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Welcome to the Fiserv Fourth Quarter 2024 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 Chariell, Senior Vice President of Investor Relations at Fiserv, Inc. Thank you, and good morning. With me on the call today are Frank Bisignano, our Chairman and Chief Executive Officer, Bob Hau, our Chief Financial Officer, and Mike Lyons, our new president and next CEO. To the call, Mike. It's great to have you here.

Thank you, Julie. And thank you all for joining us today. We wrapped up another successful year at Fiserv, Inc., and one that we are all very proud of. We set high expectations back at our 2023 investor conference and we exceeded those commitments. Fiserv delivered adjusted earnings per share of $8.80, up 17%, driven by strong and diverse revenue growth and further operating margin expansion across our businesses. Adjusted revenue growth was 7% and adjusted operating margin rose 170 basis points to 39.4%. Total company organic revenue growth was 16%. Our free cash flow was $5.2 billion and we returned $5.5 billion to shareholders via share repurchase in 2024. Throughout the year, we advanced multiple strategies and product offerings that take advantage of the unique construct of this company with strong assets across merchant and financial solutions. We added large enterprise clients, both traditional and e-commerce merchants, on the strength of our unified offerings, modern gateway, and growing value-added solutions portfolio. At Clover, we laid the foundation for continuing our strong growth as we released new software, services, and hardware offerings and added three new countries. We extended merchant acquiring services to more financial institutions focused on winning small business clients. We built solutions to help SMBs navigate the complexity of running their businesses. Managing cash flow in particular is one of the biggest challenges. It's ineffective, time-consuming, and expensive. Cash Flow Central is our solution to this problem. We completed development of this new offering in the fall. Demand from FIs to offer it remains high. Cash Flow Central is a full small business suite, the single integrated easy-to-use system that SMBs have been looking for. The products and clients for this SMB suite span our merchant and financial solutions ecosystems, a combination that no single competitor has in a solution that no single competitor can offer today. From the merchant ecosystem, we provide Clover payments, hardware, and software, CloverVass, including vertical software solutions, capital, employee customer and operations management solutions, and the small business index for localized insights. From our financial ecosystem, we provide Cash Flow Central, Optus for business card issuance, SpendTrac for expense management,

Thanks, Frank. I'm thrilled to be here. I've known Fiserv for a long time, wearing a number of different hats, including as an investor, a banker, a large client at BofA, and PNC, and a small client at my wife's business where she has been a Clover customer for years and utilizes it to its fullest. Fiserv is an amazing company with an outstanding track record of growth, innovation, operating efficiency, and importantly, the proven ability to add value for our clients and create value for our shareholders. After just a week on the job, my excitement in being here has only grown stronger. The talent and work ethic of the team, the breadth and quality of our clients and partners, the products, the distribution and technology, and the ideas and opportunities. I couldn't ask for a better platform to build upon. Right now, our number one priority is to ensure a smooth leadership transition, keeping everyone laser-focused on executing our plan that Frank and the team laid out in late 2023. I believe strongly in that plan as it offers significant growth opportunities by meeting the needs of our merchant and financial institution clients. Fiserv has a very impressive thirty-nine-year track record of double-digit adjusted EPS growth that is matched only by the opportunity that lies in front of us. I look forward to meeting you all to discuss this in the coming months. As Frank mentioned, we've worked closely and effectively together for the last twelve years and I've had a front-row seat watching him and the Fiserv leaders build this incredible company. I thank both Frank and the board for the opportunity to lead Fiserv into its next year. And, of course, we all thank Frank for his future service to our country.

Thanks, Mike. Now I'd like to cover some highlights from the fourth quarter and full year. And then I'll turn the call over to Bob to discuss the numbers. The growing connections between businesses and financial institutions are a key part of the Fiserv story. And our ability to address them makes Fiserv unique. Embedded finance is the most complete use case from merchant issuing and banking assets combined. And last quarter, we announced our first large-scale win here with DoorDash. To offer its delivery contractors full banking services from within a single app. Our cross-platform capability and Fin

Thank you, Frank, and good morning, everyone. If you're following along on our slides, I'll cover the detail on total company and segment performance in the fourth quarter and full year. Starting with our financial metrics and trends on Slide four. The fourth quarter capped off a year of strong revenue growth whether you look at the numbers as reported or on an organic basis, or even if you exclude the transitory benefit of inflation and interest, in Argentina. The quarter also featured significant ongoing margin expansion and improved free cash flow. Total company adjusted revenue grew 7% while organic growth was 13%. Driven by strong double-digit growth in the Merchant segment and mid-single-digit growth in financial solutions. The spread between these growth rates reflects currency translation. Excluding the transitory effects of excess inflation and the Dollar Treester program in Argentina, total company organic revenue growth would have been 11% in the quarter. Total company adjusted operating margin reached 42.9% an increase of 180 basis points versus the prior year. And an adjusted operating income growth of 11%. Adjusted earnings per share for the quarter was $2.51 up 15%. For the full year on an adjusted basis, revenue grew 7% to $19.1 billion Total company organic revenue growth was 16% representing our fourth consecutive year of double-digit organic revenue growth. Most of the difference between adjusted and organic growth rates came from the sharp devaluation of the Argentine peso through September and broader dollar strength in Q4. For the full year, if you were to organic revenue growth would have been 11% for the year. Adjusted earnings per share was $8.80 At the top end of our guidance range, which we raised every quarter last year, Free cash flow for the quarter was $1.9 billion and $5.2 billion for the year. This very strong free cash flow included a positive impact from a working capital improvement project that we kicked off in Q3. We improved processes around both payables and receivables and the benefit accrued sooner than expected. We expect this improvement to be sustained in the future. Turning to our performance by segment, starting on Slide six. Organic revenue growth in the Merchant Solutions segment, which 23% in the quarter, and 27% for the full year. Excluding the transitory effects of excess inflation and the Dollar Tree store in Argentina. Organic growth would have been 17% in the quarter and 16% for the year. On Slide seven, we have again included a summary of the contribution from excess Argentine inflation and interest and the temporary dollar tourista program. Along with the offsetting headwind from currency devaluation which impacts adjusted revenue for both the company and merchant segment revenue. Small business organic and adjusted revenue growth in the quarter was 24% and 12% respectively. On payments volume growth of 4%. Clover revenue reached $2.7 billion in 2024 with nearly 90% in our small business line reporting. Clover revenue grew 29% in both the quarter and full year on Q4 annualized payment volume growth of 14%. This spread reflects growth in value-added solutions, some targeted value-based pricing actions, and strong hardware sales. In 2024, we rolled out five new hardware products that gained traction, particularly in our ISO channel, and among bank partners investing in the merchant acquiring businesses. VAST penetration continued along its path of roughly three points of growth per year, reaching 22% in Q4. Driven by continued growth in Clover Capital, and the enhanced Clover SaaS package. Enterprise organic and adjusted revenue growth in the quarter was 31% driven by transactions growth of 17%. As with small business, organic growth in enterprise included great benefit. From Argentina in the fourth quarter. Above-average enterprise growth also reflects the ramping of a large PayFac from a processing customer to a direct client. Which started in earnest in Q3. For the full year, enterprise growth of 31% organic and 12% adjusted includes the impact of ramping growth from the large PayFac client we mentioned last Quarter? As well as the transitory effects from Argentina. Commerce helped continue its positive momentum roughly 250 clients and daily transactions up tenfold since Q1 of 2024. Through a single API integration, Commerce Hub clients can access a variety of solutions including fraud and security, routing optimization, pay by bank, and data analytics. And we continue to add to this portfolio. We found that on average after one year, Commerce Hub clients take over four BaaS products, or 60% more than non-Commerce Hub merchants. For our largest commerce hub clients, product attach is even higher approaching five solutions per merchant. Finally, partially reflecting the relocation of the large payback to our enterprise segment, as a direct client. So for the full year, processing organic revenue declined 1% consistent with our expectation of roughly flat growth over the medium term. Adjusted operating income in the Merchant Solutions segment increased 15% for the quarter and 20% for the year. Merchant adjusted operating margin expanded 290 basis points to 37% in 2024. As noted in prior quarters, interest expense from anticipation revenue is recorded below the operating income line. If the interest cost from anticipation were included in operating income, merchant adjusted operating margins would have expanded 120 basis basis points for the quarter, and 230 basis points for the full year. Turning to slide eight on the financial solutions segment. Organic revenue grew 4% in the quarter and 6% for the full year, at the midpoint of our full-year outlook of 5% to 7%. Looking at the business lines, digital payments organic and adjusted revenue each grew by 5% and 6% for the year. Growth in

Thanks, Bob. Those of you who know us, know that we are passionate about small businesses. In Q4, we partnered with the US Chamber of Commerce Foundation. Providing valuable insights on the impacts of hurricanes, Elaine, and Milton to guide response, invest We are undertaking similar efforts in Los Angeles as we speak. All based on the data captured in the Fiserv small business index. We also have people on the ground offering assistance To all of our clients including small businesses, And to readily address this in future disasters, we have created a $10 million relief fund to support clients and employees as needed. Last week, Fiserv was again named Oh, world is our tenth in the last eleven years. And we are proud to have moved higher in our ranking specifically in the areas of quality of product and service and quality of management. We're gratified to consistently rank highly on two other measures. Innovation and long-term investment value. Which I believe are inextricably linked. In reality, a single ranking or even multiple awards or recognitions that we've earned can capture the true value of our company. You've often heard me speak. About the unparalleled assets of Fiserv. How scale broad product set, vast distribution, innovative technology, global presence, Deep bench and unique combination of diverse merchant and FI clients and solutions. I'm very proud of the strong returns we have delivered on these assets. And grateful to the team around me to their talent and support. The board our management committee, and Fiserv associates. As well as our clients partners, and investors who I've had the privilege of sitting down with over the years. Ultimately, Fiserv's success comes down to one thing, You've heard me say it over and over again. The construction of the company. That can endure and transcend CEUs. On December fifth, I told you we would name a great CEO in a short period of time and then I'd be working every day meet financial commitments. Now two months later, you can see that we've delivered. I give you my full commitment to be working side by side with Mike. Pending the outcome of my nomination. So now, operator, please 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 one question to ensure ample time to answer as many questions as possible. If you would like to ask a question, you may press star one on your phone. If you would like to withdraw your question, press star two. Our first question comes from Tien-Tsin Huang from JPMorgan. Please go ahead.

Thanks so much for taking my question. I have to ask a question for Mike, glad to have him on the call, of course. Just I'm curious to hear your response to, you know, what surprised you about Fiserv as you did your diligence to join the company, what was different from maybe what you thought Looking at it as an investor and, of course, as a client and partner.

Yeah. That's the question. Great to hear from you. That's been a long time. You know, my relationship with the company goes back many years. They said it's both an investor and as a significant client. And then as a with all the work we did at

Next, we'll go to the line of Darrin Peller from Wolfe Research. Please go ahead.

I guess we'll just start off with Clover. I mean, the sustainability of the growth has been outstanding. And so when you look at the trend line into next year, even against tough comps, Just remind us of what you expect the more nuanced building blocks that can keep that afloat at that level. Which I know it kinda needs to be to meet your targets. And then just thinking about VAS and the cross-sell, considering what you have in terms of new direct sales and new Internet give us a Once again, revisit the building blocks for the sustainability. Nice guys.

Yeah. Maybe I'll take it. Right? You know, I'd start with You know, I was down like I told y'all, I was going to Brazil I was on my way back from the launch in Brazil, and the president said there's no doubt. Gustavo and I spent time in With the president of Brazil, he was so enthused about how small business and efforts. So you go Brazil, Mexico, or Australia, all of coming online. I think the ADP partnership, you know, Maria Black got a job a year ago. We spent time She's a fabulous leader. She saw the opportunity we saw the opportunity, you think about you know, when you wanna talk about a back book, let's think about ADP's back book. Right? That's a hell of a back book and a front book. You know, we talk about these nearly thousand FI partners you know, we you know, kinda what I love saying. That was old, but it's new. You know? I mean, we're you know, with the integrated suite of cash flow central, bringing all the other tools, expense management, Spendtrend, attach it to XD. You know, it just gives us this unbelievable opportunity to continue you know, we think we're the heavyweight champ of the world that partnerships. As I always say, partner of choice. Whether it's ADP, whether, you know, it's with a great top ten bank last night. You know, Mike and I. You know? So demand is super high, and I think every FI partner we're building tools to increase penetration in every FI partner. And then you look at, you know, all the things that we're bringing in new software, you know, besides you know, Cashflow Central, e d p, more website management, more employee management, more capital, You know, we rolled out we had a great year rolling out a Five you know, new products. So, you know, we're all gassed. No break on this baby, and that's kinda how we're playing it. You know? And we love it. And, you know, like, I will just I'll make a statement, you know, I'll make the statement. I make the statement everywhere. Mike is crushing it. So there's no pivot going on here. You know, we're not rethinking but he's gonna be better than me. He's gonna be better than me for fifteen reasons, you know, including not a pandemic and not a merger and all gas, no break, fully fully in integrated team. Everybody loves Mikey. That's it.

Next, we'll go to the line of Timothy Chiodo from UBS. Please go ahead.

Great. Thank you and congratulations to Mike as well. On DoorDash, so big contract and certainly supports the acceleration in financial solutions this year. And you mentioned a pipeline of other embedded finance, opportunities. I was hoping that you could talk a little bit about the Payfair acquisition and how that plays into that I gather that it brings on program management capabilities and previously Fiserv working with smaller third-party program managers, and now you have that in-house. Maybe just talk about what this means for The revenue opportunity, not only with your existing clients, but also how it might help you help you with some of those RFPs particularly in light of those. Comments around the pipeline.

Yeah. Tim, it's Bob. Thanks for the question. And you're right on the mark. Obviously, we feel great about landing and very rapidly accelerating our position with DoorDash getting up to a full ramp in just a few months, That's going quite well. Program management is certainly part of the overall program with DoorDash and with embedded finance clients. We do some of that in-house. We partner with third parties. It's a combination. And Payfair will bring some additional capability to us around that aspect. That transaction's not yet closed. But we feel like that's a good add to the overall capability that we have And if you think about what an embedded finance client would need, Really don't think there's another company that has all the assets available within our own shop to really fully serve those clients. Think that's why DoorDash selected us and why we feel like we're in a great position to continue to see that space grow for us.

Next, we'll go to the line of Harshita Rawat from Bernstein. Please go ahead. Congratulations, Mike. Bob, can you talk about January trends? Are you seeing kind of

Sure. I would say that obviously what we're thirty-three days into the first quarter in line with our expectations off to a good start from an overall consumer spending standpoint, consumer continues to do well and remain resilient. We certainly benefit from having the breadth of our capability Serving discretionary as well as non-discretionary categories A lot of folks talking about experiences, and, obviously, we participate in that also. So generally feel good about our ability to continue to grow nicely as we see consumer spending going on and leveraging our very broad distribution channel and variety of verticals that we serve. Obviously, a lot going on in the world. And we've seen FX ease quite a bit. I see that going on in 2025. You heard us talk in our prepared remarks 2025 outlook is much lower. That, of course, does play into that volume. That volume is a reported number. We don't adjust it for FX. We also don't adjust it for the inflation and interest rate dynamic that we saw down in Argentina. In 2024. And looking forward to not talking about that in 2025 as that has now returned to more normal levels. So bottom line, feel good about where we are. January is continuing with similar trends we saw in the fourth quarter and excited to get the year going. Thanks, Harshita.

Next, we'll go to the line of Dave Koning from Baird. Please go ahead.

And I guess my question is within Financial Solutions, issue or slow, do you talk about that a little bit. Was that I guess, was that because financial solutions product revenue was really strong in Q2, Q3. It that fallen issuer and maybe that's why it slowed a little. And then when does that pick up? When does, like, Verizon etcetera target kinda hit in 2025 to reaccelerate that?

Yeah. Overall, fourth quarter, I would probably attribute the slowdown yourself particularly in the issue of space. That's where our print and plastic business reports and so we saw some slower volume in that space. And I think that's tied to the overall credit environment. For next year for 2025, we see target coming on in very late first quarter, late March. Verizon will come in in September. And the other product, large project that we've been talking about in the past is Desjardins. That will actually come to fruition in 2026. So we'll see an uptick late March, obviously, as that ramps throughout the second half of the year. And Verizon will benefit us as it ramps into the fourth quarter.

Next, we'll go to the line of Dan Dolev from Mizuho. Please go ahead.

Hey, guys. Great results. Great year. Congrats again, Frank. So on can can we talk strategically a little bit about your Walmart partnership? Like, how do you envision this, you know, very exciting using the now now network and FedNow and all these things to actually, you know, maybe change the way people pay Any any early observations from your conversations there would be really helpful. Thank you.

Let's take the macro. You know, I mean, I got to first data. Two thousand Thirteen. And Walmart At that point, was thinking about, you know, multiple providers and other things and We've had a tremendous partnership. We continue doing more with them. I mean, look at Washer Running, you know, their JV of One Financial on Finscag, you know, which I always believe, you know, if we are able to service You know, Walmart on Fin

Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.

Thanks, guys. Congrats Mike. Congrats Frank. I wanted to ask on Clover. Just Bob, you mentioned that spread between the revenue and the volume growth. It did widen out a little bit, and I know you talked about the vast penetration. The pricing, and the hardware sales. I was hoping you could maybe break down the contribution to the spread among those three, and then any thoughts on how that spread may evolve in 2025? Thank you.

Sure. Thanks, Jason. I think, you know, overall, the The list that you just had is kinda where we are from a ranking standpoint. Fast is certainly continuing to improve, expand, We'll see that actually continue into 2025 where we expect to hit 25%. Fast penetration good growth in 2024, three points over the previous year. Hardware, given the fact that we rolled out five new pieces of hardware, saw a very nice uptick, in that space. The kiosk, the Clover Flex, FlexPacket, etcetera, all participated in helping drive additional hardware. We're also seeing more uptick in that from our financial institution clients investing in the Clover capability. And then from an overall mix standpoint, more direct is giving us great opportunity going forward. Thank you.

Next, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.

Good morning. Congrats to Mike and Frank, wanted to ask quickly about the go-to-market on a lot of these new offerings. It seems like a lot of attractive potential for your financial partners to engage with small businesses further with the new offerings. We're pretty excited about those. But wondering how we should think about go-to-market support for those, what the implications for operating expenses are, and what kind of proof points we should be watching to see as your financial partners start to engage and roll out Thanks.

Yeah. He's saying, Joe. When we lay all this out, obviously, we're adding to our sales force. Right? And we love to add to our Salesforce. So that's a real positive. You know? We also have worldwide distribution. So our ability, you know, to get product out, we have a very, very structured way to deal with our partners that's been tried and true. Start with how much distribution we got Right? Like, that was really a distribution channel than a distribution partners. Right? So it it it it it you know, as we like to say, what's old is new. You know, we're just coming back to using our distribution capability, add more sales. Obviously, we're also gonna have more digital capability of distribution this year than we had last year. And we're adding more salespeople, you know, in this street, across the board. You know? So I think I think there's a it it sounds like a lot. But a lot of it's integrated. A lot of it's technically integrated. We're doing a very good job whether it's on ADP or Cash Flow Central. To have deep technical integration. And, you know, ultimately, a bank partners, you know, wanna help us, and all these things, there's more revenue for that. Right? So, you know, when you think about Clover growth, when you think about cash flow central growth, would you think about ADP, know, deeply technically integrated, We're adding speed on the street. Bank partners love it because it's revenue to them. All our partners use ADP with you know, these are revenue-sharing agreements. Everybody is incented to, you know, grow these products. So nothing really new there except more technically integrated than ever before.

And our final question will come from the line of Ramsey El-Assal from Barclays. Please go ahead.

Hi. Thanks for squeezing me in here and nice to meet you, Mike, over the phone. I wanted to ask about Cash Flow Central at you give us your latest thoughts, Frank or Bob, on when it will become a material contributor to the P and L? Will it gain enough momentum to be felt in 2025? And also just help us understand the sort economic model there as it dips on volume, fixed fee, subscription fee. How do you actually price the thing? Thank you.

You know, meetings in a twenty-plus billion dollar company has a lot of variability on how people mean meaningful. But we'll you know, in the second half of this year, you know, our clients are gonna be online and we expect to book our revenue. I think you've seen meaningful the way Physic Nano thinks about meaningful. It's more like you know, twenty-six, not twenty-five. But, you know, this has long-term sustainability, durability, and, you know, like, my and I and, you know, like, we sit around and talk, and it's fun to be doing this with them because he's under the under the hood, Frank Day is and, you know, Moses, we believe that, you know, our ability to grow the company in total It is it is just as much as we can consume because we're continuing to you know, and I said this a long time ago to y'all. When we laid out targets a long time ago, we continue to add TAM. Opportunity. So, you know, I think on the specific question, It's you know, you'll see numbers starting to run up in the second half. I would consider it, in my language, meaningful. Right. In twenty-six, And I think we're not limited to that opportunity, you know, always a depth showman growth drivers a company that you heard in might you know, his own words and when he sat in an all-day management meeting on the first on last Monday, and we go through the business plans and look at the opportunities. You know, and that's why we able to post the numbers we post. It's land of opportunity. I hope that's helpful. So thank you for your attention today. Reach out to our IR team. I hope to just talk to all of you. And like I like to say, I'll be here till I'm not. But Mike and I are side by side. They wanna let me say that earlier, but saying it now. A great day. Fine.