Fiserv, Inc.

Welcome to the FISERV 2019 Second Quarter Earnings Conference Call. All participants will be in 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'll 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, and the timing of and the ability to complete the transaction. Forward-looking statements may differ materially from the actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release for discussion of these risk factors. 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 prior year's year-to-date adjusted earnings and adjusted earnings per share amount in the press release, supplemental materials, and comments are adjusted for the sale of a majority interest of our lending solutions business which closed in March 2018. And with that, let me turn the call over to Jeff.

Thanks, Tiffany, and good afternoon, everyone. We're pleased with our financial performance in the second quarter against our most difficult comparison of the year. We delivered better than anticipated results in the quarter and the first half and are well on our way to meet our full-year financial targets. Now, before we talk about the financial results, let me provide a brief update on the first data transaction. We've received all required regulatory approvals and plan to close the transaction on July 29th, well within our original expectations of closing in the second half of the year. As anticipated, we received all of our approvals without any conditions. We continue to prepare for day one and are focused on moving from integration planning to actual integration. We've announced a number of our senior leadership roles, and the entire organization is ready to kick off the new FISERV. Clients and prospects are excited about the opportunities they see for us to deliver differentiated value and build their businesses in new and unique ways. We've been working on meaningful incremental growth opportunities such as bank merchant, credit solutions, biller services, network, and international. We believe that integrating the solutions of our two leading companies will create incremental opportunities for clients to better serve their customers, generate additional revenue, operate more efficiently, and better manage risk. Our client-first focus should translate to more revenue for Fiserv and may ultimately allow us to exceed our $500 million revenue synergy target. We've made strong progress on cost synergy planning with a focus on delivering more efficiently for clients and with higher quality. Our teams are focused on the absolute dollar value of the opportunities as well as increasing the pace and timing of those savings. Upon closing, we will fully deploy our teams with a targeted outcome of exceeding the $900 million target. One of the unique benefits of this transaction is our commitment to increase organic solution investment by half a billion dollars over the next five years. We're acutely aware of the potential competitive advantages to making the right investments in this time of transformational market change. We're in the early stages of scoping the first round of these investments which we believe will ultimately further accelerate growth and profitability. We recently raised funds to refinance First Data's debt in a more favorable interest rate environment than we anticipated at the time the acquisition was announced. At today's rates, this translates to additional annual savings of approximately $120 million ahead of our original expectations. All of this taken together, reinforces our belief that the combination will produce more than 20% accretion to adjusted EPS in the first 12 months and more than 40% accretion at the full synergy run rate. We're thrilled to be on the precipice of closing this transaction and moving forward together. We're even more convinced that this transformative combination will extend leadership and value for clients, create important opportunities for associates, and deliver above-market returns for shareholders for many years to come. Now back to the financial results. Internal revenue growth was 4% for the quarter, and adjusted earnings per share growth was 9%, both against a very difficult prior year compare. For the first half of the year, internal revenue growth was 4%, and adjusted earnings per share was up 11%. Momentum remains strong as sales increased 17% in the quarter and is up 14% through June 30th. We fully expect to achieve our sales objectives for the year. We held our annual client conference, Forum 2019, in May, hosting over 6,000 professionals at keynote addresses, solution showcases, thought leadership sessions, and numerous client networking events. We also had nearly 400 prospects in attendance, and lead generation on site was nearly double the total contract value compared to last year. We believe Forum is becoming the must-attend client event of the year. With that, let's review performance against our 2019 key shareholder priorities, which are first, 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 mentioned, we're pleased with our second quarter's performance and strong position exiting the first half of the year. Company internal revenue growth in the quarter was 4%, including 5% growth in the payment segment, and was up 2% in the financial segment, even in the face of a very difficult compare. Adjusted earnings per share was up 9% in the quarter and 11% year-to-date. Adjusted operating margin for the quarter was flat to the prior year, which was better than our expectations given the license revenue grow over. Adjusted operating margin in the quarter was up 50 basis points sequentially as we began to see the early signs of the tax reinvestments abating, continued scale benefits of our high-quality recurring revenue, and positive impact of our operational effectiveness program. Free cash flow through June 30 was up a very strong 23% to $602 million, and our free cash flow conversion was 91%. Our second priority, to enhance client relationships with an emphasis on digital and payment solutions. The demand for FISERV account processing solutions continued to be strong with 13 wins in the quarter, six on DNA, which included a strong showing with larger credit unions. For example, Rogue Credit Union with $1.6 billion in assets expanded their FISERV relationship by selecting DNA and other complementary solutions, including Teller Capture, Item Processing, and Nautilus, to support their growing commercial and mortgage portfolios. In addition, Highway Credit Union, with over $1 billion in assets, and Velocity Credit Union, with over $800 million in assets, both selected DNA in the quarter to utilize our modern and open technology platform to enhance their members' experiences. Card Solutions continued their strong sales, signing First Mid Bank and Trust with $3.5 billion in assets to our debit processing solution in the quarter. We also added Alabama Credit Union with nearly $1 billion in assets, who selected a full suite of debit, credit, and card production services to facilitate a more integrated and enhanced member experience. JD Bank, with more than $800 million in assets, enhanced their Fiserv relationship by selecting ATM-managed services, one of our newest card capabilities coming from the Elan acquisition. This service will allow JD Bank to update their ATM fleet to the forefront of upcoming software and compliance mandates and better serve their customers. We've signed seven clients for ATM-managed services and have added more than 250 institutions to the pipeline since the transaction closed last October. Our third priority is to deliver innovation and integration, which enables differentiated value for our clients. Payments modernization continues to be top of mind for progressive financial institutions, which translated to five dovetail payment hub decisions in the quarter, including Sterling National Bank with nearly $30 billion of assets. We also signed Eastern Bank, which is one of the largest and oldest mutual banks in the country. with over $11 billion in assets and locations serving communities in Eastern Massachusetts, New Hampshire, and Rhode Island. We signed a very large bank in the Middle East, which selected Dovetail to advance their capabilities through a single platform to process payments transactions globally. Lastly, First National Bank of Pennsylvania, with nearly $34 billion in assets, chose our Dovetail payments platform along with our immediate fund solution as another way to drive value to their customers by supporting demand for real-time access to funds and improving the overall deposit experience. We remain bullish about the strength and leadership of our full complement of end-to-end payments capabilities both now and into the future. With that, let me turn the call over to Bob to provide more detail on our financial results.