Q3 2024 Earnings Summary
- 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% .
- 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.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Revenue Growth | Q3 2024 | 15% to 17% | 7% year-over-year (5,215Vs. 4,873) | Missed |
Merchant Solutions Growth | Q3 2024 | 25% to 28% | 2.4% year-over-year (2,469Vs. 2,410) | Missed |
Adjusted EPS (full-year guide) | Q3 2024 | $8.65 to $8.80 | $0.98In Q3 2024 vs. $1.55In Q3 2023 (−37% yoy) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Clover’s Growth and International Expansion | Q2: 28% revenue growth, pilot expansions in Brazil, Mexico, Australia ; Q1: 30% growth, push into Germany, Netherlands, Argentina ; Q4: 30% growth, expansion into Brazil, Mexico. | Revenue up 28% YoY, expansions progressing in Brazil, Mexico, Australia, and on track for 2026 revenue and VAS targets. | Recurring topic, consistently positive growth. |
Transitory Benefits from Argentina | Q2: 5-point benefit to total organic growth ; Q1: 15-point benefit in Merchant Solutions ; Q4: 8-point full-year benefit. | Contributed 3 points to total organic growth, down from 5 points in Q2. | Recurring, impact declining over time. |
Operating Margin Expansions | Q2: Up 160 bps, outlook raised ; Q1: Up 180 bps ; Q4: Up 150 bps. | Expanded 170 bps YoY, guided to at least 150 bps for full year. | Steady expansion each quarter. |
Financial Solutions Segment Revenue Growth | Q2: 8% organic growth, raising long-term outlook to 6%-8% ; Q1: 5% organic growth ; Q4: 6% growth, forecasting acceleration. | Projected to accelerate from 5%-7% to 6%-8% in 2025, citing new client projects and product launches. | Recurring with positive outlook. |
Digital Payments Segment Slowdown | Q2: 8% growth, no slowdown cited ; Q1: Slight slowdown noted by Robert Hau ; Q4: No slowdown mentioned. | No specific slowdown mentioned; digital payments grew 5%. | Mentioned inconsistently, no slowdown in Q3. |
Government Sector Revenue Growth | Q2: Large government deals (e.g., California EDD) ; Q1: Surpassed $500M from government clients ; Q4: No specific metric provided, but some rollout details. | Not mentioned for Q3 2024. | Mentioned in Q2 and Q1, absent in Q3. |
Reg II Opportunity in Debit Networks | Q2: Not mentioned; Q1: More opportunity ahead per Robert Hau ; Q4: Nearly 20 wins in debit networks. | Not mentioned in Q3 2024. | Mentioned in Q1 & Q4, no update in Q2 & Q3. |
Easing Consumer Spending Impact on Clover | Q2: Not explicitly tied to easing spending ; Q1: Not mentioned; Q4: No direct mention. | Slight decrease in Clover’s transaction volume growth noted, though still confident in consumer spending. | New mention in Q3, mildly cautious but generally confident. |
Cross-Selling & Integrated Solutions | Q2: Integrated strategy for SMBs, Finxact wins, Apple partnership ; Q1: Pipeline growth with Finxact, CashFlow Central focus ; Q4: Cross-selling to U.S. Bank with Cash Flow Central, integrated merchant-financial solutions. | Robust emphasis on SMB bundle (Clover + CashFlow Central), Finxact powering embedded finance, and partnerships (DoorDash, Walmart). | Consistent cross-selling focus, viewed as a key growth driver. |
AI & Data Services | Q2: Emphasis on AI potential, data science teams, real-time insights (Small Business Index) ; Q1: AI for productivity, data solutions in open banking ; Q4: AI-driven insights, advanced fraud mitigation, 85% of tech service calls resolved unassisted. | New client wins (Exxon for Data-as-a-Service), PNC adopting AI-based fraud detection. Focus on reducing implementation time via cloud. | Recurring, seen as a major future enabler. |
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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.