Q2 2025 Fiserv Inc Earnings Call
Welcome to the Fiserv second 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 will turn the call over to Julie charriol senior vice president of investor relations at fiser.
Speaker Change: With me on the call today are Mike Lyons. Our chief executive officer and Bob Howard. Chief Financial Officer for earnings release and supplemental materials for the quarter are available on the investor relations section of Fiserv cam,
Speaker Change: Please refer to these materials for an explanation of the non-gaap financial measures discussed on this call along with a Reconciliation of those measures to the nearest applicable Gap measures.
Speaker Change: Unless otherwise stated performance references are year-over-year comparisons.
Speaker Change: Our remarks today will include forward-looking statements about among other matters, expected operating and financial results and strategic initiatives. Forward-looking statements, May differ materially from actual results and are subject to a number of risks and uncertainties.
Speaker Change: You should refer to our earnings release for a discussion of these risk factors.
Mike: And now, I'll turn the call over to Mike.
Mike: Thank you, Julie, and thank you all for joining us today.
Mike: As you've seen, we had a strong second quarter fueled by our continued. Focus on executing 5. Serves mission of delivering Superior value for our stakeholders through leading Technology, Innovation and excellence in everything. We do.
Mike: During the second quarter, we grew sales clients and our new business pipeline.
Mike: We announced several exciting, new Partnerships and acquisitions.
Mike: introduced Innovative capabilities, like Phi USD stablecoin
Mike: And made Solid progress on our key product initiatives, including Clover Commerce Hub, cash flow, Central and experienced digital also known as XD. We did this, all despite an uncertain macro environment during the quarter. The second quarter, we delivered 8% adjusted and organic Revenue growth, and strong 16% adjusted, EPS growth.
Mike: We expanded our adjusted operating margin.
And generated good free cash flow.
Mike: Importantly.
Mike: We returned, 2.2 billion dollars to shareholders in the quarter by repurchasing 12.2 million shares.
Mike: For 26% more than we repurchased in q1.
Mike: And as Bob will cover later, we have increased our 2025 share, repurchase guidance.
Speaker Change: To approximately 130% of free cash flow. This means we expect to continue actively buying shares in the second half of the Year all while staying within our targeted leverage range, the 4 Bob walks you through our financial performance in more detail. I'd like to provide some color around the refinements. We made to our guidance and share some important business highlights from the quarter, the 2025 guidance, which call for 10
To 12%, organic Revenue growth, on top of the 16% growth. We achieved in 2024 and always assumed a significant growth ramp on the back half of the Year. This trajectory was based on the successful launch of a long and granular list of new products and strategic initiatives.
Speaker Change: As well as a relatively strong macroeconomic Outlook.
Our updated guidance reflects that the fact that some of those launches and initiatives are taken longer than we had planned.
Speaker Change: Some of that is on us and some is driven by other factors that we don't fully control.
Speaker Change: But we are confident that we will capture the full strategic and financial benefits.
Speaker Change: And only the timing of realizing them has been extended.
Speaker Change: And to a lesser degree, our update reflects economic conditions that we have seen versus what we, what had been assumed in the plan.
Speaker Change: As a result, we have refined our full year organic Revenue growth guidance to approximately 10%.
Which is at the low end of our guidance range.
Speaker Change: And to be clear, we are maintaining our guidance for 3.5 billion of clover Revenue this year.
Speaker Change: With this revised ramp and revenue growth in the back half.
Speaker Change: Continued, margin Improvement and the increased share repurchase guidance.
Speaker Change: We are also refining our adjusted EPS guidance by raising the bottom end of our range by 5 cents looking ahead. I am incredibly energized by the opportunities we have to generate significant share shareholder value over time.
By providing Mission critical software and value, added solutions for merchants financial institutions, governments and other yet untapped markets.
Speaker Change: Construct of the company.
Our many leadership positions.
Speaker Change: And our size and scale are unmatched yet. We are just scratching the surface of our Global opportunities.
Speaker Change: When we put all these strengths together, the result is deep long-standing client relationships that can be broadened into and improved over time.
Speaker Change: Free cash flow that allow us to continue prudently and effectively allocating capital and generating double-digit adjusted EPS growth.
Speaker Change: A virtuous Fiserv cycle.
Speaker Change: Now, let me turn to some of the highlights from our 2 business segments,
in merchant Solutions, we continue to execute on 3, key growth initiatives and are pleased with the progress we made on each in Q2.
Speaker Change: The first is driving Clover, growth through new products, new markets, new partners, and New Yorkers.
Speaker Change: The second is continuing to scale our industry-leading distribution through all channels.
Speaker Change: And third is adding new and existing Enterprise Merchant clients to our Commerce Hub platform and driving vast penetration.
Speaker Change: Let's start with Clover. Where Q2 volume growth, came in line with our expectations at 8%, reported and 11%, excluding the Gateway conversion.
Speaker Change: As a reminder for operational reasons, we converted Merchants from a non- clover. Payments, gateway to Clover, ending in 2024,
Speaker Change: The 11% represents the growth rate of clover without the converted portfolio.
Speaker Change: With respect to the second half of 2025, we expect Clover, volume growth both on a reported basis and excluding the Gateway conversion to accelerate from Q2 levels.
Speaker Change: These levels are consistent with our plan to reach 3.5 billion in Clover, revenue for the year.
Speaker Change: Clover Revenue grew 30% in Q2 highlighting the strengths of our full business operating system approach.
Speaker Change: There are 3 key contributors to Clover's Revenue.
first vast penetration of 24%, which was up from 20% a year ago,
Speaker Change: this was in line with q1 levels and demonstrates good progress towards our year-end goal of 25%,
Total vast Revenue. Grew 52% driven by both software sales and capital which includes Clover capital and anticipation in Latin America.
Speaker Change: Second Hardware Sales, remained healthy and within the expected. Long-term range of Revenue contribution.
Speaker Change: And finally pricing and other services including data.
Speaker Change: We expect our newer initiatives to support Clover, revenue and volume growth in the second half of the year. So I'll update you on their progress.
Speaker Change: On the international buildout, we are ramping Clover, merchants in all the geographies we added this year. Brazil Mexico, Australia, Singapore, and various countries in Europe as we work to integrate the CCB acquisition.
Speaker Change: We added Belgium and support sales in Germany and the Netherlands.
The largest of these opportunities is Brazil where we launched Clover sales in April and are tracking well to plan.
Speaker Change: And I'm excited to add that. This morning, we significantly increase our presence in Canada. Our largest Clover, international market with the agreement to become the merchant processing provider for TD Bank Canada.
Speaker Change: Going forward. We will jointly serve new, TD merchant clients via the Clover platform driving further processing hardware and SAS Revenue.
Speaker Change: As part of the transaction, we also agreed to purchase a portion of TD Bank's existing merchant processing business consisting of over 35,000 Enterprise and mid-market locations.
Speaker Change: We've been live with clover in Canada for over 5 years and have seen strong growth through direct sales and ISO Partnerships.
So the opportunity to further strengthen our distribution by aligning with the nation's second largest bank is tremendously exciting.
We expect to close the transaction later this year.
Speaker Change: With respect to further International expansion of clover. We are having constructive conversations with potential Partners in several attractive markets.
In Q2 our vertical software. Offerings got a boost with 2 Market expansion efforts.
Speaker Change: In may, we launched Clover, Hospitality for the upper restaurant Market, which doubles our Tam in the sector.
Speaker Change: The product became available this month and pre-sales activity has been encouraging.
and early this week, we signed a new partnership with rectangle, Health to integrate a HIPPA compliant SMB, solution, called Clover, practice, pay,
For health care providers.
Speaker Change: This solution launches an early 2026 and Marxist, significant milestone for Clover.
Speaker Change: Most in demand and most rapidly evolving markets.
Speaker Change: SMB, Healthcare also represents 1 of the areas of greatest demand from our financial institution, Merchant partners
Speaker Change: This agreement reinforces our confidence in the ability to scale Clover into additional verticals where we can use our industry-leading technology or partner to design operating systems for smbs across Industries, creating additional Tam over time.
Speaker Change: We made first with our horizontal software Solutions as well, continuing to develop clover as a full small business operating platform.
Speaker Change: Since its launch in November, the ADP relationship has been exemplary as our sales product and executive teams continue to find ways to optimize our partnership.
Speaker Change: We are making it easy for smbs to access our combined Suite of leading Solutions on platforms. They know and trust Clover and adp's run Solutions.
Speaker Change: In May the ADP run software platform was integrated into Clover and the sales rollout is ongoing through August.
ADP Salesforce is generating, Clover leads and vice versa, and they will be able to sell cash flow Central as well by the end of the year.
Speaker Change: Earlier this month, we expanded our partnership with home base to integrate their Market leading software into our clover, essential SAS package.
allowing smbs to manage employee scheduling time tracking and team, communication right from the Clover dashboard,
Speaker Change: For our second Merchant initiative, we can continue to invest in and expand our unmatched set of distribution channels which is a key differentiator for Fiserv and Clover.
Speaker Change: This includes continuing to build out our direct sales force.
And expanding our financial institution Merchant referral partner program.
Speaker Change: We have roughly 600, direct sales people in the SMB space.
Speaker Change: And we continue to grow that team.
most recently to support Clover, hospitality
Speaker Change: Our Merchants referral partner program, also continues to grow. We added 49 new financial institutions, as merchant Partners in Q2 bringing our year-to-date total to 82.
Speaker Change: in June, we reached an agreement to acquire the remaining 49.9% of aib, merchant services, our long-standing and successful joint venture with aib Bank in Ireland,
Speaker Change: we expect this change will open further opportunities for us to grow in both the Enterprise space throughout Europe and with clover.
Speaker Change: Aib will continue to work, exclusively with us, through a merchant referral program.
Speaker Change: In July, we expanded our relationship with Bank of Hawaii, through a new Revenue, sharing agreement, that transitions their merchant portfolio, 255 service, enhancing our economics, while enabling the bank to elevate its Merchants capabilities, and broaden its client offerings.
Speaker Change: And as of last week, we're excited to announce that Clover. Is now, part of US Foods, check business tools program a program that recommends value added solutions to their client base.
Speaker Change: Being a recommended technology vendor for US Foods further bolsters, our clover distribution and helps accelerate our restaurants strategy including Clover. Hospitality
Speaker Change: Our third initiative is in our Enterprise business where we were excited to sign ups as a client in Q2.
Speaker Change: We will be providing a suite of payment products, operating on our Commerce Hub, platform to The UPS Store, to support their 5,400 Plus locations in the United States.
Speaker Change: As a follow-on to our Fanatics Sportsbook, win last quarter, we've expanded our relationship with Fanatics Commerce, extending our Commerce Hub, and value added Services solutions to support their online retail operations.
Speaker Change: On the Enterprise bass side, we signed a multi-faceted partnership with Adobe. For fiser will be utilizing a doobies industry-leading marketing. Automation tools to drive lead generation within our commercial mid-market segment.
Speaker Change: Additionally, Fiserv has been named a gold partner in adobe's partner. Ecosystem supporting the rollout of our newly launched Commerce Hub. Plug-in built on Adobe Commerce.
Speaker Change: Commerce Hub is now live across North and South America via single integration point for multi-regional customers and we expect our first major client to go live on this platform shortly.
Speaker Change: ATI on our way to a single Global platform.
Speaker Change: And lastly, our bill or business is performing well with a growing pipeline.
Speaker Change: In Q2, we signed a leading insurance provider, Eerie Indemnity Company on the strength of the value added Solutions. We've been adding to the platform.
Speaker Change: Now, let's move to the Financial Solutions segment where we are focused on 3 key initiatives.
Speaker Change: Staining leadership and issuing payments and banking.
Speaker Change: Driving adoption of cash flow Central and XD and advancing Crossfire Solutions.
Speaker Change: On the first initiative, we are pleased with our continued momentum in the issuing business. With new clients and data initiatives, offsetting a more moderate pace of growth and active accounts, relative to the expectations. We had built into our guidance.
Speaker Change: We believe this reflects some macro uncertainty as consumers and issuers, effectively manage their risk.
Speaker Change: We can continue our long-standing partnership with synchrony 1 of the largest consumer finance companies in the US working to implement their strong pipeline of new products and capabilities.
Speaker Change: Including a new program to become the exclusive issue of 1 pay credit cards at Walmart.
Speaker Change: America First Credit Union, a 22 billion Utah, based institution on a journey to modernize and bring the next generation of innovative credit and debit products to its members selected, Fiserv or issuer. Credit processing, tokenization, and additional services.
Speaker Change: We also continued expand our government business as a federal government increases, its adoption of card and digital payoffs.
Speaker Change: And finally, we are pleased to send our contract with Jack Henry, a long-standing partner for issuer processing via Valera.
Speaker Change: Outside the United States, we extended our long-term relationship with DBS. The largest bank in Southeast Asia. Signing, a multi-year contract extension including modernizing their credit card technology stack.
Speaker Change: We made meaningful progress in Q2 on our card issuing platform modernization with both Optus and vision. Next?
Optus which serves 25 of the top 50 issuers in the US and many of the leading retail private label players.
Speaker Change: Within the midst of a multi-year upgrade with our first client set to go live later this year with new Phase 1 capability.
Speaker Change: Meanwhile, we expect to launch our next Generation Cloud native Global issuing platform Vision. Next in Q4,
Speaker Change: We will integrate Vision x with finsac and payfair provide a unified Next Generation, embedded Finance solution.
Speaker Change: In banking, our Cloud native, open API core platform, finsac continues to gain momentum with banks, fintechs and embedded Finance. Participants
Speaker Change: In Q2 we signed 3 significant contracts including a prominence sponsor bank that supports multiple well-known fintech companies and a large Healthcare Finance Company looking to provide banking services to healthcare payer and provider clients.
Speaker Change: Sending to our next initiative around cash, flow Central and XD growth.
Speaker Change: We remain highly encouraged by client interests signing and the size of our pipeline.
Speaker Change: Nashville Essentials signed 23 new clients, this quarter
Speaker Change: After 15, in q1, for a total of 77 clients added since launch.
Speaker Change: And we have nearly 500 more in the pipeline.
Speaker Change: Earlier this month, our largest clients signed to date US Bank.
Speaker Change: Became the second Bank to go live on cash flow Central.
Speaker Change: Millio, our key partner for cash, flow Central, and a portfolio investment for fiser. Announced an agreement in June to be acquired by zero a popular, SMB, accounting software provider.
Speaker Change: We expect millio to operate as an autonomous business unit within zero with strong alignment and incentives to deepen, the Fiserv partnership.
Speaker Change: Zero has expressed full support and enthusiasm for a shared future with fiser and we are very excited to work. Alongside them
Speaker Change: while demand for XD remains strong, we have not completed as many client implementations as we had planned so far this year,
Speaker Change: we continue to feel great about the quality of XD.
Speaker Change: It is just a matter of timing and realizing the revenues as we complete key, enhancements and Integrations and pursue high quality implementations,
Speaker Change: Creating a new channel for Clover, acquisition in our partners, digital environment.
Speaker Change: We are seeing great interest in this feature.
Our third initiative is to advance Crossfire Solutions and our announcement of Phi USD in June is a great example of our capability.
Speaker Change: Fee USD is a white labeled stable coin integrated into our Banking and payments infrastructure to enable real-time 24/7 settlement and digital asset capabilities.
Speaker Change: With effective, we combined assets of our businesses, including finsac, payfair and commerce sub.
Speaker Change: And began working with industry-leading Partners like Paypal, Mastercard Circle and paxis.
Speaker Change: The move reflects our broader strategy to support all payment types, while helping financial institutions and Merchants meet evolving. Customer needs and Technology developments.
Speaker Change: Early client interest has been very encouraging and we expect to launch a pilot with several clients by the end of 2025.
Speaker Change: Overall, I'm encouraged by our positioning and opportunity set as I look out over the next several years.
Speaker Change: We are hard at work. Fine-tuning our strategy carefully. Listening to our clients and Investing For where we think the industry is headed.
Speaker Change: We are privileged to have a leadership position across many of our businesses and we are confident, we can deliver consistent durable growth and value to our shareholders.
Speaker Change: I look forward to diving into my first annual strategic planning cycle with the fiser team in the coming weeks.
Speaker Change: And to sharing more with you on how we'll extend our leadership into the next generation of Commerce, payments, and financial technology.
Finally, I want to thank our talented employees for their continued hard work and commitment, which contributed to our achievements, this quarter and to fiser being named 1 of time. 100 most influential companies
Speaker Change: With that I'll hand the call over to Bob, who will share more on the financials.
Thank you, Mike and good morning, everyone.
Speaker Change: If you're following Along on our slides, I'll cover additional details on total company and segment performance.
Speaker Change: Starting with our financial metrics and Trends on slide 4.
Speaker Change: We delivered another strong quarter highlighting our consistent ability to grow revenue, and expand margin.
Speaker Change: Second quarter total of company, adjusted Revenue grew 8% to 5.2 billion dollars and adjusted operating income. Grew 12% to 2.1 billion dollars resulting in an adjusted operating margin of 39.6%.
Speaker Change: An increase of 120 basis points versus the prior year.
Speaker Change: For the first half of the Year adjusted Revenue grew 7% to 10 billion and adjusted operating income grew 11% to 3.9 billion.
Speaker Change: Resulting in an adjusted operating margin of 38.7% an increase of 150 basis points versus the prior year.
Speaker Change: Organic Revenue grew 8% in the quarter driven by solid performance in both segments.
Speaker Change: To the first 6 months for organic Revenue. Also grew 8%.
Speaker Change: Second quarter adjusted earnings per share was $2.47 compared to $2.13 in the prior year of 16%. And in line with our full year, growth guidance of 15 to 17%
Here today, our adjusted earnings per share, increase, 15% to $4.61 compared to $4 in the prior year.
Speaker Change: Free cash flow for the quarter was 1.2 billion dollars and 1.5 billion dollars for the first half of the year.
Speaker Change: As we said, in previous earnings calls, we expect an increase in free cash flow in the back half of the year, which reflects typical seasonality for us.
Speaker Change: Including the timing of inflows related to the green tax credit initiative.
We continue to expect approximately 5.5 billion dollars of free cash flow.
Speaker Change: Returning to performance by segment.
Speaker Change: Starting on slide 5 or organic Revenue growth in the merchant Solutions with 9% in both the quarter and year to date.
Speaker Change: this compares to 28% growth in Q2 24, when excess inflation and interest in Argentina, and the Dollar Tree star program contributed to 12 points of Revenue, organic growth
Speaker Change: Inflation and interest rates in the country are now below the 5 year historical average. And the Dollar Tree stuff is much smaller than the prior year.
Speaker Change: Was 10% in the quarter and 8% year to date.
This growth includes 55 million in inorganic revenue from the CCB acquisition in Europe.
Speaker Change: Partially offset by an fx headwind.
Speaker Change: Moving to the business lines.
small business, organic Revenue growth in the quarter was 9%, while adjusted Revenue, grew 11%, and 9%, volume growth, which includes volume from our recent acquisition,
Speaker Change: This performance was largely driven by continued strength in Clover supported by direct and partner sales, expanded vertical coverage and continued strength in the adoption of value, added services, that reinforce Clover's role as a full business operating system.
Overall Revenue grew 30% in the second quarter on annualized, reported payment, volume growth of 8%.
Speaker Change: Excluding the Gateway conversion, the volume growth in Q2 255 was 11%.
And on slide 6, as Mike said earlier, we expect volumes to accelerate in the second, half driven by a number of strategic initiatives.
Speaker Change: putting us on track to deliver at least 9% reported volume for the full year and at least 11% growth, excluding the Gateway
Speaker Change: The Gateway impact to reported volume growth was a little over 3 points in Q2 and is expected to decline. Gradually through the second half and Beyond with the magnitude dependent upon retention of the converted Merchant base.
Fast penetration State constant sequentially at 24% and it was driven by a working capital products Clover, Capital rapid deposit and anticipation.
Speaker Change: We remain on track to meet our 2025 Target of 25%.
Non Clover, SMB Revenue grew a low single digit pace.
Speaker Change: Enterprise organic, and adjusted Revenue growth in the quarter was 12% and 8% respectively.
Speaker Change: Driven by transactions growth of 14% and continued traction with Commerce health.
Speaker Change: We continue to advance e-commerce capabilities within the platform.
For instance, this quarter, we delivered a hosted checkout experience, which redirects the customer to a secure branded checkout page. Merchants can customize the page design using the checkout configurator tool
We also expanded our optimization via Ai and machine learning helping our clients to recover, declines, and increase savings through intelligent routing.
Speaker Change: Finally Processing organic and adjusted Revenue in the quarter, grew 5% and 7% respectively.
Speaker Change: Driven in part by hardware sales as well as an easier comparison, as we start to lap the impact of strategic changes by clients who exited certain types of business.
Speaker Change: Your today Processing organic and adjusted Revenue are both down 1%.
Speaker Change: Similar to our guidance for roughly flat organic Revenue over the medium term.
Speaker Change: Second quarter adjusted. Operating income for the merchant Solutions, segment was up 4% to 914 million and adjusted operating margin was 34.6% down, 200 basis points from the prior year,
Speaker Change: Year to date. Adjusted operating income. For the segment was up 4% to 1.7 billion dollars with adjusted operating margin down, 100 basis points to 34.4%.
Speaker Change: The decline in Q2 adjusted operating margin, reflects, multiple factors including investments in marketing and sales and distribution.
The impact of the CCB acquisition and increased investments in new software and Hardware.
Speaker Change: Turning to slide 7 on the financial solution segment, organic Revenue, grew 7% in the quarter and 6% year to date.
Speaker Change: in line with our full year, outlook of 6 to 8%
Speaker Change: The quarter's results were driven by a strong growth in issuing and digital payments business lines.
Speaker Change: Looking at the business lines, digital payments organic and adjusted Revenue each group by 6% in the quarter.
Speaker Change: Results were driven by strong growth in zelle transactions up 19%. Partially offset by lighter debit card spending.
Speaker Change: Demand for real-time payments continues to rise and our star and Excel debit networks are seeing increasing transaction volumes as they continue to add cards.
This above average, growth was driven by sales of our data and analytics which is relatively new offering in its early stages of commercialization.
Speaker Change: While we're excited about our long-term prospects. Here, revenue is expected to be implemented as this project-based Market matures and will not drive this level of consistent Revenue growth.
Speaker Change: Each quarter new verticals, such as Healthcare and government. Continue to ramp while our Education Loans business. Just completed a migration cycle for a new portfolio of accounts.
Speaker Change: As a reminder, will Q2 represented. Our first full quarter of Revenue since converting the target Circle card portfolio in March.
Speaker Change: That growth was offset by the loss of a large retail card portfolio. As that client was required to move to, its banks processing partner.
Speaker Change: Banking organic and adjusted Revenue was flat in the quarter, reflecting 3 primary trends.
Speaker Change: First, some slower than expected implementations.
Second less activity in the market and third, some greater pricing competition in particular areas, which has been heightened by slower activity.
Speaker Change: We continue to make progress on our core strategy.
Speaker Change: With finsac, we see strong growth opportunities and embedded Finance, International Banking, and the potential for a large Bank core upgrade cycle.
Speaker Change: And as we've said in the past, the nature of this business line is such that it will be slower than average segment growth, but drive growth in other business lines.
Second quarter, adjusted operating income. And the Financial Solutions segment was up 14% to 1.2 billion dollars and adjusted operating margin was 48.7%.
Speaker Change: Year to date adjusted operating income. For the segment was up 14% to 2.4 billion dollars with adjusted operating margin of 310 basis points to 48.1% reflecting the high margin data and analytics projects mostly in Q2 as well as cost inefficiency actions.
Speaker Change: Now, let me wrap up with some remaining details on the financials.
Speaker Change: The corporate adjusted operating loss was 99 million in the quarter and 249 million year to date in line with our expectations.
The adjusted effective tax rate in the quarter was 18.9% and 18.5% for the first half of the year.
Speaker Change: And we continue to expect the full year rate to be approximately 19.5%.
Total debt outstanding was 29.6 billion on June 30th.
Our debt to adjusted, even our ratio was steady at 2.9 times within our Target, leverage range of 2 and a half to 3 times.
Speaker Change: During the quarter. WE repurchased 12 million shares for 2.2 billion dollars bringing our total cash return to shareholders for the last 12 months to nearly 6.9 billion dollars.
Speaker Change: We had 56 million shares. Remaining authorized for repurchase at the end of the quarter.
Speaker Change: As Mike said, we now expect to return more cash to shareholders this year through share repurchases, reflecting our strong balance sheet and cash flow in a disciplined, evaluation of the opportunities in front of us.
Speaker Change: We previously expected to return approximately 110% of free cash flow back to shareholders through Sheri purchase.
Speaker Change: And we now expect to return approximately 130%, which aligns to the upper end of our targeted, leverage range.
Speaker Change: We are raising the bottom end of our adjusted earnings per share guidance range to $10.15 from $10.10 while maintaining the high end of the range at $10.30.
Speaker Change: The change reflects the refining of our organic Revenue growth. Expectations to the bottom of our prior guidance, range offset by the benefit of higher. Share repurchase activity.
Speaker Change: We continue to expect an acceleration in organic Revenue growth for the second half of the Year particularly in the merchant solution segment.
Speaker Change: Based on this, we expect both segments to grow toward the low end of their guidance. Ranges for organic Revenue growth with Merchant Solutions towards the low. End of the 12th. To 15% organic Revenue growth outlook for the year and Financial Solutions organic Revenue growth. At the low end of the 6 to 8% range.
Speaker Change: The net effect will be expected, total company, organic Revenue, growth of approximately, 10% at the bottom end of our original guidance of 10 to 12%.
Guiding to approximately 100 basis points rather than at least 125 basis points of adjusted operating margin expansion this year, the change reflects the projected impact of the 4 recent acquisitions.
Speaker Change: The refined organic Revenue growth rate and Investments to support new product, launches, and implementations.
We anticipate margin Improvement on these Acquisitions, as we work through integration and Synergy that will benefit next year and Beyond.
Speaker Change: With that, I'll turn the call back to the operator to start Q&A session.
Operator, let's open the line for questions.
Thank you. We would now like to open the phone lines for questions as a reminder for today's call. Please limit yourself to 1. 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 would like to withdraw. Your question, press star 2, our first question comes from Timothy chyodo from UBS. Please go ahead.
Timothy Chyodo: Great. Thank you for taking the question. I want to start by digging into Clover capital a little bit more so you've talked about being meaningfully underpenetrated versus some of the peers. When we look at toast and square, we would agree that you are well below their penetration levels in capital. Could you talk a little bit about some of the activities that you're doing to unlock that Tam? In other words, We Gather that with some of the wholesale isos or potentially Bank Partners, you're not able to access the full set of merchants to sell them covert capital and we got
Timothy Chyodo: Whether there are things that are happening to help unlock some of that, maybe you could put some context around that level of penetration today and where you could see it getting to uh over the medium-term thanks.
Speaker Change: Yeah, thank you. Uh, congratulations, Mike. Um, first of all, we uh, we're pleased with the progress we made in Clover. This quarter continued to be on Pace for 3 and a half billion dollars of Revenue this year and uh the the growth plan around that as as we said uh over the last several months is a combination of horizontal expansion, uh added home bases quarter, vertical expansion. Uh we did rectangle, which we're thrilled with to take us in to the healthcare space. Uh launched Global Hospitality earlier in the quarter, uh, Geographic expansion in the markets there, uh, and then building out the distribution channels. We talked about US Foods the agreement with TD and then it's in and around operational excellence within um,
Speaker Change: Within the products where we think we're the most underpenetrated, uh, as you pointed out is, is clover Capital. Uh, and the, the essence there is if you go into both, our non Clover, S&B based in a clover, S&B based very low, uh, penetration. Uh, we take, uh, we're very prudent, uh, with our risk management there. And then uh, there are a number of practices that we've put in both on the pro uh behaviors and uh on the uh around interact club or capital in terms of how we go about making the offers operationally, uh, how do we negotiate with our Merchants? How do we present?
Speaker Change: Those and how do we price this made a number for 5 minutes as beginning? This quarter. Uh, but we're just at the beginning stages of a, a much more holistic thought process around flow for Capital and ultimately, uh, we think there's a lot of ground to take within our current risk capital. And then over time whether uh, you can expand that risk. Appetite some, we obviously, given the penetration rates, we are taking less risk today than than our competitors are. So, uh, we think it's a value added product to our Merchants. Uh, they, they like it, they depend on it. We think that Tam there is significant and uh, we're going to make a series of operational pricing and uh, risk management, uh decisions, uh, over the next coming months and and quarters. And we think the progress will be good there. But what came into this quarter was were just at the very beginning effort to that.
Speaker Change: Thank you, Mike.
Speaker Change: Next, we'll go to the line of Darren Peller. From Wolfe research, please go ahead.
Thanks guys. Um but the overall growth rates on the business continued to be sound but I think there's an expectations change occurring that investors are digesting right now. So maybe just help us understand a little bit more. Specifically, what changed from the beginning of the year until now on the merchant growth rate? And and again just reiterate Bob, if you can the merchants margins
Speaker Change: And just help us understand the building blocks.
Speaker Change: For Clover growth and overall Merchant growth both. If you look at the Clover volume side, why is the adjusted verse reported? Volume still different in the second half.
Speaker Change: And then more importantly, just looking at Clover Revenue. If you could break down Hardware, vast payments for the rest of the year growth rate, wise
Speaker Change: Uh, and the conviction you have around the guy for the rest of the year.
Speaker Change: Thanks guys.
Speaker Change: 12%. Um, just a couple comments there, you know, I've been in the seat for about 10 weeks now, I've had the opportunity to better understand the key drivers of our business, the status on the Strategic initiatives, uh, and then what was embedded in the full year, guidance, and that full year guidance, always, uh, anticipated a big rant in growth in the back half of the Year based on the roll out of a whole bunch of projects and and initiatives. Uh, it was a granular list is very strong list that we had the ability to re-enter right study all of our initiatives and their great initiatives. Uh it's just a matter of the timing of getting them to Market. So as I said a minute ago, we're still confident we're get to full Financial uh and strategic benefits of all those initiatives. Uh
Speaker Change: And uh, it's just a matter of timing. And um, again we feel very good about it and the pipelines around the products that we're coming to Market with are very strong, the clients, want them, the technology is good, uh, so we feel very good about it. So the refinements are 10 to 10 10:00 to 10:00. It's just having the benefit of 6 and a half months into the year, understanding where we are in those product rollouts. And then, uh, importantly understanding how we want to roll them out with the quality, which we want to roll them out. So forecast from here, indicates back, half of the Year growth of 12% which led us to uh the the at the original range at the lower end of that General range and uh that's the type of uh type of transparency. We want to give you uh, as we go through the year and see stuff that are able to narrow the range and and the variability around you.
Speaker Change: So, uh, go into a couple of the products. Yeah. Darren I um, well you you got a multi-layer question in there. I think first.
I'll Attack the question around the Clover growth rate and we we reported uh, 30% growth rate in terms of Revenue, an 8% reported volume. Uh, adjusting for the Gateway at 11% so uh continue to see good uh um overall Revenue growth and and that certainly supported by an acceleration of volume. As you know, you know Clover is a hardware and software solution, it's a business. Operating system volume is certainly is an important part of it, but there's lots of Revenue uh in addition to that. And that's where we get into that spread. So to speak between volume and revenue. Volume volume continue to uh, grow this year, excuse me, this quarter. We also see, uh, increasing benefit of value added services at at 24%, fast penetration, it's actually a greater than a 50% growth rate just on the vast line. And that vast, as you know, is software.
Speaker Change: Plus our working capital. We continue to see good growth in our working Capital Solutions and that's rapid deposits, corporate capitalists anticipation. Um, and so we're seeing good opportunity there. Uh, we expect that to continue. We are certainly focused on growing volume, signing up more Merchants, but we're also focused on selling the full operating system. That's
Speaker Change: Hardware and evaluated services and we're seeing the benefit of that.
Speaker Change: In terms of merchants margin, uh, in the second quarter. Uh we did see, excuse me. Did see margins come down about 200 basis points, first and foremost, that's against a pretty tough comp last quarter to be Q2 of last year was up quite meaningfully. And if you look, uh, Q2, 2025 margin of 34.6, that's up, 90 basis points from where we were 2 years ago. Um, we continue to see opportunities to to grow margin, to grow the merchant business, and we continue to invest in that business. Again, in my prepared remarks, I talked about some of the Investments we made in the current quarter around marketing and sales distribution. We're seeing good growth in our ISB business, as well as our Direct business as we build out capabilities there. Um, certainly an impact of the acquisition of CCB, uh, that 1 just closed at the very tail end of q1. Uh, and as
Speaker Change: As you know, the vast majority of our Acquisitions that we do over time, they come in at below company, average, margin, uh, we bring them into the business, we grow them on a scale across the scale business. We improve them through integration and synergies in those margins expand. But where, you know, essentially 90 120 days into that acquisition, uh, and that's certainly, uh, an impact.
Speaker Change: Software capability, uh, new announcement with rectangle Health, adding a new vertical and Healthcare. Uh, the TD partnership, the partnership, with Adobe all of those take uh, Investments both in uh, product development, implementations and go to market. And so we're investing behind that those new growth opportunities.
Speaker Change: Thanks guys.
Speaker Change: Thanks Darren. Next next, we'll go to the line of tingen Wong from JP Morgan. Please go ahead.
tingen Wong: Thanks a lot. Just want to get a little more detail on.
Speaker Change: What initiatives are are being extended? Exactly. And I think Mike, you mentioned that some of it was on Fiserv, can you elaborate on on that and, and what you're doing to address it? Is it a budgeting issue or is, is there, you know, something more specific to, to that just trying to like, Darren asked get a little bit more, uh, understanding on on your conviction on the, on the new outlook.
Speaker Change: yeah, I I I as a uh,
Speaker Change: Was just saying that, you know, we went into the year, the year was built on a back half of the year plan with a lot of granular. Very attractive, very compelling initiatives, no, major, uh, 1 or 2 items but a very long list of initiatives and as you go through, uh, the planning and have the benefit of half the year. And you look at this where the roll out uh of those uh initiatives are uh in terms of timing and how we want to do it in terms of quality for
The client scalability, uh, and The Client First mindset.
Speaker Change: And then you roll forward, the rest rest of the year. Uh, it puts us at the bottom end of the original 10 to 12, uh, percent range just in getting those, uh, products to Market, uh, and realizing the revenues, there isn't a quality issue with them. It's not products that have gone to Market and not generate the revenues. We thought it's just getting, uh, the products uh, to Market. And as, as I said, some of that we control, we can execute faster, better greater sense of urgency and some of it. But we don't, because we're integrating with Partners, uh, contract signings, how do people respond, uh, to an uncertain macro in the second quarter, obviously more clear now. So, lots of factors that go in there. Uh, what we did with this is we said, when you look at, uh, our most current plan and the rest of the year, we're confident that, uh, we we've captured, what we will roll out and realize in Revenue this year. And then importantly, as you go, uh, forward, all of those Pro uh, initiatives I said we've had a great chance to re-enter item re-study them, uh, and and they're good, they're really great products with whether we're redefining how small businesses
Speaker Change: Uh, manage cash with cash flow Central where uh, resetting the, you know, all parts of how small businesses run their businesses off the uh, Clover platform and and the attributes we're going into their we're introducing.
Speaker Change: Uh, uh, you know, a digital payment Rail and I did, uh, USD. These are all great products. Uh, resetting our digital platform and banking, so we'd like all the products. It's just we're giving you the most updated look, uh, on timing and obviously, when we started the year, you give a wider range and as you go through the year and and get a better sense of, uh, where things are, we're able to narrow the range level. I think, uh, to a lesser extent, uh, we started the year with some macro assumptions around certain activity levels in in parts more more. So in the fee business, where do card accounts on file with rebound, off a cyclical low. You'd see greater activity in in certain of the digital payment Dice and maybe a a faster and and more robust upgrade cycle, in certain parts of corn and Surround Bank technology and um, obviously the well it's strong today. The economy is taken an uneven path to get here and we just factored that into the future outlook.
Speaker Change: Hopefully that helps. Hey, Jen. I think the way I I I think about it is our original guidance at 10 to 12% are quote, Baseline plan was midpoint 11% to get to 12%. We um, factored in the opportunity for a slightly better macro environment, a little bit faster business, some of the uh credit and course surrounds that Mike just talked about that would have gotten us a little bit, you know, faster stronger would have gotten us to the top end and now that we've seen a bit choppier recovery in the in the macro economy, a little bit slower.
On the initiatives again. Uh, both on things on inside and outside of things in our control and outside our control a little bit slower puts us at the bottom end of the range which is what we're a guiding to at this point.
Speaker Change: Really quick. Sounds like it's not just 1 or 2 initiatives. It's several initiatives and you're just lowering lowering the the curve of of growth expectations across all of that. Thank you.
Speaker Change: If I got that, right? Thank you.
Speaker Change: Yeah, that's right.
Harsha watt: Next, we'll go to the line of Harsha watt from Burnstein. Please go ahead.
Harsha watt: Bob Mike, I want to follow up on Merchants operating margins. I know you talked about, you know, some of the drivers there on the list, with respect to sales and marketing investment CCV and product Investments. The margin Miss was a bit of a surprise. So if would be very helpful if you can quantify, uh, some of the drivers and maybe also talk about Cadence from here and also um, was just kind of merchants margins in line with your expectations for the quarter, as you were kind of thinking, you know, thinking about it 3 months ago. Thank you.
Speaker Change: Yeah. RC is so um from a, a total company margin uh Outlook
Speaker Change: As you heard, we we've revised our, uh, our guidance, for the full year. Previously, at least 125 basis points to now approximately 100 basis points. Um, certainly an impact again, uh, this impacted Merchant Merchant in the corner but also impacted uh, full year outlook as we get you know, 9 10 months of uh,
Speaker Change: Revenue from those Acquisitions. I, I specifically talked in an earlier question about CCB, but we have 3 other Acquisitions. Uh, that just recently closed, call it the last 90 days. And as you add the, that business call that order of magnitude 20 200 plus million dollars of Revenue at below company average. Um, that's certainly weighs on the overall margin, uh, and add to that that uh, we're not.
Speaker Change: At a 10% organic growth, so we don't have quite as much volume to, um, help override or offset some of that, um, external, excuse me, some of that m&a, activity caused us to take the full year down, uh, from that 125 to 100 basis points for the full year. In terms of merchants margin in particular, I'd say generally in line with what we expected. Well, again, when you layer in the Acquisitions, uh, look at some of the Investments, we're making, obviously those were intentional decisions,
Both in terms of marketing distribution uh and investments in new products and services. Uh, so uh, overall in line with this we expected other than um obviously taking the full year in terms of uh,
Speaker Change: A fully factoring in the acquisitions.
Dave Coning: Next, we'll go to the line of Dave coning from beard. Please go ahead.
Dave Coning: Yeah hey guys, thank you and you know just looking at Merchants again just the the pure mass of Revenue growth of of 9% in the first half and 12%, guidance for the full year, puts the second half at Mid teens, and I'm just wondering, I guess a, if there was anything unnaturally low in the 9%, for the first half and B, if there's anything unnaturally high in the second, half really, what's driving that 6% acceleration and is that the starting point really into next year? I mean that would be phenomenally good if uh that's kind of the beginning Point into next year.
Speaker Change: Yeah, David I think, uh, a couple know, I wouldn't necessarily point to anything quote unnatural, uh, 1 of the biggest drivers, of course, is last year. Uh, we had the impact of, um, the transitory benefit of, uh, inflation and interest in Argentina and that, um, that Trend that transitory benefit ease quite meaninglessly, uh, throughout the, the 4 quarters last year and is actually now gone in 2025 and so on a, a comparison basis, each of the 4 quarters becomes an easier compared. And, in fact, at this point, uh, if you look at current inflation and interest rates in Argentina, they're actually below uh, the 5 year average. Uh, things have been proved quite meaningfully, ultimately, that's a good thing for us. Uh, good macro environment, in Argentina is good and and uh, things look, generally, positive there, actually, there's still an a difficult, uh, economic condition in terms of
Recession and whatnot. But, um, that, that, that is a positive for us, on a, on a transitory benefit going away. But, overall economy going away. Secondly, uh, if you look at, uh, first half to second half Clover, becomes a bigger piece of the merchant business, as well as continues to grow. Um, you know, the the second quarter was at a 30%, uh, Revenue growth. We need a pro.
Speaker Change: Expansion. Brazil is going well, that continues to grow nicely that 1 of our uh, 5 new countries, that we expanded Clover too. You heard some of the Partnerships, some of the ADP benefits, Etc. All give accelerated growth. Uh, and then, you know, that's on the, the Clover side, um, in the Enterprise space in merchant, uh, Commerce Hub continues to do well. We've got a number of very large Enterprise clients that are expanding, their use of IE, they've sold out for. So, uh, uh, up for Commerce Hub. They're now ramping that and as they add more capabilities, more, um, uh, stores in Commerce South that expands we talked a little bit in our prepared, remarks around, uh, the international expansion or the globalization of Commerce of adding Latin America. We've got the first large Enterprise client going live shortly on that uh expanded Commerce, sub capability uh and and you know on on
Speaker Change: uh, so we feel good about, uh,
Speaker Change: The opportunity to accelerate both in Merchants as well as in Financial Solutions to get us from 8% in the first half of the year to to 10% for the full year.
Speaker Change: Thanks guys.
Speaker Change: Next, we'll go to the line of Will nonce. From Goldman Sachs. Please go ahead.
Hey guys, thank you for taking the question. Um, Bob I just wanted to ask another question here on the Clover side. Uh, you know, you you expressed a lot of confidence in the ability to hit the 3 and a half billion dollar Revenue Target in 2025. You know, I know that you guys had had some targets out for 2026 as well. I don't think you've addressed those and if I look at where the street is, you know, Street, I think is still comfortably below. Those targets roughly 24%, Revenue growth next year. So just wondering if you can maybe address that and you know, talk to the confidence in that and if if not you know, the street numbers are already kind of below it. Like what do you think is a reasonable Revenue growth rate, you know, for a kind of low double digit volume growth dynamic in Clover, you know, given some of the initiatives you've got on the vast and the capital side but also maybe considering uh you know what seems to be a pretty strong year for Hardware Sales which you know, which maybe less reoccurring as we look forward. Thanks.
Speaker Change: Yeah, thanks well. So, um, certainly not updating, uh, 2026 guidance at this point, but I would certainly point to, uh, a couple of key things. Uh, first and foremost, you know, we laid out the 3 and a half billion dollar goal for 2025 above 3 years ago. And we are exactly on track to deliver. Just that, um,
Speaker Change: We need to continue to do what we did in the first half to deliver the second half to get to 3 and a half billion dollars.
Speaker Change: Obviously there's continued growth to get to the 4 and a half billion dollars. That's the number we put out about a year and a half ago or so. Um, but the things that we are doing now that help us deliver the 3 and a half billion dollars, put us in a good position to deliver the 4 and a half billion dollars next year. Things like the horizontal expansion with home base, um, adding uh, ADP and cash flow, Central capabilities into Clover, the vertical expansion. Um, adding Clover, Hospitality rectangle health, for what we're calling practice. Pay in a new healthcare vertical. Uh, the international expansions, um, we talked about uh, uh,
Speaker Change: The benefit of of Brazil, we continue to see growth across all 5 of the new um, International regions. It's very early stages. So you're getting a little bit of benefit this year that continues to accelerate in the 2026 and Beyond. Um, and then we're also expanding our distribution Channels with the announcement of the US Foods, for example, um, a new, uh, sharing partner, TD Bank, uh, building out our direct channel so, uh, absolutely online, uh, to deliver at 3 and a half billion dollars. The number. We set out 3 years ago, uh, and and things that we're doing this year, uh, help us grow the balance of this year. Second half.
Speaker Change: As well as into 2026. I think if you go back to Ting Jin's Point there's we are doing lots of things on the Clover. Platform across these 5 or 6, major areas to drive a business operating platform, not a point of sale.
Speaker Change: Bringing more AI to Clover, whether whether it's in inventory, optimization smart menu, Builders, uh, uh, helping businesses manage, uh, optimally manage their Staffing. Uh, how do you deliver better service and support to them? So it's an evolution, but I think the important takeaway is, we're building a business operating system. Uh,
Speaker Change: Tam in the United States, we're less than 10% penetrated. Their we're almost zero internationally. Uh, and, uh, we're going after an opportunity to help businesses. Run better not, uh, some type of Race To on a point of sale software to the point, they'll, uh, de Hardware software device. So, that that's the approach we're coming out of with, and it's exciting. Clover is an incredible platform and we'll just to add to that. Um, you know, oh, oh overall, we talk about Clover operating system. It's a payments. It's a software. It's a hardware solution. Uh, your your question about Hardware being good growth this year. Absolutely. Um, your, your comment about that will not likely reoccur. I, I'll gently disagree with this is a hardware business with software and and payments. Uh, we first of all, we make good margin on our Hardware, um, it it is not something we quote give away. It's not a lost leader and our Hardware. If you look at the hardware,
Revenue as a percent of overall Clover Revenue. It's been relatively consistent in kind of the mid teens range for a few years. Uh, we continue to invest in developing new hardware. We think we've got a best-in-class world-class hardware, and we continue to uh, build out that capability and provide that uh, best-in-class Hardware to our client base. So we think that continues to sell into the future.
Speaker Change: Got it. It's helpful caller. Appreciate it. Thanks guys.
Speaker Change: Thanks a lot and for and our for our final question we'll go to the line of Andrew Geoffrey from William Blair, please go ahead.
Thank you, uh, good morning. Appreciate it a question on, uh, Clover value, added services and and maybe just the the competitive environment. Uh, Bob as, as you see, uh, more International expansion, some of the growth initiatives gained Traction in Clover. Is it possible? That that value added Services attached, maybe dips before going back up again. I'm just so sort of adoption of those services and then just generally in the US, any commentary on the software integrated competitive environment. Um, is it stable, is it changing a little bit at the margin? Any help there would be great. Thanks.
Speaker Change: That's my thought, if I can, uh, come back in on it. Uh, obviously, um,
Speaker Change: You know what I just talked about is the continued continuing to serve as a business platform, we have to continue to build, uh, value added, uh, services within the vast book, and there's a tremendous amount of focus around that internationally, uh, in the markets we've gone into, uh, so far internationally, it's a less robust, uh, bass, uh, portfolio. So it's both expanding internationally and building.
Speaker Change: Uh, and building out the vast on the international side. So hopefully, we see, both of those grow over time. They should if, as the efficacy of the platform, uh, plays out with small businesses. So, um, we're very excited, not just in the US but to really bring best to, to, to the external, uh, markets versus where it is today. Um, and you, you know, that, that that that's a Hallmark of what Clover is, um, on the competitive landscape. We've got great competitors. I think our Focus uh, is going after businesses and helping businesses run their uh, businesses better versus, uh, some type of competitive Dynamic. There's great other platforms out there whether it's in specific verticals, uh, or or more broadly, and we think we've got a platform that can go globally and there's plenty of Pam, uh, to go after, uh, on that front. So, uh, again, less than 10% share in the US 0% share, uh, in in in the uh, external markets. So, the ability to penetrate and bring value added, uh, to small businesses is
Speaker Change: We just feel like we're fairly scratching the surface of that, uh, opportunity.
Speaker Change: All right, seems like a big Market, I think in terms of the vast, you know, uh, US versus global certainly, the US business, uh, US market is more mature in terms of the value, added services and and software, uh, operating system capability and it varies by uh, countries by region across the globe as well as varies in our offering.
Speaker Change: Say, you don't see a lot of that taking place because it's not available.
Speaker Change: Um and so we see that as an opportunity going forward, if you think about you know software may be a little less so but uh working capital support is is much more of a global opportunity for us. Yeah. Yeah, the comparable other Market is Canada. And again, we're excited this morning to not to partnership with TD to really build out and distribute, uh, Clover further in that market where we've, uh, as I said, we've generated really good growth over the last 5 years of being there with the constant increasing, availability of that.
Speaker Change: Thank you. I appreciate it. All right. Uh, thank you and uh just to all of those on the call today. Thank you for your interest in our our, our team is available for any further questions. Have a great day
Speaker Change: Thank you all for participating in the Fiserv second quarter 2025 earnings conference. Call that concludes today's call, please disconnect at this time and have a great rest of your day.