Fiserv, Inc. is a leading global provider of payments and financial services technology solutions, catering to a diverse clientele that includes merchants, banks, credit unions, other financial institutions, and corporate clients worldwide . The company operates through two main segments: Merchant Solutions and Financial Solutions, offering a range of commerce-enabling products and services . Fiserv is committed to innovation and integration, delivering superior value through its technology and services .
- Financial Solutions - Provides products and services to financial institutions, corporate, and public sector clients, facilitating the processing of customer loan and deposit accounts, digital payments, and card transactions. Includes services like debit and credit card processing, digital banking, financial and risk management, and check processing .
- Merchant Solutions - Offers commerce-enabling products and services such as merchant acquiring, digital commerce services, mobile payment services, security and fraud protection solutions, and pay-by-bank solutions.
- Clover® - A point-of-sale integrated commerce operating system for small businesses.
- CaratSM - An integrated commerce operating system for enterprise clients .
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What went well
- Strong Financial Performance: Fiserv delivered adjusted earnings per share of $2.30, up 17%, with organic revenue growth of 15% and free cash flow of $1.9 billion in the quarter .
- Strategic Partnerships and Expansions: The company announced a comprehensive embedded finance application with DoorDash, enabling a full range of financial services for delivery contractors . Fiserv also completed a proof of concept with Walmart for real-time pay by bank transactions over their proprietary NOW Network .
- Innovative Product Offerings Driving Future Growth: Fiserv showcased its SMB bundle, integrating products across both Merchant and Financial Solutions segments, expected to start contributing to growth next year . Additionally, Clover revenue grew 28%, with value-added services penetration reaching 21% .
What went wrong
- The company's new products, such as Clover Go and Clover Compact, are still in early stages, and may face challenges in gaining traction, especially in international markets.
- The STAR and Accel networks are not expected to experience rapid growth; the company anticipates only steady volume share gains rather than significant increases, which may limit future revenue growth from these networks.
- The anticipated acceleration in the Financial Solutions segment's revenue growth relies heavily on future projects and initiatives, which may carry execution risks and uncertainty in achieving the projected growth rates.
Q&A Summary
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Clover Growth Expectations
Q: What are your expectations for Clover's revenue and volume growth?
A: Fiserv continues to see strong overall revenue and volume growth from Clover. They have a target of $4.5 billion by 2026, requiring about a 28% compound growth rate, which they matched this quarter and year-to-date. Value-added services increased to 21% of revenue, up 1 point. While volume growth remains good, it's not as strong as last year due to tough comparisons and slightly eased consumer spending.
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Financial Solutions Growth Acceleration
Q: What drives the acceleration in Financial Solutions revenue in 2025?
A: Fiserv expects Financial Solutions revenue growth to accelerate from 5–7% this year to 6–8% next year. This confidence is driven by added pipeline and opportunities to grow the client base, including projects like Finxact, the DoorDash partnership, and the SMB bundle. They also see opportunities outside the U.S. and potential in AI and data services for financial institutions.
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Impact of Argentina and FX on Growth
Q: How are Argentina and FX impacting your SMB segment growth?
A: The Argentina tailwind has eased significantly, impacting SMB revenue growth. The tailwind decreased from a 15% benefit in Q1 to 6% in Q3. Adjusted revenue faced a 15-point negative impact from FX in the Merchant segment. These factors contribute to the lower SMB growth rate of 9% this quarter despite Clover's high growth.
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Cross-Sell Opportunities and Strategic Integration
Q: How is strategic integration driving cross-sell opportunities?
A: Fiserv has constructed a strategic set of complementary assets over the past five years, enhancing cross-sell opportunities. The integration of merchant and financial institution services, including Clover on the front end and owning a debit network, allows them to deliver capabilities to large institutions and SMBs. Initiatives like the SMB bundle, international expansion, and partnerships with companies like Walmart and DoorDash exemplify this strategy.
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Clover International Expansion
Q: What are your plans and timelines for Clover's international expansion?
A: Fiserv is launching Clover in Brazil and Mexico in December. While they expect immediate merchant adoption, scaling to peak levels is a multiyear build and ramp. The expansion will affect growth rates in 2025, with Brazil contributing to next year's numbers at some level, though not reaching full potential for another three years.
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Clover Go and Compact Strategy
Q: What's the strategy and traction for Clover Go and Clover Compact?
A: Clover Go and Clover Compact are seen as augmentation products for Fiserv's client base. They aim to provide existing clients with more mobile solutions and to cater to different markets, including international ones. These products may offer software and value-added services but are also designed to reach a broader set of merchants through various distribution channels.
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SMB Bundle Impact on Clover Targets
Q: How does the SMB bundle affect your Clover growth targets?
A: The SMB bundle allows Fiserv to deliver more capabilities to the SMB space, integrating products like Clover, XD, and acquisitions like SpendLabs. This broader offering may capture more of the back book but remains within natural merchant churn rates. The increased capabilities enhance the opportunity to impact Clover's growth more than before.
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Enterprise Transaction Growth
Q: Can you elaborate on the enterprise transaction growth and PayFac conversion?
A: Transaction growth in the enterprise segment was up 12% over the prior year, matching Q1 and up from 8% in Q2. This increase is partly due to onboarding new clients, including a large PayFac that began ramping in Q3. The PayFac will continue to contribute in Q4 before volumes return to more normal levels.
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STAR and Accel Networks Positioning
Q: How are STAR and Accel positioned for growth amid U.S. market changes?
A: STAR and Accel are strategic assets that allow Fiserv to compete for transactions for client benefit. They offer a dual messaging capability and provide merchants and issuers choices to compete for transactions at every level. While not expecting meteoric transaction growth, they anticipate continued volume share gains.
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Regarding the SMB bundle, can you elaborate on the specific challenges of integrating products across both the Merchant and Financial Solutions segments, and how you plan to ensure its successful contribution to growth next year?
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As you expand Clover into Latin America and Australia, what risks do you anticipate in these new markets, and what strategies are in place to mitigate potential adoption hurdles?
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With the approval of your merchant acquirer limited purpose bank charter in Georgia, how might this change affect your relationships with existing bank partners, and are there any regulatory concerns that could impact this initiative?
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Given the raised guidance for organic revenue growth and adjusted earnings per share, what key factors are driving this optimism, and what potential headwinds could jeopardize achieving these targets?
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Can you provide more details on the partnership with DoorDash, specifically how this embedded finance application will impact your financial performance, considering the challenges associated with long implementation cycles in such initiatives?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Adjusted Earnings Per Share (EPS): Raised to $8.73 to $8.80, representing 16% to 17% growth .
- Organic Revenue Growth: Raised to 16% to 17% .
- Adjusted Margin Expansion: Increased to at least 150 basis points .
- Free Cash Flow: Updated to above $4.7 billion .
- Foreign Currency Exchange Impact: Forecasted impact remains at 8.5% .
- Argentina Impact: Assumes a 4-point benefit from excess inflation and interest, with 9 points for Merchant Solutions .
- Medium-Term Outlook: Reiterated 9% to 12% adjusted revenue growth and 15% to 17% adjusted EPS growth .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Adjusted Earnings Per Share (EPS): Raised to $8.65 to $8.80, representing 15% to 17% growth .
- Organic Revenue Growth: Maintained at 15% to 17% .
- Adjusted Operating Margin Expansion: Raised to more than 135 basis points .
- Free Cash Flow: Adjusted to $4.7 billion .
- Transitory Benefit from Argentina: Assumed 4-point benefit .
- Normalized Growth: Expected to be 11% to 13% excluding Argentina's benefit .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Organic Revenue Growth: Expected to be 15% to 17% .
- Adjusted Operating Margin Expansion: Anticipated to be more than 125 basis points .
- Adjusted Earnings Per Share (EPS): Raised to $8.60 to $8.75, representing 14% to 16% growth .
- Free Cash Flow: Expected to be $4.5 billion .
- Debt to Adjusted EBITDA Ratio: Slightly increased to 2.8x .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Organic Revenue Growth: Expected to be 15% to 17%, including a 7-point growth from Argentina .
- Adjusted Operating Margin Expansion: Anticipated to be more than 100 basis points .
- Adjusted Earnings Per Share (EPS): Expected to grow 14% to 16%, reaching $8.55 to $8.70 .
- Merchant Solutions Organic Revenue Growth: Expected to be 25% to 28%, including 14 points from Argentina .
- Financial Solutions Organic Revenue Growth: Expected to be 5% to 7% .
- Free Cash Flow: Estimated to be approximately $4.5 billion .
Competitors mentioned in the company's latest 10K filing.
- Other large, integrated providers of financial services technology and payment systems
- Data processing affiliates of large companies
- Processing centers owned or operated as user cooperatives
- Financial institutions
- Merchant acquirers
- Independent Sales Organizations (ISOs)
- Independent Software Vendors (ISVs)
- Payments companies
- Payment network operators
- Global and local IT product and services companies
- Payment service providers and processors
- Large, diversified software and service companies
- Vendors that offer similar transaction processing products and services to financial institutions
- Large technology, media, and other emerging financial technology providers
Recent developments and announcements about FI.
Corporate Leadership
Leadership Change
Frank Bisignano, Chairman, President, and CEO of Fiserv, has been nominated by President-elect Donald J. Trump to serve as Commissioner of the Social Security Administration. His appointment is pending confirmation by the U.S. Senate. Until then, he will continue in his current roles at Fiserv. The company has a long-term succession plan in place to select his successor .
Board Change
Frank Bisignano, Chairman, President, and CEO of Fiserv, has been nominated by President-elect Donald J. Trump as Commissioner of the Social Security Administration. He will continue in his current roles at Fiserv until his appointment is confirmed by the U.S. Senate .
CEO Change
Frank Bisignano, the Chairman, President, and CEO of Fiserv, Inc., has been nominated by President-elect Donald J. Trump to serve as the Commissioner of the Social Security Administration. However, he will continue in his current roles at Fiserv until his appointment is confirmed by the U.S. Senate. The Fiserv Board of Directors has a succession plan in place to select a new CEO once the confirmation occurs .