Fiserv, Inc. (FISV) Earnings

Management highlights

- Execution of 1-5 serve action plan, laser focused on executing against it with progress made. - Adding outstanding talent across organization. - Merchant Solutions: Solid growth in Clover GPV, Clover VAS revenue growth, steady growth in enterprise transactions; but lower inflation and interest rates in Argentina were a revenue headwind. Signed new banks, announced large agent bank partnership, hit milestones with Commerce Hub. - Financial Solutions: Solid underlying business volume growth in Finzac and payments businesses; new business sales momentum, product delivery milestones, improved client service metrics; positive client feedback on supporting all cores; recent acquisitions of Stonecastle and Smith Consulting in line with business cases; new business wins. - Innovation milestones on key strategic products. - Project Elevate with AI at center, early results encouraging. - Actions in Q1 to drive efficiency like closing offices, exiting underperforming businesses, reducing management layers, performance management, data center migration. - Commitment to disciplined capital allocation.

Guidance

- 2026 organic revenue growth in range of 1 to 3%, merchant solutions revenue growth in mid-single digits, financial solutions flat to slightly down. - Adjusted revenue growth in range of 1 to 3%. - Adjusted EPS $8 to $8.30. - Adjusted operating margin approximately 34% for the year, first half 31 to 32%, second half 35 to 36%. - Capital expenditures remain approximately flat with 2025 levels. - Free cash flow conversion of approximately 90% of adjusted net income for the year.

Segment performance

Merchant Solutions: Organic revenue declined 1% for the quarter, while adjusted revenue was flat. Clover revenue grew 6% in Q1, with Clover VAS revenue representing 27% of Clover revenue, growing 18% from a year ago. Enterprise transactions grew 8%. Processing organic revenue declined 14%, while adjusted revenue declined 9%. First quarter adjusted operating income for merchant solution segment was $626 million, down 23%, with adjusted operating margin of 26.4%. Financial Solutions: Organic revenue declined by 6% in Q1, while adjusted revenue declined by 5%. Digital payments both organic and adjusted revenue declined by 5%. Issuing revenue declined by 6% on an organic basis and 5% on an adjusted basis. Banking revenue decreased 6% on an organic basis and was down 4% on an adjusted basis. First quarter adjusted operating income for the financial solution segment declined 24% to $877 million, and adjusted operating margin was 38.1 percent versus 47.5 percent in the prior year period.

Risks & headwinds

- Macro environment impact on consumer spending mix. - Lower inflation and interest rates in Argentina as revenue headwind to Merchant. - Client service challenges leading to core account and revenue attrition above long-term trend. - Execution risks related to AI initiatives and Project Elevate. - Potential challenges in converting non-Clover merchants to Clover.

Analyst Q&A

• Q: Hey, thanks for going through all of that. I wanted to ask just on maybe visibility on the banking side and retention given some of the bank conversions that you're doing. surprised there. I know the trough comments were made, but I'd love to hear a little bit more detail on nutrition and retention, that kind of thing.

  A: I think broadly on banking, we continue to be obviously very proud of the leading market share position we have in the business and all the support across almost 3,000 banks and credit unions on the core side. As we've said, and we've said again today, you know, core attrition's been above where we want it to be, and getting that back to normal is a significant focus for us. That attrition, as you know, is the result of actions taken over the last several years, especially around the client service front, and we're confident we have the right fixes and addresses, and the way we're addressing it is the right thing to do. And while there's significant work to do, as I said today, we feel like We're bending that curve in a positive way, and contributing to that is we've significantly increased our client coverage efforts, which was an ask that came directly from the clients. From that has come better service, and we're seeing that show up in both our surveys and anecdotal evidence. And then we've really leveraged a number of different forms of AI to help in call centers, enhancing our client portal services, experience accelerating our tech modernization and reducing the books of work we have. Then obviously the decision to support all of our cores was an important one for our clients and has taken a significant amount of perceived pressure that they had on themselves to switch and obviously pressure on us. Little things or less highlighted things. The Stone Castle acquisition has been a great value-added positive, supporting our clients and one of the depository clients and one of their biggest needs, which is continued deposit growth. And then our approach to embracing the consultant community and even acquiring Smith Consulting to really drive value-added services to our depository partners, again, is another piece. Finally, we've taken an advanced approach, again using AI, to measure what we call a client health index across all their experiences with us in terms of pace of change, resolution, inquiries, client touch, and the like. And it's given us a much better view and perspective of where these clients stand, which allows us to play much more on the offensive side to getting to them. So a lot of stuff listed, but it's a complete package of behavioral changes, technology changes, service changes, alignment changes, enhancements. We talked about continued enhancement, the quality of our leadership team, bringing in new executives to combine with executives here. So I wish it was more visible in the results, but when you go through the underlying KPIs that we have, we feel really good about the progress we're making and our ability to get core revenue-related attrition back down to more normal levels. Ideally, we'd like to have none, but, of course, you've got M&A and stuff, and we've had some over history, but getting it back to those historical levels, we feel like we're doing all the right stuff and are on the path to do it. It just takes time and work.