markets, especially as you roll out clover to those markets. How should we think about the maturity of profitability in those markets and how can that change over time as you continue to grow footprint outside the US. Thanks.
Catchins, you know, we've certainly seen a tremendous operating.
margin expansion over the last several years.
James Fawcett: We guided or provided a medium-term outlook back in our last investor day, what November of-
2023 that we expected margins to expand on hundred basis points.
obviously very strong growth last year, 170 basis points.
James Fawcett: Over the prior year that was on top of 230 years before that.
James Fawcett: Our guide for this year is at least 125 basis points, so certainly exceeding our outlook there. We continue to see real opportunity to see that.
James Fawcett: Continue into 26 and beyond. We've talked about the, quote, virtuous cycle of growth in this company, where investment brings growth, growth brings very high fall through on a very scale global business.
James Fawcett: That allows us to expand operating margins while reinvesting some of that operating income back into the company to provide additional growth.
James Fawcett: We've seen that for the last many years. It's been the secret sauce to 39 consecutive years of double digit earnings growth. And we think we've got some meaningful runway, our international businesses.
James Fawcett: are certainly part of that as you enter new markets with new products.
James Fawcett: Those certainly don't immediately add to margin in a way that a scaled business can, but given the breath of the company,
seeing. Thank you. Thank you.
James Fawcett: Clover Row, meaningfully, in the US, is you great margin expansion? Well, you accelerate things like Brazil. And so the power of the scale of our business, the global breadth of the business allows us to expand margin, while investing both in new products as well as new markets. So we continue to see great opportunity out of us.
James Fawcett: I think that when we talk at those client conversations we've had and wanting to do more with us, the ability to consistently invest, increasingly invest in products and services through the franchise.
the most important consideration of whether they continue to do.
James Fawcett: Incremental Business with us. So we think that's important. We think it's especially important to admit disruption in the industry, whether it be tariffs or mergers alike. Continue to invest in an high quality product.
James Fawcett: Williams-Borer customers, and then there's still, I'm only 90 days in, but there's still plenty of opportunity at the core to continue to increase the efficiency of the company and we point to it.
James Fawcett: The investment in Kansas City to inject Kup this week is a great opportunity to bring our employees together, make them more effective, more efficient, more focused, and there's opportunities like that across the company, Franks.
James Fawcett: An incredible beginning after a lot of those, that we still have opportunities to be more efficient at the company. So, lots of run my head for margins.
Speaker Change: All right, thank you everyone to all those on the call today for your interest in a special thanks to 38,000 associates and Pfizer who are driving our success every day. Our IRK is available for any further questions and we wish you all a great day.
Speaker Change: Thank you all for participating in the Fiserv first quarter, 2025 earnings conference call. That concludes today's call. Please disconnect at this time and we hope you have a great rest of your day.