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FI

FISERV INC (FI)·Q1 2025 Earnings Summary

Executive Summary

  • Fiserv delivered a clean beat: adjusted EPS of $2.14 vs $2.08 consensus* and GAAP revenue of $5.13B vs $4.84B consensus*, while reaffirming 2025 guidance (organic revenue growth 10–12%; adjusted EPS $10.10–$10.30) and at least 125 bps adjusted operating margin expansion .
  • Merchant Solutions organic revenue grew 8% despite ~3 pts of timing headwinds (leap year, Easter shift, prior-year term fee), with Clover revenue up 27% and VAS penetration reaching 24% .
  • Financial Solutions posted strong profitability: adjusted operating margin of 47.5% (+340 bps YoY) driven by discrete data/license sales and operational efficiency .
  • Capital deployment remained aggressive: $2.2B repurchases (9.7M shares) in Q1; leverage at 2.9x within target range (2.5–3x) .
  • Catalysts: maintained FY guidance and accelerated Clover/global initiatives (new markets, partnerships), plus early data monetization and embedded finance momentum .

What Went Well and What Went Wrong

What Went Well

  • Clover momentum: revenue +27% with better VAS penetration (24%), hardware demand, and anticipation/capital contributions; management reiterated $3.5B Clover revenue and 25% VAS penetration targets for 2025 .
  • FI distribution flywheel: 33 new U.S. financial institutions signed; extended PNC JV, transitioned Wells Fargo JV to processing agreement, enhanced ICBA partnership; now 40 of top 100 U.S. FIs are referral partners .
  • Financial Solutions execution: adjusted operating margin reached 47.5% (+340 bps), supported by discrete data/license sales and efficiency gains; Digital Payments growth benefited from +22% Zelle transactions and initial data sales .

“Client authorization metrics using the new optimization tool have been encouraging… combining this wealth of data with our AI… to increase authorization rates” .

What Went Wrong

  • Discretionary soft spots: Small Business volume growth was 3% with notable weakness in travel/hotels/restaurants; Canada travel was a specific headwind for Clover volumes .
  • Processing line pressure: Merchant Processing organic revenue down 7% YoY; excluding a large termination fee in Q1’24, Processing would have been +4% but remains the smallest and slower-growing sub-line .
  • Seasonal FCF trough: Q1 free cash flow fell to $371M (timing of working capital and green tax credits), below $454M in the prior-year quarter .

Financial Results

Headline Metrics vs Prior Periods and Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue (GAAP, $B)$5.22 $5.25 $5.13
Revenue Consensus Mean ($B)*$4.91$4.96$4.84
Adjusted Revenue ($B)$4.88 $4.90 $4.79
Adjusted EPS ($)$2.30 $2.51 $2.14
EPS Consensus Mean ($)*$2.26$2.48$2.08
Adjusted Operating Margin (%)40.2% 42.9% 37.8%
Organic Revenue Growth (%)15% 13% 7%

Estimates marked with * are values retrieved from S&P Global.

Segment Breakdown

Segment MetricQ3 2024Q4 2024Q1 2025
Merchant Solutions Revenue ($B)$2.47 $2.50 $2.37
Merchant Operating Margin (%)37.7% 39.2% 34.2%
Financial Solutions Revenue ($B)$2.41 $2.40 $2.42
Financial Operating Margin (%)47.4% 51.7% 47.5%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Clover Revenue Growth (%)——27%
Clover VAS Penetration (%)——24%
Small Business Payment Volume Growth (%)——3%
Enterprise Transactions Growth (%)——13%
Zelle Transactions Growth (%)——22%
Free Cash Flow ($M)$3,344 (9M) —$371
Share Repurchases (M / $B)7.6 / $1.3 6.1 / $1.3 9.7 / $2.2
Adjusted Effective Tax Rate (%)——17.9% (full-year ~19.5%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Revenue GrowthFY 202510–12% 10–12% Maintained
Adjusted EPSFY 2025$10.10–$10.30 $10.10–$10.30 Maintained
Adjusted Operating Margin ExpansionFY 2025—≥125 bps Introduced/Specified
FX Impact to Adjusted RevenueFY 20251.5% 1.5% Maintained
Merchant Organic Revenue GrowthFY 2025—12–15% Introduced
Clover TargetsFY 2025—$3.5B revenue; 25% VAS penetration Introduced
Financial Solutions Organic GrowthFY 2025—6–8% Introduced
Tariff AssumptionsFY 2025—Minimal cost impact at current levels Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
AI & Data MonetizationIntroduced Data-as-a-Service offering to enterprise clients Authorization optimization tool leveraging AI; pilot improved decline recovery by 30% at a large tech client Strengthening
Clover Global ExpansionMerchant strength; raised FY’24 outlook; no specific country adds in releases Launched Clover in Mexico, Brazil, Australia, Singapore; Belgium via CCV; Clover Hospitality launch in May Accelerating
FI Distribution & SMB BundlesStrong Merchant momentum; 2024 raised outlook 33 new FI partners; PNC JV extended, Wells Fargo JV to processing; ICBA enhanced; ADP partnership pilots Expanding
Tariffs/Macro SignalsNot highlighted in releases Guidance contemplates stable tariffs; minimal cost impact at current levels Neutral/Managed
Embedded FinanceNot emphasized in releases DoorDash win; Payfare acquisition enhances orchestration/program management; Thread Bank partnership on Finxact Building
Regional Trends (Argentina/Canada)2024 included equity-method impairment; organic growth aided by FX Argentina growth contribution now ~0; Dólar Turista likely ending; Canada travel dampened Clover volumes Normalizing (AR); Soft (CA travel)

Management Commentary

  • “Adjusted EPS results exceeded expectations… the construction of the company… with two market‑leading segments — Merchant and Financial Solutions — … future‑proofed” (Frank Bisignano) .
  • “Fiserv is off to a strong start… organic revenue up 7%, adjusted EPS up 14%, adjusted operating margin up 200 bps” (Michael Lyons) .
  • “We are maintaining our full year 2025 guidance… and remain on track to achieve… $3.5B Clover revenue and 25% VAS penetration by year‑end” (Robert Hau) .
  • “We added 33 new financial institutions as merchant partners in the U.S. in Q1… pipeline is strong” (Michael Lyons) .

Q&A Highlights

  • Clover growth bridge: Revenue growth outpaced volume (+27% vs +8%) due to higher VAS penetration, hardware sales, and anticipation/capital; sequential VAS penetration reached 24% .
  • Merchant trajectory: ~3 pts headwinds (leap year, Easter shift, prior-term fee) masked underlying trajectory; acceleration expected as new geographies/products ramp (Clover Hospitality, CCV/Europe) .
  • Processing outlook: Despite Q1 YoY decline, excluding prior-year fee, Processing would be +4%; expected roughly flat to slightly positive over time .
  • Macro/capex sensitivity: Banks and merchants continue “doing more” with mission-critical platforms; flight to quality favors Fiserv’s scale/integration .
  • Argentina normalization: Q1 Argentina contribution ~0 vs ~22 pts in prior-year Merchant, with Dólar Turista ~7 pts then; program likely ending this quarter .

Estimates Context

  • Q1 2025: Adjusted EPS $2.14 beat $2.08 consensus*; GAAP revenue $5.13B beat $4.84B consensus* .
  • Q4 2024: Adjusted EPS $2.51 beat $2.48 consensus*; GAAP revenue $5.25B beat $4.96B consensus* .
  • Q3 2024: Adjusted EPS $2.30 beat $2.26 consensus*; GAAP revenue $5.22B beat $4.91B consensus* .

Estimates marked with * are values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat and reaffirmed outlook: EPS and revenue beats alongside maintained FY guidance and ≥125 bps margin expansion support near-term sentiment .
  • Clover remains the growth engine: 27% revenue growth, expanding VAS, and international launches (Brazil, Australia, Singapore, Belgium) underpin Merchant acceleration through 2H .
  • Distribution advantage compounding: 33 new FI partners and ADP collaboration enhance SMB funnel and multi-product bundling (Clover + CashFlow Central + XD) .
  • Data & AI monetization: Early revenue from data sales and measurable authorization recovery improvements signal a new, higher-margin lever .
  • Processing headwinds manageable: Core processing softer against tough comps but expected flat to slightly positive; mix shift to higher-value VAS/enterprise supports margins .
  • Capital discipline intact: $2.2B buybacks; leverage 2.9x within target with ~$5.5B FCF expected for 2025, enabling continued shareholder returns and investment .
  • Watch near-term macros: Discretionary softness (travel/hotels/restaurants) and Canada-specific travel pressure, but nondiscretionary categories remain resilient; tariff cost impact minimal under current assumptions .