Fiserv, Inc.

Welcome to the FISER 2020 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 would now like to turn the conference over to Peter Pullian, Senior Vice President of Investor Relations at FISER.

Thank you, Ivy. Good afternoon, everyone. With me on the call today are Frank Fusignano, our President and Chief Executive Officer and Bob Howe, our Chief Financial Officer. Our earnings release and supplemental materials 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, the impact of the COVID-19 pandemic on our business, expected operating and financial results, strategic initiatives and expected benefits and synergies from the first data acquisition. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. You should refer to our earnings release for a discussion of these risk factors. Please refer to our earnings release and supplemental materials for today's call for an explanation of the non-GAAP financial measures discussed on this call, along with a reconciliation of those measures to the nearest applicable GAAP measures. Unless stated otherwise, performance references or year-over-year comparisons and all references to internal revenue growth are on a constant currency basis. Note that the full year 2019 non-GAAP financial measures in our earnings release and supplemental materials have been prepared by making certain adjustments to the sum of historical FIRST data and FISERV GAAP financial information for periods prior to the acquisition date. And now I'll turn the call over to Frank.

Thank you, Peter, and good afternoon, everyone. 2020 was unprecedented on many levels. We started the year strong, and after entering the pandemic, we continued investing heavily in technology, innovation, our client franchise, and our people. We've now entered 2021 with tremendous momentum. Your company performed very well given the circumstances across a number of facets of our business. A 22% sales growth for the year demonstrates that we're clearly winning in the client's office. We strengthened our client franchise, raising our client satisfaction scores across all measures. We invested in our people platform, resulting in top quartile engagement scores amongst companies in the Fortune 500. We made outstanding progress on integration. We accelerated and increased synergy execution while ramping our investment in innovative products and solutions. We delivered 12 percent adjusted earnings for share growth for the year, marking our 35th consecutive year of double-digit adjusted EPS growth. And we delivered record-free cash flow. We are exiting the year stronger than we entered, and we're well-positioned to capitalize on our momentum in 2021 and beyond. Let me provide a brief overview of our financial results in the quarter, and Bob will provide more detail later on the call. Total company internal revenue growth was 1%. That performance was led by a merchant acceptance segment, which was up 3%, a strong result in light of the global pandemic. Total company adjusted operating margin for the quarter was up 420 basis points, and adjusted earnings per share increased 16%. Free cash flow was again excellent, coming in at $1.1 billion in the quarter, bringing free cash flow for the full year to more than $3.6 billion. Out sales momentum remains quite strong. Fourth quarter sales were up 19% with terrific results in our credit processing, merchant acquiring, and account processing businesses. Sales for the full year were up an impressive 22%. The combination of robust sales and excellent pipeline into 2021 is evidence that our formula of bringing the strength and breadth of Pfizer's offerings together with our integrated sales model is extremely well received in the client's office and bodes well for the future. Now I'd like to update you on how our leading digital-enabled merchant business is performing. Through Clover, our leading SMB platform, Carrot, our enterprise omni-channel commerce solution, and Clover Connect, our rich ISV solution set, we continue to drive innovation, expand partnerships, and deliver leading solutions to our merchant clients. The momentum within the digital-enabled segments of the merchant business continues to be excellent. Clover's gross payment volume grew 25 percent to $34 billion in the quarter, or $135 billion annualized. We continue to extend the breadth of services to Clover merchants with innovative solutions that enhance convenience, especially in the digital segment. For example, We recently introduced invoicing capabilities that allow Clover merchants, especially those in the services vertical, to bill and collect payments from consumers electronically. Carrot saw continued growth with global e-commerce transactions up about 25% both in the quarter and for the full year. We saw omni-channel transactions such as order ahead and pick up in store grow more than 125% year over year with some of our best known quick service restaurant clients seeing excellent growth. We continue to capture market share winning 46 new enterprise level e-comm clients in the fourth quarter. including digital acquiring for Overstock.com and Wingstop in North America. In Europe, we signed Total, one of the largest energy providers in the world, to provide global digital payment acceptance services across more than 100 countries around the world. We also expanded employer relationships. delivering new products and services to key clients such as Lyft, where we are now powering disbursements to drivers. Clover Connect allows us to win new partnerships and drive growth in our partner solutions business. In the fourth quarter, we signed 44 new ISV partners, bringing us to 176 new ISVs signed for the year. Those new partner relationships are driving strong results in active merchants of 43% in Q4 and strong revenue growth in the ISV channel. For example, during the quarter, Fiserv signed a strategic partnership agreement with RFMS, the largest provider of software services for floor installation professionals. to provide omnichannel payment capabilities to their foreign customers. We also signed one of the largest providers of eye care products and technology to provide payment acceptance services to its more than 7,000 eye care professional customers. To further expand our value-added services for merchants, Fiserv and Citizens Financial Group have partnered to offer merchants a new suite of lending solutions at the point of sale through Citizens Pay, providing merchants with flexible payment options for customers to finance purchases at the point of sale. The program expands the partnership we've had with Citizens since 2015 to provide new financing options. and we expect it to drive adoption in the fast-growing buy now, pay later space. Moving to account processing business, we continue to expand the number of privileged relationships we have in our account processing business across financial institutions of all sizes and types. We signed 19 new core account processing clients in the quarter. including five on the DNA platform, bringing the total to 60 for the year with 25 on DNA. I'd like to highlight a few of our recent wins. Service First, a commercial bank with more than $11 billion in assets, signed on for a full suite of Fiserv products, including core processing, card services, and output solutions. Lakeside Bank, a full-service bank with more than $2 billion in assets, signed on for our core processing along with a robust suite of solutions that includes check-free, debit card services, and Zelle. I'm also pleased that just recently, Republic Bank has partnered with Fiserv for core processing plus a rich suite of digital and payment solutions. Republic is a $5 billion asset, full-service retail and commercial bank that was voted the number one bank in America for service by Forbes in 2020. All of these illustrative wins were competitive takeaways with a common characteristic. they selected a leading core platform plus multiple surround digital solutions to support their goals of sustained growth and superior customer service. I'm also pleased to note that we signed three more de novo banks in the quarter. In our payment and network segment, we continue to see robust sales activity, including several notable card production and personalization wins. We inked a new agreement with Capital One to add Capital One's more than 1,500 ATMs to Fiserv's MoneyPass ATM network, while offering their customers access to thousands of additional surcharge-free ATMs across the country. And I'm pleased to note that we expanded our long-standing partnership with PayPal, signing a deal in the quarter to integrate PayPal as a bill payment option for Fiserv billers, a notable synergy sale. With that, let me update you on our integration efforts. At Investor Day, we discussed how our integration continues to go extraordinarily well and our synergy execution is far ahead of original schedule. Through December 31st, we've already actioned over $1 billion of cost savings and are well on our way to fully action at $1.2 billion cost synergies by the end of this year. We entered 2021 with the majority of the integration work behind us and a focus on driving further growth and sustainable value in the years ahead. On the revenue side, we're pleased with the level of synergy sales, which accelerated in the fourth quarter. As of year end, we've already actioned $215 million in annualized revenue synergies, and our synergy sales pipeline is growing robustly, giving us confidence in meeting or exceeding our $600 million target. Our bank merchant program continues to be one of the larger synergy opportunity and offers financial institutions of all sizes and ability to offer their important merchant clients a modern suite of merchant acquiring capabilities including the innovative Clover platform, along with digital capabilities like loyalty programs and e-com solutions. In the fourth quarter, we added 45 new bank merchant clients, bringing the total to 231 new clients since the merger, with more than half of those wins competitive takeaways. The pipeline into 2021 remains robust with over 500 financial institutions, prompting our continued confidence in achieving this sizable revenue synergy opportunity. One final point on our digital initiatives before turning it over to Bob. As you've heard us discuss in the past, One of the most important strategic initiatives is to redefine the client experience by utilizing the latest technology to drive innovation and offer digital capabilities across our payments ecosystem. We've taken two important steps in the last 60 days in this area. First, we acquired OnDot Systems, the leading digital card services platform for financial institutions of all sizes. We're committed to deploying capital both organically and inorganically to develop the digital and data next-generational solutions that will drive growth long into the future. And second, further demonstrating our commitment to leadership in this area, we appointed a Chief Digital and Data Officer to lead these important strategic growth initiatives across all websites there. Now let me pass the discussion to Bob for more detail on the financial results.