Fiserv, Inc.

Welcome to the FISERV 2018 Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question and answer session begins following the presentation. As a reminder, today's call is being recorded. At this time, I will turn the call over to Tiffany Willis, Vice President of Investor Relations at FISERV.

Thank you and good afternoon. With me today for the call are Jeff Yabuki, our Chief Executive Officer, and Bob Howe, our Chief Financial Officer. Please note that our earnings release and supplemental presentation for the quarter are available on the Investor Relations section of Fiserv.com. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results, strategic initiatives, and the anticipated combination with first data, including expected benefits, financial projections, synergies, financing, and timing of as well as the ability to complete the transaction. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release for a discussion of these risk factors. Today's presentation is neither an offering of securities nor solicitation of a proxy vote. The information discussed today is qualified by the registration and joint proxy statement that FISERV and First Data will be filing with the SEC. You should review that information carefully. You should also refer to our materials for today's call for an explanation of the non-GAAP financial measures discussed in this call, along with a reconciliation of those measures to the nearest applicable GAAP measures. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results. and as a basis for planning and forecasting for future periods. Unless stated otherwise, performance references made throughout this call are assumed to be year-over-year comparisons. As a reminder, the share and per share amounts in the press release, supplemental materials, and comments are adjusted for the two-for-one stock split completed in March of 2018. along with adjusting the comparable 2017 adjusted earnings per share amounts in each period for the sale of a majority interest of our lending solutions business, which also closed in March. And with that, allow me to turn the call over to Jeff.

Thanks, Tiffany, and good afternoon, everyone. As you know, key elements of our shareholder value proposition are to steadily increase our internal revenue growth rate, Convert that to growing streams of free cash flow. And last, but certainly not least, allocate that capital in a shareholder-friendly way. We accomplished those objectives in 2018 and made important progress in building your company's future success. We achieved an 80 basis point increase in our internal revenue growth rate for the year to 4.5%, and also achieved our 33rd consecutive year of double-digit adjusted earnings per share growth. Results in the quarter which are consistent with our preliminary results announced on January 16th, include 4.5% internal revenue growth and a 33.4% adjusted operating margin, both against a very difficult prior year compare. Adjusted earnings per share increased 24% to $0.84 in the quarter and up a very strong 25% to $3.10 for the year. We also generated an all-time high in free cash flow, and allocated a record $1.9 billion to shareholders, repurchasing more than 25 million shares for the year. Sales were extraordinary in the quarter, finishing more than 30% higher than last year's record sales, including our largest account processing win ever, enhancing our growth profile entering the new year. Before we provide detail on the results, let me make a few comments on our recent merger announcement with First Data, which we believe creates the preeminent global provider of payments and financial technology. We expect this strategic transaction to move the industry forward in new and exciting ways. Early client reaction has been extremely positive and centered on the ways in which the combined solutions can come together to create unique value for them and their customers. The model is compelling, with leadership positions across multiple solutions and numerous ways to grow and prosper. We also intend to enable meaningful new client value along several axes through increased investments in strategic solutions, unique and compelling end-to-end integration, and as important, by identifying new and unique sources of value at the intersection of technology, innovation, and data. We're approaching this opportunity with excitement as well as a steadfast commitment to excellence. We've kicked off integration planning and expect to hit the ground running when we close. Our priorities include unlocking client value, capturing the meaningful synergies, and retaining and attracting the best talent. We have skilled, experienced integration leaders driving the process, accompanied by strong governance and oversight. We are highly confident we will achieve the incremental revenue synergies of $500 million and the $900 million of cost benefits shared in the original announcement. In addition to this transformative transaction benefiting clients, we are equally as focused on creating significant shareholder value. We expect to generate upwards of $4 billion of annual free cash flow over the next several years and will continue to use our disciplined capital allocation strategy to optimize value in the aggregate as well as on a per share basis. Our collective enthusiasm about the combination with First Data is even greater now than it was on the day of announcement. With that, let's get back to reviewing performance and start against our 2018 key shareholder priorities. Our first priority was to continue to build high-quality revenue while meeting our earnings commitments. Next, to enhance client relationships with an emphasis on digital and payment solutions. And third, to deliver innovation and integration, which enables differentiated value for our clients. As I mentioned, we continue to focus on high-quality revenue growth acceleration, delivering 4.5% internal revenue growth in both the quarter and the year. The 80 basis point increase in our internal revenue growth rate for the year comes from multiple sources, including the cumulative effect of adding recurring revenue with a direct link to client value. We also expect another lift in our internal revenue growth rate for 2019. Our strong adjusted earnings per share performance was due to a combination of internal revenue growth, tax leverage, and operational effectiveness. Our full year adjusted operating margin was below the prior year, primarily due to a 110 basis point headwind from the combination of the lending transaction announced in March, and the meaningful internal investments funded by the Tax Cuts and Jobs Act enacted last year. But for these items, adjusted operating margin would have increased 80 basis points for the full year. Our second priority was to enhance client relationships with an emphasis on digital and payment solutions. Now, as you may have seen earlier today, we announced the largest new core account processing sales win in our history. In a competitive takeaway, New York Community Bank Corp, Inc., the holding company for New York Community Bank, with over 50 billion of assets and locations in five states, selected DNA and a package of more than 40 solutions, including debit processing, Carillion Online Banking, Mobility, Zelle, and Dovetail, to deliver differentiated high-value solutions to their customers. The combination of modern... real-time technology with significant flexibility is allowing us to meet the changing needs of larger financial institutions. DNA also continued its momentum with large credit unions, signing Fox Community's credit union with $1.6 billion of assets. Fox Community selected DNA as their business had outgrown their existing core processing provider. DNA provides a platform for future growth, eliminates a number of third-party vendors, and will allow Fox communities to continue serving their members with excellence. Overall, DNA performance was strong, with 30 implementations for the year, including 16 for institutions with assets greater than $1 billion. We also signed 29 new clients for the year, which is indicative of the continuing momentum of DNA. Equally important, We signed 30 new account processing clients to our market-leading premier platform during the year. Interest also remains high for our digital and payment solutions, such as Architect, Commercial Center, and Dovetail. Bank of California, with more than $10 billion in assets, selected Architect and Commercial Center in the quarter to better meet the rapidly changing expectations of their retail and commercial customers. Additionally, Both KeyBank with over $130 billion in assets and BankOZK with more than $20 billion in assets selected dovetail in the quarter. We expect to see more institutions take steps to enrich and extend their payments capabilities to meet the evolving needs of a digitally-centric landscape. Our third priority is to deliver innovation and integration, which enables differentiated value for our clients. We continue to see strong demand around Zelle. As you have likely seen reported, Zelle transactions now exceed 400 million and grew 75% year over year. We expect broad industry adoption to accelerate over the next 24 months, as evidenced by the nearly 100 new clients we signed for Zelle in the fourth quarter alone, which is more than the total signings in the first three quarters of the year. As the leading provider of Zelle services to all sized financial institutions, we have opportunities to package our payments value proposition in unique and interesting ways. For example, in the quarter, MUFG Union Bank, with $124 billion in assets, selected both our turnkey Zelle solution to be implemented later this year, along with the dovetail payments platform to help enable real-time enterprise payment capabilities for their customers. Overall, we believe our leadership as the most experienced standalone as well as integrated Zelle provider will enable us to deliver payments innovation and client value to the financial industry. Lastly, PennyMac, a top mortgage lender, selected a broad suite of products including debit processing, electronic billing, and a unique mobile wallet to meet their customers' expectations. With that, let me turn the call over to Bob for more detail on our financial results.