The operator welcomes participants to the Fiserv second quarter 2024 earnings conference call and reminds them that the call is being recorded. The call is then turned over to Julie Chariell, Senior Vice President of Investor Relations, who introduces Frank Bisignano, Chairman, President and CEO, and Bob Hau, CFO. The earnings release and supplemental materials are available on the company's website. Julie also mentions that the discussion will include forward-looking statements and refers listeners to the earnings release for a discussion of risk factors. Frank then discusses the strong second quarter results, with adjusted earnings per share up 18% and organic revenue growth at 18%.

The second paragraph highlights the successes of Fiserv during the quarter, including growth in Clover revenue and new clients in various industries. The company also celebrates its 40th anniversary and fifth anniversary of the merger with First Data. The company's vision of providing a wide range of solutions and becoming a global partner has been realized, and they continue to invest in technology innovation. Fiserv has disrupted itself to better serve clients of all sizes and industries and has demonstrated accelerated growth in the past three years. The paragraph also mentions how clients are using Fiserv's traditional businesses in new ways to attract and retain their own customers.

In the third paragraph, the article discusses how banks are adding merchant acquiring services in order to grow with small and medium sized businesses. They have chosen Fiserv for its leading solutions, including Clover. In addition, Fiserv has signed a merchant agreement with COCC, a provider of banking technology, giving access to acquiring services for 150 community banks and credit unions. The second part of the paragraph discusses CashFlow Central, which has been signed by two more multi-billion dollar banks in the second quarter and will go live this quarter. This solution aims to turn consumer bill pay into a revenue generator for small businesses. First Citizens, a top 20 U.S. bank, was a consumer bill pay win in Q2. Fiserv is also the largest provider of bank consumer bill pay services with over 20 million users on their check-free platform. Both merchant acquiring solutions and CashFlow Central provide revenue generating opportunities for financial institutions and offer a distinct value proposition for small businesses.

The company is integrating their solutions with Experience Digital, a new online and mobile banking platform. They are also seeing an increase in large and midmarket merchants using their value-added solutions such as SnapPay, gift solutions, and data analytics. The company continues to invest in new solutions, including a partnership with Apple to offer pay with points and installment loans on credit cards. This is a differentiating feature as it allows consumers to pay for purchases in installments at checkout.

Fiserv is partnering with Apple to offer an installment loan feature at the point of purchase, which can drive card conversion and usage. They are raising their earnings outlook and have seen growth in their small business segment. They also have plans for new product rollouts in the second half of the year, including restaurant software features and new hardware opportunities.

In this paragraph, the author discusses the recent developments and growth in various areas of Fiserv's business. These include the launch of the Clover Compact and upcoming Clover Flex Pocket for smaller merchants and restaurants, as well as international expansion plans. The company's Commerce Hub and financial solutions segments have also seen strong growth, with new clients being added. Additionally, Fiserv has won a strategic outsourcing agreement with Verizon to support their device financing activity.

The company has been successful in expanding its issuer and loan processing capabilities into new industries, as seen in their recent deal with an industrial equipment manufacturer. The company's financial performance in the second quarter was strong, with a 7% increase in adjusted revenue and a 12% increase in adjusted operating income. Organic revenue also grew by 18% in the quarter, with a contribution from Argentina. Adjusted earnings per share increased by 18% in the quarter and free cash flow was $1 billion. The company expects free cash flow to increase in the second half of the year due to the timing of cash flows for a green tax credit program.

In the merchant solutions segment, organic revenue growth was 28% in the quarter and 32% year to date, with a 10-point benefit from above average interest and inflation in Argentina. Adjusted revenue growth was 9% in the quarter and 11% year to date, with a 19 percentage point currency headwind largely from the Argentine peso. Small business revenue grew 35% organically and 13% adjusted, with Clover revenue growing 28% and VAS penetration staying constant at 20%. Enterprise revenue grew 27% organically and 9% adjusted, driven by transactions growth and higher VAS penetration. Both segments saw some transitory benefit from excess inflation and interest in Argentina.

In this paragraph, the company discusses their satisfaction with the growth and uptake of Commerce Hub, with daily transactions increasing by 3.5 times. They also mention the popularity of three enhanced solutions: pay by bank, online EVT, and digital payouts. However, they note a decline in processing revenue due to a few large clients experiencing declines in volumes and revenue. In terms of international merchant highlights, they mention an improving business tone in EMEA and partnerships with BNP Paribas and H&M Group in Germany, as well as a business transformation program with Lloyd's Banking Group in the UK.

Fiserv is expanding its services globally, offering tailored solutions such as Clover, dynamic currency conversion, and merchant cash advance to new and existing merchant relationships. They have been selected by Deutsche Bahn, extended their relationship with Absa, and extended their merchant acquiring relationship with Żabka Polska. In Brazil, their Caixa relationship has begun to ramp with a 20% growth in Q2, and they have gone live with their Pix platform to act as a payment service provider. They continue to see growth in instant payment transactions in Brazil and Argentina, and have launched a pilot for merchant acquiring services in New Zealand.

The company plans to target a variety of merchants, including those in the hospitality and retail sectors, ecommerce-only merchants, and other partners. In the merchant solutions segment, adjusted operating income and margins have increased significantly. In the financial solutions segment, organic revenue grew in line with expectations, with digital payments and issuing showing strong growth. The company also saw success in the government sector, winning large programs and achieving double-digit growth in the federal market.

In the second quarter, our company had several successful deals in the merchant side of the business, including wins in Texas, Arizona, North Carolina, and San Francisco. We also made progress with previous large wins and are investing in international expansion. In banking, organic and adjusted revenue grew 6% and 4% respectively. We had two Finxact wins, including one with a $7 billion bank. Our financial solutions segment had a 6% increase in adjusted operating income and a consistent adjusted operating margin. The corporate adjusted operating loss was in line with expectations. The adjusted effective tax rate for the quarter and first half were 19.9% and 18.1% respectively, with an expected full year rate of 20%.

In the second quarter, the company had a total debt of $25.5 billion, with a steady debt to adjusted EBITDA ratio of 2.8 times. They also repurchased 10 million shares for $1.5 billion and have authorized 32 million shares for future repurchases. The company has raised their full-year adjusted earnings per share outlook and expects an accelerated growth of 15% to 17%. They are maintaining their 2024 organic revenue growth outlook and have raised their estimate for adjusted operating margin expansion. However, there has been a faster than expected decline in excess inflation and interest in Argentina, resulting in a lower revenue contribution this year. Despite this, the company is able to maintain their organic growth guidance due to their diverse product portfolio, resourceful management team, and global reach. They have offset the lower inflation and interest benefit in Argentina with other sources of growth.

Fiserv is expecting 11% to 13% organic growth in 2024, in line with their medium term guidance. They have made changes to their cash flow reporting, which has affected their free cash flow outlook. Fiserv sees potential for growth in data intelligence and has been investing in this area for the past three years.

Fiserv has a mandate to use its data from transactions and account processing to provide actionable intelligence for clients. The company's data is real-time, granular, and multi-faceted, making it powerful for anti-fraud solutions. They have already launched the Fiserv Small Business Index and are working on supporting clients with their AI journeys. The company's integrated platforms and scale give them a significant opportunity in the data and intelligence market. The success is attributed to the hard work and commitment of their 40,000 employees.

The speaker thanks the audience for their time and announces that the phone lines will now be open for questions. A question is asked about the company's international expansion plans in Brazil and Mexico, and the speaker responds by stating that these markets will be launched as a pilot in August with a full ramp up in 2025. They have high expectations for growth in these markets and also mention plans for a launch in Australia in September.

The speaker believes that there will not be much growth this year, but expects better results in 2025. They mention the strong demand for their services and thank a questioner for their support. They then congratulate the questioner on their retirement from Evercore after 29 years of covering Fiserv and 32 years of covering First Data. The questioner thanks the speaker and expresses their continued interest in the company's progress. The speaker then answers a question about margins and clarifies that the increase is due to various factors. They also clarify that the merchant processing issue is not related to bank losses.

Bob Hau, speaking at a conference, clarified that the margin outlook for the bank is positive due to increased revenue and ongoing productivity. However, there has been a decline in volume for the processing business line, which is expected to remain flat going forward. On a separate note, Jason Kupferberg from Bank of America Merrill Lynch asked about the underlying metrics for small business volume growth and enterprise transaction growth.

In the second quarter, the company experienced a slowdown, which could not be fully explained by the leap year. The CFO, Bob Hau, stated that the slowdown was seen in both the small business and enterprise segments, but it was in line with their expectations. The company is maintaining their full year organic growth rate and is encouraged by the normalization of growth in Argentina. The CEO, Frank Bisignano, also mentioned that their numbers do not exactly mirror the FSBI due to their international presence and strong performance in certain verticals. They saw a slight slowdown in July, but it was in line with the second quarter and slightly ahead of June.

The speaker discusses the slowing in credit originations across their book and mentions that they have a strong hedge. They also mention their CashFlow Central product, which is about to go live and has already secured six large clients. The product will be monetized through subscription fees and transaction fees, and the company's pipeline for this product is strong. They also mention their SMB bundle, which will be brought to Clover and their ISV channels.

The SMB bundle will include four products - Clover, CashFlow Central, Active D, and Spendlabs. This bundle is unique in the market and has been well received by financial institutions. The strategy is a long-term growth engine for the company and has already attracted six large banks. CashFlow Central is a standout product and will generate revenue for both the banks and the company.

In a recent earnings call, CEO Frank Bisignano discussed the growth of Fiserv's banking sub-unit, which saw a 4% increase in revenue. This growth is attributed to high demand for the company's services from financial institutions, as well as recent wins in the marketplace and improvements in service delivery. Bisignano also mentioned the success of their relationship management model and expressed confidence in their ability to continue growing in this segment. Analyst Darrin Peller asked for further updates on the financial solutions segment, specifically mentioning the strength of CashFlow Central and Zelle implementations.

Bob Hau, from the financial solutions segment, discusses the driving forces behind the expected growth in the company's financial solutions segment. He mentions that the current outlook for this year is 5-7%, with an expected acceleration in 2025 and 2026 due to the implementation of CashFlow Central and other solutions, as well as large client wins. The next question from Dan Dolev asks for more clarification on the company's guidance and the strong results despite a more muted tone from Visa.

Bob Hau, the speaker, is discussing the company's overall organic growth and expectations for the merchant segment. He mentions that they are ahead of their growth target and that the transitory benefit of inflation and interest has decreased. However, they are still maintaining their full year outlook due to strong sales of Clover and value-added solutions. He also mentions growth in Latin America and the company's history of resilience and adaptability. The next speaker, James Faucette, asks for more information about Clover's growth.

Frank Bisignano, the CEO of First Data, is confident about the company's Clover strategy and its potential for growth. They have seen success with Clover in terms of attrition rates and are continuing to invest in value-added services and vertical expertise. The company has set goals for the merchant business and is on track to meet them. Bisignano mentions that they started with a small team and have now expanded globally.

The speaker discusses the success of their portfolio and financial institutions, and expects continued growth in this area. They also mention their capital deployment philosophy and potential for future M&A opportunities, with a focus on creating long-term value for clients and shareholders. The speaker thanks the audience and encourages further questions to be directed to their IR team.

The operator thanks everyone for participating in the Fiserv earnings conference call and concludes the call, wishing them a great day and looking forward to speaking with them in the future.

This summary was generated with AI and may contain some inaccuracies.