Fiserv, Inc.

Welcome to the FISERV 2022 First 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 Shubh Mukherjee, Senior Vice President of Investor Relations at FISERV.

Thank you, and good morning. With me on the call today are Frank Bezignano, 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. Please refer to these materials 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. Unless otherwise stated, performance references are year-over-year comparisons. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results and strategic initiatives. 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. And now, over to Frank.

Thank you, Shu. And thank you all for listening as we share our results for the quarter and highlight the progress against our growth agenda. As you know, we serve as the operating system for commerce and money movement across our client base of banks, credit unions, fintechs, and businesses ranging from SMBs to mid-market to large enterprises. We help our clients grow by extending our platform to capture new services and new money flows. Our relentless pursuit of innovation for our clients has placed us on the list of the world's most innovative companies by Fast Company for the second consecutive year. We've entered 2022 with strong momentum. We delivered 11% total company organic revenue growth in the first quarter. We expanded adjusted operating margin by 60 basis points to 32 percent. We also achieved 20 percent adjusted EPS growth to $1.40. We obtained $40 million of action revenue synergies in a quarter, reaching $520 million since the merger, 87 percent of the increased commitment of $600 million for the five year period following the merger and now expect to hit that goal by the end of this year. As we shared with you on our year end 2021 earnings call, we concluded our cost synergy program having actions the promised 1.2 billion of synergies since the closing of the merger. As we invested to accelerate growth, free cash flow came in at $603 million. The outperformance on the top and bottom line versus our full year guidance ranges puts us in a good position to meet or exceed our full year outlook. As we evaluate the year ahead, we believe it is prudent to leave our 2022 guidance unchanged, given the uncertain macroeconomic backdrop with high inflation rising interest rates, and geopolitical issues looming. Accordingly, we are maintaining our 2022 outlook for organic revenue growth of 7% to 9% and adjusted earnings per share in a range of $6.40 to $6.55, representing growth of 15% to 17% for 2022. Now turning to our business strategy. Fiserv solutions are geared towards merchants and financial institutions, including fintechs. Starting with merchants, we are transforming from selling merchants individual point solutions to offering operating systems. Clover for small to medium-sized merchants and Carrot for large enterprises. This operating systems approach expands the size of our total addressable market and makes us more valuable to our customers. We grow and create value in three ways. First, attracting more merchants to our operating systems. Second, expanding the relationship we have with our merchants by encouraging adoption of more software and services modules. And third, benefiting from the organic growth of our existing customer base. Turning to our financial institution clients, we remain steadfast in our commitment to continuously innovate for our clients and broaden our total addressable market. In early April, we closed the acquisition of FinTech, a leading developer of cloud-native banking solutions. We have already seen a tremendous amount of interest in the platform from existing and new clients. We believe this acquisition will augment our ability to enrich and accelerate the delivery of digital solutions to existing clients, as well as broaden our client base to include large financial institutions and fintechs through banking as a service and embedded finance opportunities. We advanced our strategic focus on data and analytics. This quarter, we announced partnerships with Equifax, Finicity, and MX, which will utilize our vast and highly valuable real-time data to create insights to strengthen and create new offerings across fraud, risk, and marketing. While early in the journey, we expect data and analytics to be a new growth driver for us. Next, diving deeper into our performance in the quarter by business segment, let me start with merchant acceptance. We posted a very strong organic revenue growth of 20% year-over-year. Global merchant volume and transactions grew 11% and 8% respectively. Our global active merchant accounts grew 6% year-over-year in the first quarter. continuing a positive trend since the start of 2021. Results were strong across all regions. North America was led by strength in SMBs, particularly within the restaurant vertical, as well as strength in enterprise verticals such as Travel and Petro. Spending across the meal was strong in the quarter, as restrictions were lifted in the UK and the Netherlands in early January, followed by Ireland, Poland, and Germany later in the quarter. Travel was particularly strong, followed by restaurants and hospitality. Our merchant business in LATAM was also very strong in the quarter. We've made significant progress in onboarding merchants through our exclusive merchant acquiring mandate from Caixa in Brazil, with 140,000 merchants currently onboarded. In just one year since signing the agreement, we are also expanding our presence rapidly in Mexico and Colombia. Spending trends in APAC were very strong as key markets such as India and Australia continue to resume normalcy. fueling discretionary spend in verticals such as travel, retail, and restaurants. In addition to the sickle who rebound, the region has continued to win and implement new business. Moving to our merchant operating systems, Clover and Carrot continue to gain significant traction with clients. Clover global revenue grew 39% in the quarter, driven by volume growth of 39 percent, as well as close to 200 basis points of sequential growth in software and services penetration of revenue to 15 percent. We continue to make progress on our vertical focus. Starting with restaurants, the integration of bento box into Clover is well underway, and the early proof points in both lead conversion rate and ARPU are all very positive. Within the services and retail verticals, we are offering merchants leading solutions to address key business functions through a combination of pre-installed apps and tailored vertical SaaS offerings. Carrot, an omni-commerce operating system for enterprise clients, grew revenue 20%. We saw broad-based growth across verticals, including travel, government, technology, and quick-serve restaurants. In the quarter, we had some impressive wins across Omni and e-com acquiring, including a card-not-present acquiring mandate for the leading fantasy sports player, DraftKings, an extension of of our long-standing omnichannel partnership with Chick-fil-A, a mandate for fast food brand Jersey Mike's Subs. With their new payment flows, Carrot's leadership in digital payouts continues, with a doubling of disbursement volume processed in a quarter. During the quarter, we extended our contract with Coinbase to support their launch of an NFT marketplace. We are making rapid inroads into the high growth markets, such as payment facilitators and platforms. The November acquisition of NetPay gives us a differentiated solution in the market, including fully managed onboarding, risk, and funding services to support these high growth platform businesses. We have seen rapid growth in this end market. with new clients signing nearly doubling transactions in the past year. Finally, before closing out the merchant segment, an update on the progress of our point-of-sale lending offering. Our strategy all along has been to leverage our position as the operating platform for businesses, small, medium, and large, to offer a range of buy now, pay later options. We are simplifying the merchant experience through an integration into the carrot operating system for large enterprises and enabling BMPL app downloads through the Clover app market for small and mid-sized businesses. By enabling our clients to easily connect to BMPL providers of their choice, we are making it possible for them to offer their customers in-demand payment options in an easy-to-manage, cost-effective way. Moving to payments and network segment, organic revenue grew 5% in the quarter. This growth was enabled by a variety of drivers across our business lines. Our North American credit active accounts on file grew 10% versus Q1 of last year. This growth was driven by new business onboarding and a favorable credit environment. We fully ramped Genesis Financial onto our platform in the quarter, which, along with the onboarding of Atlanticus last year, marked the onboarding of two of the three major credit processing mandates we announced in 2020. We had solid growth in our debit networks, Star and Accel, and debit processing businesses, driven by new wins, despite the stimulus-induced tough growth comparisons in a year ago. We've seen impressive growth in engagement metrics across OFIs, driven by our market-leading digital solutions like CardHub, SpendTrack, our loyalty platform, and our AI-based fraud system. These surrounds not only greatly enhance the competitiveness of our credit and debit card processing offering, but also serve to drive more cards into our debit network and more opportunities for Fiserv to offer risk and fraud, digital banking, and account processing solutions, demonstrating an attractive flywheel effect. We continue to see growth in digital payments driven by Zelle, which posted transaction growth of a strong 40% in the quarter. Finally, While we still see softness in our bill payments business, sequential growth rates continue to improve as we create new use cases like bill pay for fintechs, including crypto digital wallets, and enter long-term renewals with large clients, notably U.S. Bank and Regents Bank. Additionally, this summer, we will launch a revamped bill pay interface to elevate the customer experience. Looking ahead, our sales and product pipeline gives us confidence in our ability to grow the payment segment in the 5% to 8% medium-term organic revenue range. Our client wins in a quarter support this momentum. We signed a long-term renewal with a highly valued client, Synchrony. spanning across issuer processing, bank services, and merchant acquiring, reinforcing our commitment to providing best-in-class solutions to our clients. We continue to win credit processing mandates globally. In the first quarter, we signed a new installment loan provider, Flexity Financial in Canada. The debit wins in the quarter included a processing win extending our relationship with KeyBank and an integrated debit processing, network, and digital surround solutions win with Heritage Federal Credit Union, a $900 million asset size client. These wins showcase the breadth and reach of our debit processing capabilities, spanning from smaller credit unions to some of the nation's largest financial institutions. We also continue to show the power of our enterprise offering and our competitive advantage when working with fintechs. This quarter, we signed an enterprise agreement with a new digital financial services company across bank services, credit and debit processing, and output services. We will also fully onboard Bread Financial, previously known as Alliance Data, for card processing in the second quarter of this year. The tailwinds from our large-grade implementations Recent debit wins like KeyBank this quarter, Chime and Great Southern over the last couple of quarters, and the investments in our digital surround solutions gives us confidence of the continued growth in payments and network segment. Moving to the financial technology segment, we posted strong organic revenue growth of 6% in the quarter. We had 12 core wins in the quarter. including four competitive takeaways. Sales of digital surround solutions continue to grow at a healthy clip, driven by the increased digital focus of our financial institution clients and the success of Ability, our modern online and mobile banking platform. Sales to existing clients help us deepen the penetration of our fully integrated digital surrounds, such as Cardhub, Zelle, and SpendTrack, thereby creating stickier clients. The competitive landscape continues to evolve quickly, and we believe that our FinTech strategy, combined with FinTech's modern core capabilities, positions us uniquely to offer a full stack of offerings aimed at expanding the addressable market for embedded finance and banking as a service. The linchpin of our FinTech strategy is our open finance initiative. In the third quarter of 2021, we launched our new developer portal called the Developer Studio, a platform for exposing our microservice APIs for the developer community with the goal of becoming the destination of choice for the embedded finance ecosystem, including card issuing, and processing, merchant, and core banking integrations. Our banking as a service capability enables financial institutions to expose modern FinTech solutions to their client base to increase engagement and relevance while extending their reach into new market segments. Our banking as a service capability is also a turnkey solution for FinTechs and merchants wanting to offer banking and payment services. We believe we are best positioned to power the ongoing revolution in banking as a service and embedded finance due to our footprint of community financial institutions and breadth of banking and payment capabilities. Now, let me pass the discussion to Bob for more detail on our financial results.