Q4 2024 Earnings Summary
- Clover's Value-Added Services (VAS) penetration is expected to continue improving, reaching 25% in 2025, up from a 3-point increase in 2024. This growth is driven by strong performance in value-added solutions and hardware sales from five new hardware products, contributing to revenue growth and margin expansion.
- International expansion into new markets such as Brazil, Mexico, and Australia, combined with significant partnerships like with ADP and nearly 1,000 financial institution partners, along with new software products including CashFlow Central, are expected to drive continued growth and increase market penetration.
- The new CEO, Mike Lyons, emphasizes the unparalleled cross-selling opportunities across Fiserv's merchant and financial platforms, highlighting the potential in international markets, strong client relationships, and the company's substantial talent and innovation base with 13,000 engineers, which are poised to drive future growth.
- Clover's Gross Payment Volume (GPV) growth has decelerated, raising concerns about sustaining previous growth levels, especially since revenue growth is increasingly driven by hardware sales and value-added services rather than core transaction volume. ,
- CashFlow Central is not expected to become a meaningful contributor to revenue until 2026, which may delay anticipated growth from this initiative and impact short-term revenue growth.
- The company benefited from transitory effects in Argentina in 2024, including excess inflation and interest, which boosted results. With these effects expected to normalize in 2025, there may be challenges in maintaining previous growth momentum.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Up 6.8% (from $4,917M to $5,251M) | The 6.8% increase in total revenue is driven by continued organic growth in core segments such as Merchant and Financial, reflecting an ongoing trend from previous periods of improved global processing and merchant acceptance revenues. |
Operating Income | Up 15% (from $1,446M to $1,668M) | A 15% increase in operating income is attributed to enhanced operating leverage and disciplined cost management, building on prior period initiatives that improved segment performance and margins. |
Net Income | Rebounded from $87M to $938M (>1000% rise) | The dramatic rebound in net income is due to the normalization of non-recurring items from the previous period and a return to strong core profitability, reversing the impact of one-off events that depressed Q4 2023 figures. |
EPS – Diluted | Up ~14% (from $1.44 to $1.64) | EPS improved by approximately 14% as a result of higher net income combined with operational improvements and potentially lower share counts from repurchase activities, amplifying the positive impact of better underlying business performance. |
Interest Expense | Reversed from $284M to –$2,067M | The extraordinary reversal in interest expense reflects significant non‐recurring adjustments in Q4 2024—likely related to debt restructuring or adjustments in financing costs—marking a stark contrast to the normal expense recorded in Q4 2023. |
Corporate and Other Segment Revenue | Up ~23% (from $285M to $351M) | Corporate and Other segment revenue increased by about 23% driven by higher postage revenue and improved performance in smaller revenue streams, continuing the positive trend seen in prior periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | FY2024 | no prior guidance | $8.73 to $8.80 | no prior guidance |
Organic Revenue Growth | FY2024 | no prior guidance | 16% to 17% | no prior guidance |
Adjusted Operating Margin Expansion | FY2024 | no prior guidance | at least 150 basis points | no prior guidance |
Free Cash Flow | FY2024 | no prior guidance | above $4.7 billion | no prior guidance |
Impact of Argentina (Transitory) | FY2024 | no prior guidance | 4-point benefit total, 9 points for Merchant Solutions | no prior guidance |
Foreign Currency Exchange Impact | FY2024 | no prior guidance | 8.5% | no prior guidance |
Organic Revenue Growth | FY2025 | no prior guidance | 10% to 12% | no prior guidance |
Adjusted Operating Margin Expansion | FY2025 | no prior guidance | greater than 125 basis points | no prior guidance |
Adjusted EPS Growth | FY2025 | no prior guidance | 15% to 17% | no prior guidance |
Free Cash Flow | FY2025 | no prior guidance | approximately $5.5 billion | no prior guidance |
Adjusted EPS Range | FY2025 | no prior guidance | $10.10 to $10.30 | no prior guidance |
Interest Expense | FY2025 | no prior guidance | Expected to be higher | no prior guidance |
Adjusted Effective Tax Rate | FY2025 | no prior guidance | roughly 19.5% | no prior guidance |
Share Repurchase Program | FY2025 | no prior guidance | Expected to continue | no prior guidance |
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Clover Growth Sustainability
Q: Can Clover's strong growth continue next year?
A: Management is confident in Clover's sustainable growth, citing expansion into Brazil, Mexico, and Australia and partnerships like ADP. They emphasize their "all gas and no brake" approach and expect continued momentum despite tough comparisons. -
DoorDash and Embedded Finance
Q: How does PayFare acquisition enhance DoorDash partnership?
A: The PayFare acquisition adds program management capabilities, strengthening Fiserv's services for DoorDash and other embedded finance clients. This positions them to "wholly serve those clients," supporting acceleration in Financial Solutions. -
Financial Solutions Outlook
Q: When will issuer slowdown reverse with Verizon and Target?
A: The issuer slowdown was due to lower volumes in the plastics business tied to the credit environment. An uptick is expected in late March 2025 as Target comes online, with Verizon contributing in September, leading to growth throughout the second half. -
Clover GPV Growth and January Trends
Q: Why did Clover GPV growth decelerate, and how is January?
A: The deceleration is partly due to FX impacts and inflation in markets like Argentina. January trends are in line with expectations, with resilient consumer spending. Management is confident in continued growth across broad distribution and various verticals. -
CashFlow Central Impact
Q: When will CashFlow Central materially impact P&L?
A: Clients will come online in the second half, generating revenue. For a $20+ billion company, CashFlow Central will become meaningful more in 2026 rather than 2025, offering long-term sustainability. -
Clover Revenue vs. Volume Growth
Q: What drove the widening spread between Clover revenue and volume growth?
A: Increased Value-Added Services (VAS) penetration, improving by 3 points over the previous year and expected to reach 25% in 2025, along with the rollout of five new hardware products, boosted revenue beyond volume growth. -
Go-To-Market Strategy and Expenses
Q: How will new offerings affect operating expenses?
A: They're adding to the sales force and leveraging their "world-class distribution." With technical integration and partner incentives, growth is driven without significantly impacting operating expenses. -
Walmart Partnership
Q: Any insights on the Walmart partnership's impact?
A: Fiserv continues to expand its long-standing partnership with Walmart, including running Walmart's GV One financial on Finxact. This close collaboration on payments and fintech initiatives strengthens their mutual growth. -
New CEO's Impressions
Q: What surprised Michael Lyons about Fiserv?
A: Few surprises due to prior involvement, but he was impressed by the "unparalleled" cross-selling opportunities between merchant and financial platforms, international potential, and the innovation focus of 13,000 engineers.