The Fiserv Third Quarter 2024 Earnings Conference Call began with an introduction by Operator and then Julie Chariell providing opening remarks. She introduced Frank Bisignano, the CEO, and Bob Hau, the CFO. The focus was on the company's strong financial performance for the third quarter, with notable figures such as a 17% increase in adjusted earnings per share to $2.30, 7% adjusted revenue growth, a 170 basis point increase in adjusted operating margin to 40.2%, and 15% organic revenue growth. The call highlighted Fiserv's strategic advantage in the merchant and financial solutions sector.

In the recent quarter, Fiserv reported a free cash flow of $1.9 billion and $3.3 billion year-to-date, with $1.3 billion returned to shareholders through share repurchases. The company emphasizes its role in the interconnected financial landscape through innovative solutions. Fiserv launched an embedded finance application with DoorDash for its delivery contractors, offering financial services like instant wage access within a single app. The company's partnership with Walmart introduced a real-time Pay by Bank feature, enhancing consumer payment options. Additionally, Fiserv partnered with Walmart Business to support small businesses through its Clover platform, which was recognized by Inc. magazine as a top B2B provider for SMBs.

In the Merchant Solutions segment, organic revenue grew by 24%, with Clover achieving a 28% increase in revenue and expanding its pilot programs in Brazil, Mexico, and Australia. The Enterprise Commerce Control Center was launched to provide merchants with a comprehensive view of their business performance. The Financial Solutions segment reported a 6% growth, completing the build-out of CashFlow Central and continuing client migrations to the new digital banking solution, Experience Digital (XD). Fiserv secured significant partnerships, including a merchant acceptance deal with a major e-commerce marketplace and expanding services with Costco for a digital wallet launch. Additionally, Exxon signed up for a data-as-a-service solution to extract valuable insights.

Fiserv has rapidly expanded its cloud-based services, reducing implementation times significantly. They secured partnerships with Ahold Delhaize and Alex Lee for payment and routing technologies, respectively. They've also increased collaborations with financial institutions, including major credit unions like Golden 1 and America First. In Europe, they've expanded their services with Netto across Poland, and in Asia, they're partnering with foodpanda to process payments in Singapore and Hong Kong. Additionally, Fiserv launched Clover Sport at Argentina's Bombonera stadium, enhancing the fan experience with various payment options.

In the Financial Solutions segment, four banks, including a credit union, have adopted CashFlow Central in the past three months, making a total of 10 since the initiative's launch. AvidXchange will use CheckFree's biller directory for faster payments. A competitive bid was won with Farm Credit Mid-America, converting their loan portfolio and adding value solutions. PNC chose the AI-enabled Advance Defense for fraud detection. Equitas Small Finance Bank launched a new card product on our India processing hub with full features, contributing to our leadership in India. We hosted 3,000 clients and prospects at the annual Client Conference, representing significant revenue and pipeline growth, featuring numerous demos, sessions, and strengthening relationships, with a focus on the SMB bundle.

The paragraph highlights Fiserv's comprehensive suite of products designed for small- and medium-sized businesses (SMBs), emphasizing simplicity and integration across various business needs. This suite spans Fiserv's Merchant and Financial Solutions segments, offering tools for payment processing, business insights, cash management, expense management, and more. By next year, these products will be integrated into platforms like Fiserv's Experience Digital and the Clover Dashboard. Fiserv's innovation in merchant-related services provides financial institutions a competitive advantage, enabling them to better understand and serve SMB clients, and ultimately boost growth and revenue.

The paragraph discusses Fiserv's strategic initiatives aimed at driving growth by expanding their services for both small and medium-sized businesses (SMBs) and financial institutions. The company is enhancing its merchant lead generation and onboarding capabilities, expecting their SMB bundle to contribute to growth next year. Fiserv has raised its guidance for organic revenue growth and adjusted earnings per share, indicating confidence in its strategy. The company plans to expand its Clover portfolio, extend services internationally, and continue leveraging data to support both merchants and financial institutions. Fiserv positions itself as a unique provider at the intersection of merchants and fintech, working with partners like DoorDash, Apple, and Walmart. While these initiatives are in early stages, the goal is to achieve sustainable long-term growth.

In the paragraph, Bob Hau discusses the company's strong financial performance in the third quarter, highlighting a 7% increase in adjusted revenue to $4.9 billion and a 12% rise in adjusted operating income to $2 billion, resulting in an improved operating margin of 40.2%. Year-to-date figures show similar growth with revenues at $14.2 billion and operating income at $5.4 billion. Organic revenue grew 15%, partially driven by inflation in Argentina and minor contributions from "dólar turista." Adjusted earnings per share increased by 17% to $2.30, while year-to-date figures rose by 18% to $6.29. Free cash flow for the quarter was $1.9 billion and $3.3 billion year-to-date, with expectations met for higher free cash flow in the second half due to the green tax credit refund received in Q3.

In the Merchant Solutions segment, organic revenue grew by 24% in the recent quarter and 29% year-to-date, boosted by inflation and interest conditions in Argentina and the extension of the "dólar turista." However, currency devaluation, particularly the Argentine peso, created a significant headwind, resulting in adjusted revenue growth of 9% for the quarter and 10% year-to-date. Despite currency challenges, 2024 saw successful launches of new Clover hardware, including the Kitchen Display System, a self-service Kiosk, the lightweight Flex Pocket device, and the entry-level Clover Compact, enhancing service efficiency and expanding market opportunities.

In the quarter, Fiserv's small business segment saw organic and adjusted revenue growth of 25% and 9%, respectively, with payment volume growth of 4%. This outperformed broader consumer spending trends and was attributed to Fiserv's international presence and focus on non-discretionary categories like food and services. Clover, a part of Fiserv, experienced a 28% revenue increase on a 15% annualized payment volume growth, with VAS penetration rising to 21%. New software plans will be introduced in Q4 as Fiserv aims for $4.5 billion in revenue and 27% VAS penetration by 2026. The enterprise segment had 37% organic and 17% adjusted revenue growth, driven by a 12% increase in transactions and higher VAS penetration, with notable growth from a PayFac client transitioning to direct service. Commerce Hub showed significant transaction growth from client migrations, enhancing opportunities for selling more VAS.

In the latest quarter, processing organic revenue declined by 1%, and adjusted revenue by 2%, with year-to-date figures remaining flat. However, the Merchant Solutions segment saw a 19% increase in adjusted operating income, reaching $931 million, and an adjusted operating margin rise of 290 basis points to 37.7%. Year-to-date, operating income rose by 22% to $2.6 billion with a 330 basis point margin increase. Interest expenses from anticipation revenue are noted below operating income, with margins potentially expanding further if included. In the Financial Solutions segment, organic revenue grew 6% in the quarter, aligning with annual growth expectations. Digital payments revenue grew 5%, with strong demand for FedNow and RTP integrations. CashFlow Central gained interest from financial institutions, securing partnerships with Amarillo National Bank and Tri Counties Bank. Issuing saw organic and adjusted revenue growth of 7% and 4%, mainly from government and healthcare demand.

In the quarter, the company completed the conversion of HealthEquity HSA and FSA card accounts to their Optis processing platform and saw a 5% growth in banking organic and adjusted revenue. They expanded their partnership with COCC to include their Experience Digital (XD) solution for 150 community banks and credit unions. The Financial Solutions segment's adjusted operating income grew 5% to $1.1 billion with a 47.4% margin. Year-to-date, this segment's income increased 6% to $3.2 billion, with margins up 60 basis points to 45.8%. Corporate adjusted operating loss was $112 million for the quarter and $394 million year-to-date. The adjusted tax rate for the quarter was 18.8%, with an expectation to be slightly below 20% for the full year. Total debt was $25.3 billion, and the debt-to-adjusted-EBITDA ratio improved to 2.7 times. The company repurchased 8 million shares for $1.3 billion, totaling $5.3 billion in shareholder returns over the past 12 months and over $16 billion since 2019. They have 24 million shares authorized for further repurchase and increased their full-year adjusted earnings per share outlook to $8.73-$8.80.

The company has revised its financial forecasts for 2024, indicating an increase in adjusted EPS growth to 16%-17%, a raise in organic revenue growth and margin expansion outlooks, and updated free cash flow guidance to above $4.7 billion. This is influenced by strong third-quarter cash flow and year-to-date performance, despite challenges such as the economic environment in Argentina. Transitory benefits from Argentine inflation and the dólar turista program contribute to expected growth, which, without these effects, would fall within the medium-term guidance of 9%-12%. Additionally, the company addresses challenges from foreign currency exchange impacts and highlights its ability to manage changes within its business structure effectively.

The paragraph outlines Fiserv's strategic business updates and corporate initiatives. Wells Fargo will take full ownership of their joint venture, but Fiserv will still offer processing services, maintaining their revenue and EPS growth outlook. Fiserv has extended its merchant processing partnership with PNC and expects increased presence for Clover. Fiserv has also gained approval for a special bank charter in Georgia to enhance its merchant acquiring services, without becoming a traditional bank. Lastly, the paragraph mentions Fiserv's corporate social responsibility efforts in response to hurricanes Helene and Milton, including support for the Red Cross and supply deliveries to affected areas.

In this paragraph, the company highlights its achievements and initiatives from the recent quarter. They partnered with the U.S. Chamber of Commerce Foundation to support disaster preparedness for small businesses by providing insights from the Fiserv Small Business Index. Fiserv was recognized with several accolades, including a perfect score on the Disability Equality Index, recognition as a Top Veteran-Friendly Company, and the Corporate Excellence Award from the National Bankers Association. They advanced their sustainability efforts with LEED certifications for their headquarters and innovation centers. Their strong financial performance placed them at the top of the IDC FinTech Rankings for the second year. The paragraph concludes by expressing gratitude to their 40,000 employees for their contributions over 40 years and since a recent merger, and invites questions from the audience.

The paragraph is a transcript from a Q&A session during a financial update call. Tien-Tsin Huang from JPMorgan asks Bob Hau about the growth in enterprise transactions, noting an acceleration and wanting to understand its sustainability into the fourth quarter. Bob Hau responds, explaining that transaction growth was 12% in the quarter, driven by new clients in the enterprise space, including a large PayFac that is ramping up. He expects this to stabilize to normal levels after the fourth quarter. Darrin Peller from Wolfe Research then asks about the strong cross-selling within the business, highlighting Frank's remarks on integrating offerings across segments, seeking specific examples of this trend.

Frank Bisignano highlights the strategic alignment and complementary nature of assets within the company's Financial Solutions segment, which he believes will accelerate growth from 5%-7% to 6%-8% by 2025. He emphasizes the company's role as a strategic partner for merchants and financial institutions (FIs), leveraging assets like Clover and a debit network to serve large institutions and clients. Bisignano points to successful partnerships with companies like Walmart and DoorDash and mentions initiatives like the SMB bundle and Finxact's integration. He also highlights the company's international expansion and the Commerce Hub's role in the enterprise segment, illustrating the comprehensive capabilities offered to financial institutions of all sizes.

The paragraph is a segment from a conference call where Frank Bisignano discusses the strategic positioning and capabilities of STAR and Accel, particularly in light of some changes happening in the U.S. market. He highlights the importance of competing for transactions to benefit clients, noting that STAR and Accel sit at an important junction between merchants and financial institutions. Their capabilities include strong PIN, signature, and dual-messaging, offering choices to merchants and issuers. The strategy focuses on steady growth in volume share rather than rapid increases in transactions. Following this, Jason Kupferberg from Bank of America Merrill Lynch asks about the expectations for revenue and volume growth for Clover in the fourth quarter.

The paragraph discusses the financial performance and growth projections of Clover, a solution mentioned by Bob Hau in an earnings call. Hau highlights that Clover aims for a $4.5 billion target by 2026, requiring a 28% compound growth rate, which they have maintained. Despite challenging comparisons to the previous year's strong performance and eased consumer spending, the company feels positive about the current trajectory. Dave Koning from Baird queries about slower growth in the SMB segment, which saw a decline to 9% from previous teen percentages. Hau attributes this slowdown to reduced benefits from Argentina, which had provided a tailwind earlier but has now lessened, affecting all segments, including SMB revenue.

The paragraph discusses the financial outlook and challenges faced by a company, highlighting the strong anticipation for growth, especially among large enterprises in Argentina. However, it notes that predicting future developments in Argentina is challenging, with tailwinds like inflation easing and interest levels normalizing. FX remains a significant headwind, impacting adjusted revenue negatively by 15 points in the Merchant segment. Tim Chiodo from UBS questions about the Financial Solutions revenue guidance for next year, expecting a slight acceleration from 5-7% this year to 6-8% next year, driven by projects with Target, Desjardins, Verizon, and CashFlow Central. Frank Bisignano is asked to elaborate on these projects or the confidence in the anticipated growth.

In the paragraph, the speaker discusses the company's growth and future opportunities. They highlight recent successes, such as a 6% growth year-to-date, and emphasize the potential for further expansion through initiatives like Finxact and collaborations with DoorDash. The company is focusing on embedded finance and small-to-medium business bundles, alongside exploring opportunities in the banking sector, particularly outside the U.S. They express confidence in leveraging AI and data to support financial institutions, aiming to be a key data and AI provider, especially for medium to smaller banks. Overall, they are optimistic about continued growth and improving their core business operations.

The paragraph discusses the strategy and progress of new products, Clover Go and Clover Compact, which are aimed at micro sellers. Frank Bisignano highlights these products as enhancements for their client base, expanding their total addressable market (TAM) by offering more diverse solutions. The Clover Compact is particularly noted for potential use in the food industry and for international markets beyond the U.S. The products will be distributed through various channels, providing more software and value-added services. The focus is on expanding the capability of their ecosystem and venturing into new market segments, as also indicated in the question by James Faucette about small-to-medium business (SMB) bundles and market strategies.

In the paragraph, Frank Bisignano discusses the company's strategic thinking and approach towards achieving a $4.5 billion target with specific focus on the Clover product line and the SMB space. He mentions that while there is ongoing R&D and product development, the fundamental approach remains consistent, with past acquisitions like Ondot being integrated into their offerings. Bisignano emphasizes their capability to serve as a partner of choice for SMBs by offering extensive product integration and innovation, such as with Clover and Spendlabs. He also notes the potential for growth in the Clover segment due to enhanced offerings, which might surpass natural churn rates from older devices to newer ones.

In the paragraph, Ramsey El-Assal from Barclays asks about the timeline for Clover's international expansion to reach peak run rate in new markets and whether there will be a consistent introduction of new markets or pauses for development. Frank Bisignano responds, indicating that Clover aims for continuous growth without a definitive peak. Using Brazil as an example, he mentions an upcoming launch and the potential to capture more merchants and revenue. Bisignano notes that Brazil's growth is a multi-year process involving partners like Caixa for widespread distribution. The focus will affect the growth rate in 2025, with further expansion expected in subsequent years. He concludes by thanking participants and inviting further questions through their IR team.

The paragraph announces the conclusion of Fiserv's third quarter 2024 earnings conference call, thanks participants for joining, and instructs them to disconnect, wishing them a good day.

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