Fiserv, Inc. Q2 FY2025 earnings call

Key Points

• Mike highlighted the strong second quarter with 8% adjusted and organic revenue growth, 16% adjusted EPS growth, and $2.2 billion returned to shareholders. They refined guidance due to product rollout timing and economic conditions.
• Merchant Solutions has 3 growth initiatives: driving Clover growth (including new products, markets, partners, geographies), scaling distribution channels, and adding enterprise merchant clients. Clover had 30% revenue growth, 8% reported volume growth (excluding gateway conversion at 11% in Q2), and VAS penetration at 24%.
• Financial Solutions focuses on 3 initiatives: gaining leadership in issuing payments and banking, driving CashFlow Central and XD growth, and advancing cross-Fiserv solutions. CashFlow Central signed 23 new clients, and FIUSD stablecoin pilot expected by end of 2025.

In the Merchant Solutions segment, organic revenue growth was 9% in both the quarter and year-to-date. Adjusted revenue growth was 10% in the quarter and 8% year-to-date. Clover revenue grew 30% in the second quarter with annualized reported payment volume growth of 8%; excluding the gateway conversion, Q2 '25 volume growth was 11%, and it's expected to accelerate in the second half. For the Financial Solutions segment, organic revenue grew 7% in the quarter and 6% year-to-date. Issuing organic and adjusted revenue grew 13% and 14% respectively in the quarter, while banking organic and adjusted revenue was flat in the quarter.

Guidance Details

• Refined full-year organic revenue growth guidance to approximately 10% (low end of original range).
• Maintained $3.5 billion Clover revenue target for the year.
• Raised the bottom end of adjusted EPS guidance range by $0.05.
• Increased share repurchase guidance to approximately 130% of free cash flow.
• Modified adjusted operating margin guidance to approximately 100 basis points rather than at least 125 basis points of expansion.

Risks

• Forward-looking statements may differ materially from actual results due to various risks and uncertainties, including product launches and initiatives taking longer than planned, and economic conditions differing from assumptions.

Q: Timothy Chiodo from UBS asked about Clover Capital's penetration and activities to unlock TAM.

A: Mike Lyons stated they're in early stages of refining Clover Capital with risk management and operational changes to unlock TAM.

Q: Darrin Peller from Wolfe Research asked about merchant growth rate change and merchant margins.

A: Mike Lyons and Bob Hau discussed refined organic growth guidance due to product rollout timing and macro factors, and merchant margin impacts from acquisitions and investments.

Q: Tien-Tsin Huang from JPMorgan asked about guidance change reasons.

A: Mike Lyons said it's due to product rollout timing, some factors in and out of control, and macro economic differences.

Q: Harshita Rawat from Bernstein asked about merchant operating margins.

A: Robert W. Hau said margin miss was due to acquisitions, marketing investments, and product investments, in line with expectations but factoring in acquisitions for the full year.

Q: Dave Koning from Baird asked about first half and second half growth.

A: Robert W. Hau explained first half growth was affected by prior year transitory benefits, and second half growth driven by Clover's continued growth, international expansion, and enterprise business.

Q: Will Nance from Goldman Sachs asked about Clover revenue targets.

A: Robert W. Hau and Mike Lyons talked about being on track for $3.5 billion in 2025 and growth into 2026 with various initiatives.

Q: Andrew Jeffrey from William Blair asked about Clover VAS and competitive environment.

A: Mike Lyons and Robert W. Hau discussed VAS expansion internationally and domestically, and focus on serving businesses better in the competitive landscape