Fiserv, Inc.

Welcome to the FISERV 2023 Second 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 like to turn the call over to Julie Cheriel, Senior Vice President of Investor Relations at FISERV.

Thank you, and good morning. With me on the call today are Frank Busigliano, our Chairman, 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 our 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 I'll turn the call over to Frank.

Thank you, Julie. And thank you all for joining us today to discuss another very good quarter for FISERN. Our results continue to demonstrate strong performance in revenue and operating income, with second quarter organic revenue growth of 10% led by performance in merchant acceptance, particularly in our international regions and our payments and network segments. Adjusted earnings per share of $1.81 was up 16%, and adjusted operating margin of 36.5% was up 300 basis points. All three measures are tracking ahead of our previous guidance for the full year. As we look to the remainder of 2023, we note that economists' expectations have improved for GDP and consumer spending relative to the start of the year. But those economists also forecast a modest macro slowdown from the first half in part due to higher anticipated unemployment and the reinstatement of student loan repayment. Among our financial institution customers, spending and spending intentions remain healthy, even as net interest margins narrow and lending activity eases. Card and non-card payment services, digital banking, IT modernization, and data analytics are high-demand services, and financial institutions are looking to us to deliver. With the outperformance in the second quarter, we are once again raising our outlook for the full year. We now expect 2023 organic revenue growth in the range of 9% to 11%, up from 8% to 9% previously. Adjusted operating margin is now forecast to improve at least 150 basis points this year, up from our prior expectation of greater than 125 basis points. With year-to-date adjusted EPS growth of 14 percent and the improved revenue and operating margin performance, we are raising our full-year adjusted EPS guidance by 10 cents to a new range of $7.40 to $7.50, representing growth of 14 to 16 percent over 2022. These second quarter results mark out ninth consecutive quarter of double digit organic revenue growth. We have also repurchased nearly 6% of our shares outstanding over the last 12 months. I am incredibly proud of the strong performance and the hard work, foresight, and collaboration that it took to get here. Now, I'm focused on sustaining this momentum There are multiple parts of our business that I consider future growth accelerants. I will touch on five of these today, and then we'll add and elaborate on them at our investor day later this year. Bob will provide more details on this later in the call. The first success story with a continuing growth outlook is Clover, our market-leading cloud-based SaaS operating system for small and medium-sized businesses. Revenue is growing more than 20 percent on $267 billion in annualized payment volume. This is a testament not only to the appeal of the product offering, but to the power of our vast distribution network. Bover has only begun to scratch the surface on the opportunity in vertical specific solutions, horizontal value-added services and software, and international markets. In the restaurant vertical, we expect to offer the full suite of value-added services and point-of-sale solutions for restaurants and QSRs of all sizes next year. and we've begun to build out vertical specialized software solutions for retail and professional services, including partnerships to manage inventory, improve SKU-level analytics, and manage appointment scheduling. We're also continuing to enhance our ISV partner program, giving our ISVs access to Clover hardware and processing alongside our value-added services. This will support our growth among additional verticals, including businesses in our back book. An example of this is our integration with Salon Ultimate, a vertical software platform provider focused on the salon and spa industry that will provide a broader combined offering to its large merchant base. Clover now accounts for approximately 25% of our merchant revenue and remains on track to reach 35% by 2025, in line with our targets for $10 billion in total merchant revenue and $3.5 billion in Clover revenue by 2025, implying expected growth acceleration. Following in the footsteps of Clover is Carrot, a unified commerce offering for omnichannel merchants. Like Clover, Carrot is an operating system that delivers both payments and experiences, but instead of small businesses, Carrot is for the world's leading brands and large enterprises. Carrot has been posting revenue growth in the mid-teens on the strength of Fiserv's scale, flexibility, and customization capability, plus key integrated services and broad payment options. We recently released our two biggest differentiators for Carrot, Commerce Hub, which is the orchestration layer that enables easy client access to our products and services and a data and insights command center that lets clients manage their data in real time to better engage end customers and improve operating efficiency. Over time, as with Clover, we'll add more first and third party value added services and payment flows and increase accessibility around the world. A third area of growth is digital payments and the intersection with digital banking. CardHub is our card account product for debit card issuers that offers all of the newest features for cardholders to manage their accounts. It helps how small and mid-sized bank issuer clients offer their customers the same cutting-edge functionality as the largest independent card issuers. We're about halfway through migrating financial institution clients onto CardHub, where they can integrate with our digital mobile banking product, Mobility, and with competing digital banking providers. This migration has shown a doubling of customer adoption on CardHub in the first year. which means greater card usage, reduced call center activity, and better security. It's drawing new clients to our digital banking solutions, who then tend to bundle out debit processing, debit network, and risk services. The full integration of CardHub and mobility is an investment unique to Pfizer because it spans two operating segments. payments, and FinTech, where others don't participate. Elkhart's solution was strengthened by two acquisitions, OnDot and SpendLabs, in 2021. And it's just one example of the many cross-selling opportunities specific to Fiserv, given our integration work and breadth of capability. The fourth growth area is Latin America. Although we haven't spoken in depth about our international operations, Lion America has been a standout grower in recent quarters, and we believe it can remain so for the long term. We've built a leading franchise across multiple countries and leading financial institutions that spans our product set from merchant acceptance to card issuing to fintech. is about 6% of total company adjusted revenue. And in merchant acceptance, it's 10% of adjusted revenue. It's largely driven by Argentina and Brazil, followed by Mexico, Colombia, and several others. Argentina has garnered attention lately for 100% plus inflation. And while this has certainly contributed to some of our merchant segment strength, a bigger and more sustainable part of the growth comes from anticipation revenue, also known as merchant prepayments. This is where we help merchants navigate the long settlement periods in Argentina, Brazil, and Uruguay by funding their payment receivables early at a discounted rate. Businesses get better liquidity and we receive a spread that carries low risk. Other parts of our TAM business show strong momentum as well. We will be expanding our relationship with our partner, Caixa Econômica Federal, enabling card payment for their more than 13,000 bill payment agencies throughout Brazil. Biosphere Solutions will allow agencies to extend bill payment options from only cash and CASHA debit cards today to all credit, debit, and prepaid cards. The opportunity is meaningful when considering that in 2022, this agent network enabled bill payments equal to about 11% of all credit and debit payments in Brazil. We are also enabling PIX transactions in Brazil in the P2B space, utilizing a software express platform and expanding our presence in PIX beyond P2B. We have also made PIX payments capability available in our large acquiring network in Argentina, supporting Brazilians visiting this neighboring country. We're excited for the opportunities presented by PIX and it has already exceeded total card sales volume in Brazil in a short period of time. The fifth opportunity is Finzec. You know Finzec as the acquisition we made in April of last year to offer a next generation core banking system that's cloud native. It gives us the opportunity to compete and win with financial institutions of all sizes and across geographies, expanding our total addressable market. Our three-pronged strategy is to win digital first banks, provide next-generation core banking to our existing FI clients, and add larger banks as clients, often starting as they launch new products in the cloud. Another opportunity in Finzec that's coming together now actually started many years ago. We were an initial investor in Finzec when it began raising money in 2017 because we saw a value in marrying a merchant processing platform with a back office banking platform. Today, that's called embedded finance, and we are beginning to tap into the opportunity as merchants look to offer banking services to their customers. Their goal is typically to provide more purchasing power and payment flexibility to their customers while creating deeper relationships. Embedded Binance will add to the many payment and banking solutions that merchants want to offer, and we already provide. Here are some examples. We deliver stored value and gift card solutions to many of the world's leading brands. We're the largest private label credit card provider, and we are the processor behind most HSA and FSA accounts. FinTech is the single ledger and issuing platform for products like debit cards and DBAs. And from here, we're investing in the connectivity between platforms to create a more seamless experience for our clients and their end customers. Now, let me turn this discussion over to Bob for more detail on our financial results.