Fiserv at Bank of America Symposium: Strategic Growth and Expansion

On Tuesday, 18 March 2025, Fiserv (NYSE: FI) presented at the Bank of America Electronic Payments Symposium, offering insights into its strategic direction. While the company highlighted robust growth prospects and leadership transition, concerns over market uncertainties like tariffs were noted. Fiserv remains optimistic about its organic growth and international expansion efforts.

Key Takeaways

• Fiserv anticipates organic revenue growth of 10% to 12% and EPS growth of 15% to 17% in 2025.
• Clover’s international expansion and new product offerings are key growth drivers.
• The company plans significant margin expansion and improved free cash flow management.
• Fiserv is actively pursuing M&A opportunities that add value for shareholders.
• Leadership transition to CEO Mike Lyons is progressing smoothly.

Financial Results

• Fiserv projects a 10% to 12% organic revenue growth for 2025.
• Operating margins are expected to expand by at least 125 basis points.
• EPS is forecasted to grow by 15% to 17%.
• Free cash flow for 2024 exceeded expectations at $5.2 billion, with 2025 guidance at $5.5 billion.
• Clover’s growth rate was 29% in 2024, with value-added service penetration rising from 19% to 22%.

Operational Updates

• Clover aims for $3.5 billion in revenue by 2025 and $4.5 billion by 2026.
• International expansion includes launches in Brazil, Australia, and soon Mexico.
• New initiatives like Cash Flow Central are set to launch in Q2 2025.
• Partnerships with Target and Verizon are underway, enhancing issuer processing capabilities.
• The DoorDash partnership has seen significant success in embedded finance.

Future Outlook

• Fiserv expects continued growth in Clover’s international and value-added services.
• The Financial Solutions segment is projected to grow 6% to 8% organically in 2025.
• The company is focused on strategic M&A to drive shareholder value.
• Operating margins are targeted to expand by at least 125 basis points, supported by economies of scale.

Q&A Highlights

• The Small Business Index showed modest growth, with February up 2% year over year.
• Tariffs have no direct impact, but market uncertainty remains a concern.
• Clover Capital provides good visibility into merchant cash flow.
• The transition to CEO Mike Lyons is seamless, with no major strategic shifts expected.
• Free cash flow improvements are driven by better working capital management.

Readers are encouraged to refer to the full transcript for a more detailed account of Fiserv’s presentation at the symposium.

Full transcript - Bank of America Electronic Payments Symposium:

Unidentified speaker: Next session here and keep everybody on schedule. We are very excited to have Bob Howe from Fiserv here, Chief Financial Officer, who many of you know. So, Bob, thanks for being here.

Bob Howe, Chief Financial Officer, Fiserv: Thanks for having me. Appreciate it.

Unidentified speaker: Got a lot of stuff we want to kind of hit on with you because there’s always a lot of stuff going on at Fiserv and tends to be good stuff. So we like those conversations. I wanted to start kind of big picture on some of the data that you guys tend to put out monthly. You’ve got your small business index and you’ve got your spend trend report. And if we look at what you guys have shown since the beginning of the year, at least through February, Pretty healthy numbers, I would say, overall.

I mean, seasonally adjusted. It seems like there’s stability is kind of the trend. At the same time, there’s been a lot of fresh debates in recent weeks about the macro and the tariff uncertainty and some airlines are cutting guidance, right, and all kinds of moving parts. So just anything you can share in terms of what you guys are seeing more recently on the merchant side of the business, volumes, transaction growth?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So you pointed to I guess, the one key one I would reference is the Fiserv Small Business Index, which is an index we’ve been publishing for a little more than a year now that tracks the health of The U. S. Small businesses. And this is a wide swath of data that we use.

So it’s not a survey, it’s actual data that we have available to us through our variety of merchant channels, looking at debit card, credit card, cash spending, etcetera. And we saw good growth in January, up about just under 5% year over year. And then January to February month over month was essentially flat, but February over February last year was up about 2% slow on a year over year basis had slowed a bit, but still generally in line with our expectations. Certainly, a lot of news these days, but a lot of news, not necessarily a lot of movement. Some of the airlines you talked about were guiding to a lower outlook versus actually saying it’s lower today sort of thing and some of the retailers a little bit of a mix.

Unidentified speaker: Right.

Bob Howe, Chief Financial Officer, Fiserv: So right now, I think the the if you watch your local news channel or your favorite business news channel Yeah. Lots and lots of conversations about tariffs on, tariffs off. At the end of the day right now, there’s an increase in tariffs to China and I think aluminum tariff in place. Other than that, everything has been kind of stayed. But that’s causing some uncertainty in the market and the market doesn’t like uncertainty.

And so, but so far, I would say consumer continues to spend maybe a slightly lower pace than certainly what we saw in January.

Unidentified speaker: Okay. Okay. All right. Yeah, definitely a lot of noise and sometimes we got to separate the noise from the facts. So that’s all helpful.

Yes.

Bob Howe, Chief Financial Officer, Fiserv: And the one thing I would point to is, for our business in particular, given the breadth of reach that we have, obviously, both in The U. S. But globally, we like to say we touch nearly 100% of all U. S. Households.

We have a broad reach, but also a broad distribution, meaning roughly half of our merchant acquiring business is discretionary spending. The other half is non discretionary spending. And so there’s some inherent balance within the company. And we think over the last forty years of our existence, we’ve shown a pretty good resilience and the ability to deliver in any economic environment. Yes.

Last year was That’s right. Last year was our thirty ninth consecutive year of double digit EPS growth. That’s a lot of really good cycles and a lot of pretty tough cycles.

Unidentified speaker: For sure, for sure. So maybe just remind us about some of the other considerations for Q1. I mean, there’s leap day, of course, everyone has to kind of grow over. There’s some Argentina dynamics for Fiserv. Just if you want to put a finer point on any of that just as people start to firm up their first quarter numbers?

Yes.

Bob Howe, Chief Financial Officer, Fiserv: It’s actually something we pointed out when we gave original guidance for the year back in early February during our fourth quarter earnings call. We gave a full year guide for top line growth of 10% to 12% organic growth, operating margins expanding 125 basis at least 125 basis points and earnings per share growing 15% to 17%, but that we would expect to see that organic growth ramp through the course of the year. And there’s really a number of key factors that are playing there. First and foremost, as you pointed out, Argentina. In 2024, we saw, transitory benefit of extraordinary inflation and interest rates in Argentina for the year at about 11%.

And that waned throughout the course of the year. It started out much higher. First quarter last year was a 22 benefit that eased so that when we close out the year fourth quarter, I think it was about 6%. That’s to the merchant organic growth line. Right.

And so that eased pretty considerably. And by the time we closed out fourth quarter, both inflation and interest had returned to more normal levels such that we won’t see the transitory benefit of that in 2025. So very tough compares in Q1 levels offer or eases through the balance of the year such that we finished the year at 11%, which is why you see the growth for the full year at that 10% to 12% organic. Second thing is there’s a number of new products, new contracts, new clients coming on board throughout the year. Things like cash flow central that will go live in second quarter and ramp through the year.

A number of large issuing contracts going live with Target and Verizon, the two largest ones that we talk pretty regularly about. Target actually went live earlier this week over the weekend. And Verizon will go live very late third quarter, early fourth quarter. Then you have things like the ADP partnership continuing to ramp, rolling out Clover in three new geographies in Brazil, Australia and Mexico. Brazil, we are live formal official launch and now selling.

Australia, we did that official launch party in early December and now selling that in 2025. The launch party in Australia is at the end of this month and Mexico will follow behind. So that ramps over the course of the year. So we feel quite good about the visibility into those programs. They’re either launched or launching very quickly, and we’ll see growth accelerate through the year.

Unidentified speaker: Just one follow-up on the tariffs. I mean, anything indirect we need to think about? I mean, I don’t know how much of your merchant business is in places like Canada or Mexico or anything in terms of point of sale devices? Do you source any of those from China or anything like that?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So I would say no direct impact Right. For all practical purposes. Yes. We have business in Mexico.

We have it in in Canada and and everywhere else around the globe. Sure. But it’s not a a tariff import export dynamic. It’s what happens to the local economy.

Unidentified speaker: Yeah.

Bob Howe, Chief Financial Officer, Fiserv: Exactly. So the indirect aspect, whether it’s one of the many foreign countries that may or may not be impact may or may not be impacted, but also, of course, what happens to The US. Right. At the end of the day, very modest inflation is good for our company because higher volumes mean higher revenue, but it’s got to be modest. When you see extraordinary inflation, you see the secondary impact to the consumer.

Unidentified speaker: Yeah. Yes. That’s what I think we’re all watching and

Bob Howe, Chief Financial Officer, Fiserv: hoping that

Unidentified speaker: will happen. Yes. Exactly. Correct. So, okay, great.

So, Mike Lyons, CEO of LACT, he’s got some big shoes to fill, but pretty exciting for your company. He’s been on the job, I don’t know, month and a half or so, I think. I mean, are there any parts of the strategy you think he might tweak a little bit? I mean, certainly his initial comments suggest there’s not going to be any major wholesale changes coming, which makes sense, but any tweaks maybe we should be on the look out for?

Bob Howe, Chief Financial Officer, Fiserv: I think this is, if I remember correctly, this is about week eight for him right now. And one of the things I’ve heard him say multiple times both internally and externally with our own employee base, but also with clients, don’t expect the big unveil is the term he uses. He came to the company, first of all, knowing the company quite well. He’s been a client of Pfizer for you know, more than a decade. He likes to say, you know, at PNC where he was president prior to joining us, he was 92 Fiserv products.

So he knows the company quite well. And he believes in the product, he believes in the company, he believes in the capability and So no big change in direction, obviously. Mike’s not Frank, nobody is Frank. He’ll put his own touches on the market or excuse me, on the business. It’s been an incredibly easy smooth transition, I think I said, to some folks last week.

He started on a we announced him on a Thursday. He started Monday morning and his first day on the job was an all day management committee meeting, which we do once a month. Yeah. So he jumped right in and and was engaged right up front. And I think it was something like, you know, ten days into his tenure, Frank declared transition over.

We’re now running the company together. And quite honestly, you’ve seen this physically take place inside the office where on day one, the two of them were inseparable. Separable. On day two, inseparable. Day five, day seven, day 10.

And now to this point, there’s a little bit of a divide and conquer and that transition has been quite smooth and having the two of them around for eight weeks now has allowed for what has been quite a smooth transition and ultimately officially turn the keys over and we’ll move on.

Unidentified speaker: Sounds good. Sounds good. I mean, Fiserv obviously has a number of attractive businesses, but most people certainly consider Clover to be your crown jewel. I mean, it’s approaching, I think, 15% of total company revenue. It’s growing almost 30% still, obviously, at scale.

We’d like to get your current assessment of Clover’s competitive environment. Any changes maybe you’ve seen or evolution there, particularly, at least starting in The U. S. When we think about the three main verticals that Clover is really focused in?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So I mean, obviously, Clover is a big product. It’s one of what I would consider several crown jewels of the company. One of the unique characteristics or benefits of Fiserv is we have lots and lots of products. And even within a product like Clover, there’s lots of elements of Clover.

And to your point, we guided back in actually March of twenty twenty two for the first time. We indicated we expect to get to $3,500,000,000 in revenue by the end of twenty twenty five. We updated that in our November of twenty twenty three Investor Day to reaffirm the $3,500,000,000 for this year and add a 2026 goal of $4,500,000,000 essentially a 29% CAGR from March of twenty twenty two to now really the end of ’twenty six.

Unidentified speaker: Yes.

Bob Howe, Chief Financial Officer, Fiserv: And we’re right on track for doing that. 29% growth in 2024. We also provided an outlook for value added services, part of the key growth elements of the Clover solution, with an expectation that value added service penetration would hit 25% this year and 27% next year. We’re right on track. We added three points last year, went from 19% to 22%.

Unidentified speaker: We’ve

Bob Howe, Chief Financial Officer, Fiserv: got to add another three points this year. And then we get to ease in only two points after that. But of course, that’s off a much bigger number. And so we feel quite good about the track record and our ability to deliver on that. Some of the keys to that growth is those three new international verticals, building out additional value added services.

We continue to implement and deliver new software solutions. We launched five new hardware products last year. So we continue to invest in that product and bring new capabilities to market and have a very broad distribution channel that continues to grow. We’ve seen a pretty significant renewal of interest in the FI channel. Selling merchant services, signing up a number of new banks.

That was one of the early synergies of the Fiserv First Data merger. It did quite well, signing up hundreds of new financial institutions. And over the last six or nine months, we’ve seen some really significant acceleration of that really around the solution that we launched last year, we refer to as the Small Business Integrated Suite of Software, something that small businesses around the country, around the globe will benefit from and something that we’re seeing our financial institution partners seeing as quite valuable in order for them to not only generate revenue through revenue sharing agreements, but also deepen their relationship with an important client base of theirs, their own small businesses.

Unidentified speaker: Right. Right. Right. Yeah. And I want to come back to dive into some of these incremental drivers that get you to those 2025 ’20 ’20 ’6 targets.

But before I forget, I actually want to come back to the ADP Clover relationship. I know you highlighted that briefly. I mean, it really does seem like a very natural cross sell opportunity between the two customer bases. But tell us a little bit more about the rollout plans, anything you can share on the economics of the relationship and whether or not it’s exclusive and do you think it starts to move the needle a little bit this year on revenue?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So the partnership you are referring to, we launched late last year, in where we are essentially selling each other’s solutions to small businesses. ADP obviously has an extensive network of existing clients and new clients where they are selling payroll and human resources solutions, which we obviously don’t have. And offering those types of capabilities to our small businesses, again, deepens our relationship with our small businesses. It expands the offering that we can bring to a small business and vice versa.

They don’t have a merchant acquiring or a Clover solution. And so we’re now essentially selling each other’s products to each other’s clients on a referral basis. And we’re quite excited over the partnership. We think it’s a very natural link. The two companies get along quite well, and we’re encouraged on early signs, but it’s early signs.

Yeah. Yeah. You know, is it gonna move the needle? It depends on how fine a needle you wanna look at. Yeah.

At the end of the day, you know, we’re gonna do, you know, $2,021,000,000,000 dollars of revenue this year Sure. With roughly half of that, call it, $10,000,000,000 in merchant acquiring. ADP is helping with that, no doubt about it and vice versa. So we’re excited about the partnership.

Unidentified speaker: Yes. No, it does sound super interesting. So let’s come back to some of these incremental sources of growth for Clover. And I want to talk about the VAS piece. I guess, when we think about BaaS today, we think of Clover Capital as being the biggest piece of that and correct me if I’m wrong.

So I’m just curious how you guys are thinking about underwriting and credit there and with the macro becoming a little shakier, do you think anything different about it?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So Clover Capital is not the largest, but it’s one of the largest value add services most definitely. And I would say it’s a different sort of it’s not a loan and we have very, very good visibility. It’s essentially an advance against receivables And we have very good visibility into the merchant acquirers cash flow. You got

Unidentified speaker: the hand in the cash flow basically, right?

Bob Howe, Chief Financial Officer, Fiserv: Exactly. And in fact, are in the payment flow. So if you look at our financial disclosures, continue to see good growth in Clover Capital and any reserves or losses are remaining quite steady. I still feel very good about our ability to continue to offer that and generate good margins and good returns.

Unidentified speaker: Have you guys seen any different kind of loan sizes in Clover Capital? Or is there what is the average loan size?

Bob Howe, Chief Financial Officer, Fiserv: No, it’s relatively small, both in terms of dollars and in terms of term or length.

Unidentified speaker: Okay.

Bob Howe, Chief Financial Officer, Fiserv: And so I would say, I don’t think we’ve seen any change in dynamic there one way or another. And I don’t think we’ve seen any big shift in demand. Certainly something that we’ll watch for, but so far relatively stable and steady.

Unidentified speaker: Okay. So let’s turn to some of those newer geographies, Brazil, Mexico, Australia. And I know again some of this is pretty nascent, but just if you’re looking out whatever twelve, eighteen, twenty four months, is there a view in terms of which of those geographies can actually drive the most incremental revenue? And maybe just talk a little bit about distribution strategy in the respective regions?

Bob Howe, Chief Financial Officer, Fiserv: Yes, I think so a couple of keys there. One is from a distribution strategy very similar to what we have globally today, a variety of different distributions, direct channel through partnerships, through bank partnerships. Important to note that as we expand Clover into these new geographies, the three Brazil, Australia and Mexico, they’re not new geographies for us. They’re new geographies for Clover.

Unidentified speaker: True, true. Right.

Bob Howe, Chief Financial Officer, Fiserv: We have merchant acquiring capability in all three of those today. We’re well known in the market, well known through the distribution channels and have good local presence. One of the things that Fiserv has done for five years post merger is we are organized We don’t have an international division. We have really four regions, North AmericaThe U. S, Latin America, EMEA and Asia Pac.

And each of those regions are run by local leaders that report directly into FrankMike. And so that local presence really makes a big difference. And the fact that we are expanding Clover into local markets for us, We’re not entering a market we’re not familiar with. It’s not a market that is new to us by any stretch of imagination. So we feel quite good about our ability to make good headway and grow nicely.

I would anticipate this year, all three of those regions ramping and continuing to add to that is one of the many ways we’ll achieve the $3,500,000,000 of revenue for 2025. I would anticipate and this is somewhat size of market as well as pacing or timing, we’re first to launch in Brazil, next is Australia and then Mexico. And I think you’ll see that in terms of growth trajectory.

Unidentified speaker: Okay. Yes. Makes sense. Makes sense. So the back book also comes up sometimes as a Clover driver.

And I think originally at the Investor Day, you guys had said that back book maybe contributes 10%.

Bob Howe, Chief Financial Officer, Fiserv: Right.

Unidentified speaker: And I think that’s more or less been your experience since the time of the Investor Day. As we look out at your 2026 target, does that 10% get a little bit bigger?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So the 10% you were referring to is a number actually we’ve been seeing for several years. I can tell you for the last five years that I’ve been associated with the merchant side of our business. That’s been the case. And what that is, is roughly 10% of the Clover growth is driven by back book conversion or said another way, 90% of new Clover revenue growth is from clients that are new to Fiserv from a merchant acquiring standpoint.

And that’s been very consistent for the last five years. I would expect that to kind of hang in there for this year. That’s what we’re seeing right now and I expect to see the balance of this year. What we said during Investor Day back in November is, as we hit 2026, ’20 ’20 ’7, ’20 ’20 ’8, we’d expect that to modify a little bit. It’s not something that we don’t need that to go to 50% to get to the $4,500,000,000 But at some point in time, it would make sense to more proactively address that back book.

And November of twenty twenty three, twenty twenty six look like a time that we’d probably want to do that.

Unidentified speaker: Yes. No, that would certainly make sense. All right. So we’re going to move on to Financial Solutions. And I wanted to talk about pipeline on the Issuer Processing side of the business because you’ve had a number of big wins.

You touched on a couple of them briefly like Verizon and Target, there was Desjardins. So what’s the state of play right now in the pipeline now that you landed some big contracts?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So still good pipeline, good growth in one of the areas in particular we see real opportunities internationally. This is a global business for us and we see some real opportunities, obviously Desjardins up in Canada, the largest credit union consortium up in Canada. I mentioned Target is now live. Verizon will go late third quarter, early fourth quarter.

We actually expect Desjardins to be in 2026. In December of twenty twenty, ’1 of we had an investor conference. One of the key messages we delivered there was we had and I think this number is right, it was many years ago now, dollars 120,000,000 worth of new issuer wins in the previous twelve months that we expected to go live. Then in November of ’twenty three, which was our next Investor Day, we recapped that January, they were all live. And secondly, it turned out to be more than $120,000,000

Unidentified speaker: I.

Bob Howe, Chief Financial Officer, Fiserv: E. Natural growth of those products, actually of those clients. And then announced another $125,000,000 or so of new wins as of November 23 that would go live and that’s the target in the Desjardins and whatnot you see now going live. We continue to see good pipeline and good level of interest. We got a terrific product.

We continue to invest in that product, bringing more capabilities to that. We’re quite encouraged about the growth that we’re seeing from that group of wins we had back in November of twenty twenty three starting to go live as well as new wins that we’re seeing. And part of that, of course, is, the now the hot term embedded finance, which we’ve been participating in for a number of years. We didn’t used to call it embedded finance. And in that November 2023 Investor Day, ’1 of the examples we used is Walmart.

Didn’t realize that was embedded finance. We just thought we were providing additional services to a very large client of ours. Today, that’s embedded finance. And of course, at the end of kind of the second half of last year, we announced the DoorDash win, a large embedded finance win that is now live. I think we announced that in early fourth quarter.

It’s live and at full ramp. Still growth opportunity, but we’ve converted the Dashers as they call their drivers. And we’ve now got a few million accounts open on that system and we’ll continue to see growth in that space as DoorDash grows as well as as they look to add additional capabilities to their program.

Unidentified speaker: Yes. I’m glad you brought up DoorDash because I was going to get there, but maybe for people who are a little less familiar with the relationship, maybe just say a few words about how it actually works in practice and and, you know, kind of the benefit to to the to the dashers.

Bob Howe, Chief Financial Officer, Fiserv: Yeah. Yeah. So if if you’re not familiar with DoorDash, every time a delivery takes place, their drivers are paid instantaneously. And so if a driver is making 10 deliveries, they’re getting 10 paychecks that day. If they’re making 20 deliveries, they’re getting 20 paychecks that day and obviously they’re not checks.

And we are the processor for those payments. We provide the program management. We provide the debit processing and FinZac is the ledger that they’re running that system on.

Unidentified speaker: Great, great. And then I want to come back to cash flow central than the small business bundle. It will be helpful, I think, if you just kind of go through some of the key aspects of those products and the rollout timelines. I know the Cash Flow Central is kind of part of the bundle.

Bob Howe, Chief Financial Officer, Fiserv: That’s right.

Unidentified speaker: But just unpack that for

Bob Howe, Chief Financial Officer, Fiserv: us a little bit. So the small business integrated suite that you’re referring to is a set of products that we are bringing to a market that enable a small business to better operate their small business. And it’s a variety of different solutions that obviously starts with Clover at its heart from an operating system standpoint. It adds Cash Flow Central, which will go live in the second quarter, which is an APAR solution that enables a small business to better manage their cash flow that we all know is the heart and soul of the success of a small business. We have experienced digital or XD, which is our digital banking software.

So you can access that small business integrated suite through XD, through your digital banking solution. Therefore, financial institutions are a key part of the distribution channel for the small business integrated suite. It’s things like ADP or SpendTrack, which is a credit card control and reporting system. Or a lot of different capabilities that come in an integrated suite that you can either access through XD.

Unidentified speaker: Mhmm.

Bob Howe, Chief Financial Officer, Fiserv: Again, your digital banking solution or through the Clover dashboard, depending on how you want to access all of that capability. A lot of that is in place today, and deepening the integration of that capability and some of that like Cash Flow Central will go live later this year.

Unidentified speaker: How many banks are signed up so far?

Bob Howe, Chief Financial Officer, Fiserv: So from a Cash Flow Central standpoint, by the end of last year, end of twenty twenty four, we had 39 financial institutions.

Unidentified speaker: All right.

Bob Howe, Chief Financial Officer, Fiserv: And of course, continue to sign up new ones this quarter and have a tremendous pipeline.

Unidentified speaker: Okay. So we’ll look forward to hearing more about those. I wanted to spend a couple of minutes on the core banking business, which obviously post the merger with First Data became a smaller piece of overall Fiserv, but it’s been a very long term business for you guys. How would you assess the competitive landscape there? I mean, I think of Fiserv as playing across various aspects of that market.

So just how you’ve seen that evolve and how you feel about Fiserv’s overall positioning?

Bob Howe, Chief Financial Officer, Fiserv: Yes. First and foremost, I feel great about where we stand in that overall market. Core banking is one of the three business lines within our Financial Solutions segment. As you may or may not recall, Fiserv has got two segment reports. One is the Merchant Solutions, the other Financial Solutions, roughly 50% of the revenue in each of those two.

And in the Financial Solutions segment, there are three business lines that roughly represent a third of the revenue of that segment, call it $9,000,000,000 9 point 5 billion dollars of revenue last year. Banking is where we see our core as well as digital banking XT, for example, reported in. And overall, the Financial Solutions segment has seen good accelerated organic growth. We did 6% last year. We had guided the segment to be 5% to 7%.

We did 6% guidance or outlook for 2025 is that segment will grow at 6% to 8%. And in banking in particular, we indicated that would be below that average, that 6% for the last year and 6% to 8% this year. Given the nature of that segment, you don’t have lots of banks changing course on a regular basis. Over the last several years, that growth rate is up pretty meaningfully from what used to be mid single digits, but we battled to get to 3% or 4%. So now to be at 6% is an accelerated growth.

XD is a tremendous digital banking solution. DNA, FinZac are two very strong core account processing systems, and we have a variety of different solutions depending on the bank and the credit union and what works for your bank or credit union. Over the last several years, you’ve seen our solution kind of grow. We’re now participating in much larger banks. If you had talked to me seven, eight years ago, I would have told you kind of the heart of our offering was in a bank size or credit union size of, call it, $5,000,000,000 to $10,000,000,000 typically.

Yep. That’s moved up quite meaningfully. Mhmm. DNA and and FinCAC in particular, we have now, you know, multiple banks well in excess of a hundred billion dollars in assets. Wow.

The other thing that’s changed quite meaningfully is ten years ago, the secret sauce to Pfizer was sell a core and then add surrounds to it. Yeah. Today, we we can start those relationships with the financial institution in a lot of different ways. It might be selling debit processing or it might be selling digital banking or whatnot and then add the core where ten years ago as you had to be the core.

Unidentified speaker: Yeah. Right.

Bob Howe, Chief Financial Officer, Fiserv: We can lead with a lot of different solutions.

Unidentified speaker: Okay.

Bob Howe, Chief Financial Officer, Fiserv: And, of course, having both that financial solutions and that merchant solutions capability and being able to go to a bank and talk about a small business integrated suite, which allows them to sell a solution to what really is a pretty important element of their customer base and deepen their relationships with their clients as well as generate revenue through our revenue sharing agreements is quite meaningful.

Unidentified speaker: If we think about you mentioned the guidance for Financial Solutions this year, so it is calling for a little bit of acceleration. I think it’s a little bit back half loaded. I think there are some genuine drivers for that, but just hone in on kind of the points of visibility that you have into that acceleration?

Bob Howe, Chief Financial Officer, Fiserv: Yes. So this is generally, well, overall Fiserv, but in particular on the Financial Solutions, a pretty high recurring revenue business. And what drives that growth rate into the as it accelerates into the second half of the year is things like Cash Flow Central launching some of the new issuer programs going live. We’ll continue to see good growth in both the digital payments and digital banking solutions, the other two large business lines within that segment. We’ve got a great debit business.

We’ve got a great credit issuing business. Debit is both debit processing as well as Star and Excel, essentially the third largest debit network in The United States, continuing to see growth in that space. So we’re quite enthused over our ability to accelerate revenue again into 2025. We essentially hit the bottom end of that range last year. Right.

The second. And given the things like Cashflow Central and new implementations on experienced digital or digital banking solution, the new issuer wins and whatnot, we feel quite good about the visibility and delivering on that.

Unidentified speaker: Basically, you’re talking about a point, right? That’s right. It’d be one point of accelerated. Exactly. Okay.

And you’re going to have target for three quarters and Verizon for whatever

Bob Howe, Chief Financial Officer, Fiserv: For quarter, you got DoorDash for a full year and just a quarter with and even in the fourth quarter, it was ramping and so Right. Right.

Unidentified speaker: Pieces are all there. Yeah. Okay. Okay, good. That’s a good color.

I wanted to touch on the Pay by Bank initiative at Walmart, where you guys are obviously an important part of that. And I wanted to get a sense of just, is that moving into production? Just curious on timing there. And when you guys talk to other large merchants that obviously you have deep relationships with, are you getting the sense that there is interest from others as well? Yes.

Bob Howe, Chief Financial Officer, Fiserv: Yes. I definitely would say there’s some real interest. Obviously, the pilot that we did with Walmart last year garnered some interest with Walmart, but also with other large clients of ours. It’s still early stages on how that plays out. But we are in have been and continue to be and expect to be into the future offering a variety of different payment solutions for our clients and enable them to pay and get paid in whatever form they want to get paid.

And PayByBank is yet another solution we’re bringing to market.

Unidentified speaker: Yes. Okay. So it sounds like one to watch, but still early days. Yes. Let’s talk about operating margins.

You guys are calling for at least 125 bps of expansion, I think in both segments as well as obviously total company. And you guys have really done a fantastic job on margins, probably even more so since the merger. And I wanted to hear about kind of the levers that you have to drive incremental margin expansion and all this ongoing efficiency because again margins are up hundreds of basis points since the merger.

Bob Howe, Chief Financial Officer, Fiserv: Yes. So since merger, margins are up just under 1,000 basis points. And as you said, our outlook and guidance for this year is at least 125 basis points this year and we expect both of our segments to contribute towards that growth. This is really something that is the heart and soul of Fiserv. It’s also what I sometimes refer to as the natural cycle of the company.

As we accelerate growth, this will be 2025 with a 10% to 12% outlook would be our fifth consecutive year of double digit organic revenue growth. We like to talk about thirty nine consecutive years of double digit earnings growth. But we’re now looking at we did four years, this would be the fifth year of double digit top line. That organic growth of the company falls through at better than company average margin. It’s just very scaled business.

Right.

Unidentified speaker: Right.

Bob Howe, Chief Financial Officer, Fiserv: And so it’s a virtuous cycle of growth. Yeah. Our investments in the company last year, the year before, the year before Mhmm. Drive that 10% to 12% growth this year. That 10% to 12% growth comes through at better than company average, better than the 39% margin, and therefore allows us to take some of that, reinvest into more growth for next year and following years, we’ll see margin expand.

Yeah. And it’s something that we’ve been doing for a lot of years, since before the merger, but obviously accelerated meaningfully as the growth of the company accelerated pretty meaningfully. And when we started making those investments and started talking about, you know, high single digit, low double digit organic growth. I think a lot of people were looking at saying, okay, you’re going to make the investments where you’re going to actually deliver the growth. Right.

Unidentified speaker: And we’ve absolutely done that. Right.

Bob Howe, Chief Financial Officer, Fiserv: And you’ve seen a pretty significant increase in

Unidentified speaker: our

Bob Howe, Chief Financial Officer, Fiserv: CapEx. In 2020, we spent about $900,000,000 in CapEx. The last three years, I think we’ve averaged $1,500,000,000 we’re just over $1,500,000,000 last year. That brings that long list of new products that are now going into market, cash flow central, five new pieces of hardware in Clover, new software for our vertical our focused verticals around retail, restaurants and services in Clover. Number of new products that are coming into market drive that growth and allow us to continue to expand margin.

Yeah. It’s a nice Something we see growing for a number of years. This won’t be the last.

Unidentified speaker: Yeah. Yeah. No. It’s a great flywheel, right?

Bob Howe, Chief Financial Officer, Fiserv: Yeah.

Unidentified speaker: And I guess is mix helping with ongoing margin expansion too? I mean, if I think about, for example, the outsized growth in Clover?

Bob Howe, Chief Financial Officer, Fiserv: Yes. I think mix within the business lines, mix within the products and even within the products. So one of the key elements of growth of Clover is that deeper value added services penetration.

Unidentified speaker: Exactly.

Bob Howe, Chief Financial Officer, Fiserv: And that software sale obviously is a much higher margin than selling a basic terminal processing solution, payment processing. And therefore, that allows that margin expansion most definitely. There’s reasons for the investments we’re making and where we’re making them that’s better margins.

Unidentified speaker: Is there still a focus on outright cost takeout too? Or do you feel like you’ve realized most of that?

Bob Howe, Chief Financial Officer, Fiserv: I think depending on how deep you want to look, yes. But ultimately, it’s growing at better than company margins. And so incremental dollar of revenue or 5% revenue growth doesn’t bring five percent cost growth.

Unidentified speaker: Right.

Bob Howe, Chief Financial Officer, Fiserv: So, you know, you’ll see our expenses will grow in 2025.

Unidentified speaker: Sure.

Bob Howe, Chief Financial Officer, Fiserv: ’24 was above ’23, ’20 ’5 will be above ’24.

Unidentified speaker: Sure.

Bob Howe, Chief Financial Officer, Fiserv: But at well less than the growth rate of the top line.

Unidentified speaker: Yeah.

Bob Howe, Chief Financial Officer, Fiserv: Now in individual specific areas, there’s cost management or cost takeout. But generally, our costs are growing just at

Unidentified speaker: a much slower rate than revenue is. Economies of scale are a beautiful thing, right?

Bob Howe, Chief Financial Officer, Fiserv: Yes.

Unidentified speaker: I wanted to talk about free cash flow. This has also been a bright spot of the story. I think you’re guiding to $5,500,000,000 for this year. I think that would put you pretty close to the 100% conversion target. And that’s actually better than I think 90% is what you talked about at the Investor Day, right, that you were aiming for 2526%.

So looks like you’re actually outperforming a little bit and just curious what’s driven the outperformance. Is it just the margins coming in better or other factors?

Bob Howe, Chief Financial Officer, Fiserv: Yes, I think margins coming in better as part of it. I think there’s also and we talked a little bit about this in fourth quarter when we provided the full year 2024 results. We did $5,200,000,000 last year, which was above what we are guided and above what people had expected. And that really was driven by a pretty meaningful project around working capital management. And that’s both accounts payable and accounts receivable better managing both the cash in and the cash out in a in a systemic way.

Right. It wasn’t

Unidentified speaker: It’s blocking and tackling.

Bob Howe, Chief Financial Officer, Fiserv: Exactly. Right.

Unidentified speaker: Yeah.

Bob Howe, Chief Financial Officer, Fiserv: But it wasn’t, oh, geez. I got a big receivable. Let’s make five phone calls and beg for that money. It really was changing the way the cycle of how we generate invoices, where those go out, how we follow-up, and managing terms and managing communication, a lot more electronic delivery of invoices, a better like a better predictability of accounts payable that enables you to get different terms where if if a vendor knows they’re gonna get paid in sixty days, they’re willing to take a sixty day payment. Yeah.

Where if they were at 45 and you paid them sometimes in thirty days, sometimes in fifty five days, that visibility where they actually can see that the payments been approved, that sort of a thing. A wide variety of pretty significant working capital projects, again, both on the AR and AP side, paid off in a bigger way in fourth quarter than we had anticipated. And it is a sustainable systemic change that we expect to continue into the future.

Unidentified speaker: Optimization, right? Yes. That was right. Like you said, the payables and receivables, yes, good old fashioned working capital management, which is great. Let’s talk about M and A.

I mean, obviously, you guys buy back a lot of stock pretty much every year, but there is some balance in your capital deployment strategy and you’ve not been shy about doing deals historically. If I think about just since First Data, obviously, I mean, they’ve obviously been smaller transactions. But now with kind of the changing of the guard CEO, do you expect anything to materially change there or maybe just any characterization of the current M and A pipeline you’d want to share?

Bob Howe, Chief Financial Officer, Fiserv: I wouldn’t point to a changing of the guard that will drive a change of outcome. We’ve always been quite interested in acquisitions and done dozens of them over the last several years. To your point, the last couple of years, they’ve been typically smaller in nature. And really what’s driven that is not an appetite, but a value. We have always been very much a value driver.

If we see an opportunity to acquire a company or a capability, that is value accretive for our shareholders, we’ll absolutely address that. And I would tell you, we have a very active M and A group, that looks at dozens and dozens and dozens of properties, both in terms of our own random interest, on companies that aren’t necessarily available, but we’d love to find a way to do something with, but also ones that are in a process. And at the end of the day, as I’ve been known to say, I’m a willing buyer at a specific price. The challenge is finding a willing seller at that same price. And for a while, we thought we were seeing valuation expectations improve and ease, but we haven’t gotten to the point where we’re doing lots of deals now.

We actually did close we announced to the end of last year and closed them this year. So we got a couple of first quarter deals done relatively small. I think a combined call it $300,000,000 give or take. Okay. So not a significant amount of capital being deployed, but we continue to look and if we see a nice opportunity, we’re more than happy to do that.

We have the strength of the balance sheet. We got a great balance sheet, great cash flow. So we’re absolutely willing, but it’s got to be value accretive to the company.

Unidentified speaker: Yes. But with your organic growth, you can afford to be disciplined.

Bob Howe, Chief Financial Officer, Fiserv: Exactly.

Unidentified speaker: So all right, great. We got to leave it there. We’re out of time. Thanks so much. Really appreciate it.

Bob Howe, Chief Financial Officer, Fiserv: Appreciate it, Jason. Thank you.

Unidentified speaker: Take care. Thanks, everyone. We’re going to have one more session and that’s with Flywire beginning in five minutes. So thank you.

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