FISERV INC Q3 FY2024 earnings call

• Fiserv delivered strong third quarter results with adjusted earnings per share of $2.30, up 17%, driven by 7% adjusted revenue growth and 170 basis points expansion in adjusted operating margin to 40.2%. Organic revenue growth was 15%.
• Key strategic partnerships include working with DoorDash on embedded finance, a proof of concept with Walmart on Pay by Bank, and a referral partnership with Walmart Business for Clover.
• Merchant Solutions segment had organic revenue growth of 24% in Q3, with Clover revenue up 28% and value-added services penetration at 21%. In Financial Solutions, CashFlow Central build-out was completed, and migration to Experience Digital (XD) continued.
• Hosted 3,000 clients and prospects at the annual Client Conference, highlighting the SMB bundle which integrates solutions across Merchant and Financial Solutions segments.

Merchant Solutions Segment: Organic revenue growth was 24% in the third quarter and 29% year-to-date. Adjusted revenue growth was 9% in the quarter and 10% year-to-date. Organic growth includes benefits from Argentine inflation and dólar turista. Financial Solutions Segment: Organic revenue grew 6% in the third quarter and year-to-date, in line with the full-year outlook of 5% to 7%. Digital payments organic and adjusted revenue each grew by 5% in the quarter, issuing organic and adjusted revenue grew 7% and 4% respectively, and banking organic and adjusted revenue grew 5% in the quarter.

• Raised full-year adjusted earnings per share outlook to $8.73 to $8.80, up from $8.65 to $8.80, with adjusted EPS growth accelerating to 16% to 17% from 15% to 17%.
• Raised 2024 organic revenue growth outlook from 15% to 17% to 16% to 17%.
• Adjusted margin expansion outlook raised to at least 150 basis points from more than 135 basis points.
• Free cash flow guidance updated to above $4.7 billion, driven by strong third quarter and year-to-date free cash flow.

• Continued impact of Argentine inflation and dólar turista, which can affect organic growth.
• Foreign currency exchange remains a headwind to adjusted revenue growth relative to the tailwind from excess inflation and interest in Argentina.

Q: Tien-Tsin Huang from JPMorgan asked about enterprise growth and sustainable levels.

A: Bob Hau responded that enterprise transaction growth was 12% in the quarter, with a large PayFac ramping in Q3, and some continuation in Q4 before returning to more normal levels.

Q: Darrin Peller from Wolfe Research asked about cross-sell examples and conviction in Financial Solutions segment acceleration.

A: Frank Bisignano discussed the strategic complementarity of merchant and financial institution assets, the SMB bundle, and the power of being a strategic partner of choice.

Q: Harshita Rawat from Bernstein asked about STAR and Accel's capabilities.

A: Frank Bisignano stated that STAR/Accel is a strategic asset supporting client transactions with PIN, signature, and dual-messaging capabilities.

Q: Jason Kupferberg from Bank of America Merrill Lynch asked about Clover Q4 expectations.

A: Bob Hau mentioned Clover continues to have good revenue and volume growth, with a target of $4.5 billion by 2026 and value-added services penetration at 21%.

Q: Dave Koning from Baird asked about SMB segment growth.

A: Bob Hau explained that Argentina tailwind has eased, anticipation is strong, and FX is a headwind, affecting SMB growth.

Q: Tim Chiodo from UBS asked about Financial Solutions revenue guidance for next year.

A: Frank Bisignano discussed the strong pipeline, including Finxact growth, SMB bundle, and AI/data opportunities for financial institutions.

Q: Dan Dolev from Mizuho Securities asked about Clover Go and Compact initial traction.

A: Frank Bisignano said these are augmentation products for the client base, with potential for international expansion.

Q: James Faucette from Morgan Stanley asked about SMB bundle and Clover target mix.

A: Frank Bisignano talked about the integrated capabilities and broader opportunity within the SMB space.

Q: Ramsey El-Assal from Barclays asked about Clover international expansion ramp.

A: Frank Bisignano said international expansion is a multiyear process with countries like Brazil having a multiyear ramp for adoption and scaling.