Fiserv, Inc.

Welcome to the FISERV second quarter 2024 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 Julie Cheriel, Senior Vice President of Investor Relations at FISERV.

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

Thank you, Julie. And thank you all for joining us today to discuss second quarter results that bring us closer to another year of double-digit organic revenue and adjusted earnings per share growth. Fiserv delivered strong results across our businesses, with second quarter adjusted earnings per share of $2.13 of 18%, driven by continued healthy revenue growth and further operating margin expansion. Adjusted revenue growth was 7%, and adjusted operating margin rose 160 basis points to 38.4%. Organic revenue growth was 18%. We can point to many highlights in our business during the quarter, including Clover revenue of 28%, accelerated organic revenue growth in financial solutions to 8%, multiple wins with marquee clients, including Verizon and Apple, plus new clients in important verticals such as petro, gaming, government, and healthcare. Our free cash flow was $1 billion in the quarter and $4 billion over the last 12 months. And we returned $1.5 billion to shareholders via share repurchases. This month, we're celebrating the 40th anniversary of Fiserv, along with the fifth anniversary of the merger between Fiserv and First Data. Our vision back in 2019 was that if we brought together scaled platforms supporting a full breadth of solutions, merchant acquiring, debit and credit issuer services, digital payments of all kinds, and core bank account systems modernized with cloud technology, then clients would find value in the combination and the integration and Fiserv would become a partner of choice with unparalleled global reach. Today, we can see that's exactly what has happened. As we realized revenue and cost synergies over this time, we increased our investment in technology innovation. Our purpose has been to deliver solutions to clients of all kinds, established and new, large and small, local, and global, spanning all verticals. With the proper amount of disrupting ourselves then and now, Fiserv is better able to run, optimize, and grow our business, and now we find ourselves at this moment, singular in our ability to deliver a breadth of leading products across a diverse base of clients and demonstrating accelerated growth for the past three years. After five years of innovation, in some ways, what's old is new again. Let me share three examples of how our clients are engaging in some of our traditional businesses as new ways to add and retain their own customers. First, in merchant acquiring. banks are adding this service as a way to grow with small and medium-sized business customers and choosing Fiserv for its leading solutions, including Clover. We already have nearly 900 financial institutions who offer merchant processing services to their small business clients and thousands more who can still benefit from doing so. As an example, In Q2, we signed a merchant agreement with Connecticut Online Computer Center, known as COCC, which is a client-owned provider of banking technology. The 150 community banks and credit unions on the COCC platform now have access to our acquiring services in support of their own hundreds of thousands of merchants. Second, in digital payments, Cash Flow Central takes the best of consumer bill pay and turns it from a cost center within banks to a revenue generator that appeals to small business with bill payment and presentment capability. In the second quarter, we signed two more Cash Flow Central deals with multi-billion dollar banks for a total of six in the few months since we introduced this solution. Cashflow Central will go live this quarter, and the pipeline remains full. We are finding that as they go down this path, financial institutions are revitalizing their consumer bill pay offerings as well, answering the competition from the direct biller model. First Citizens, a top 20 U.S. bank with more than $200 billion in assets, was one such consumer bill pay win in Q2. As a reminder, Fiserv is the largest provider of bank consumer bill pay services with over 20 million users on our check-free platform. Both Merchant Acquiring Solutions and Cashflow Central are compelling because they provide revenue generating opportunities for our financial institution clients. They also demonstrate a distinct value proposition for small businesses, which includes other products across our issuing and banking businesses. Next, we are integrating these solutions with Experience Digital, or XD, our new online and mobile banking solution. And third, traditional enterprise merchants are turning to software that surrounds their payments functionality to enhance revenue and improve data integration, as we've seen from small businesses. The large and mid-market merchants who have been migrating to our omni-channel platform are increasingly integrating our value-added solutions. These include SnapPay, our ERP-integrated B2B bill presentment platform, GiveSolutions, where we support multiple leading retail and QSR enterprise clients, and data analytics, which I'll discuss a bit later. We continue to invest in new solutions, such as our new dedicated platform for paybacks, which is gaining momentum. In the second quarter, for instance, we were selected by Cantaloupe, a major provider of unattended payment devices, such as vending machines. for our Exchange Payback platform. And we continue to integrate solutions across our two segments. One important example is our new partnership with Apple. That will enable new Apple Pay functionality with two of our next-generation solutions. One is Pay With Points, where the loyalty points residing on the card accounts of our issuer clients can be redeemed for a transaction in the Apple Pay wallet at checkout, serving as currency. We're a natural partner given the breadth of our card accounts on file and our technical capability to maintain account point balances, convert and accept those points as payment, and then reconcile the balances. A second solution is installment loans on credit cards. This is a new feature that presents the consumer with the choice to pay for a purchase in a set of installments when using Apple Pay at checkout. This is differentiating in that consumers have only been provided with the option to pay for a purchase in installments after making a purchase on a credit card. With Apple, we will move this installment loan feature into the checkout flow, giving the consumer choice at the point of purchase. Having this functionality at the point of sale from a digital wallet can drive greater cart conversion, card usage, and spending power. It also enables our issuing partners to more directly compete with buy now, pay later using their existing credit card products. Fiserv is unique in its reach across all parties involved here, the consumer, the digital wallet provider, the issuer, and the merchant. So we see multiple opportunities ahead as we enable this network effect to be a win-win across the ecosystem. So let's turn to our outlook for the business. Based on strong performance in the quarter and conviction in our unique opportunity set, we're raising our adjusted earnings per share outlook to $8.65 to $8.80, an increase of 5 cents across the range. Our revenue outlook is unchanged at 15% to 17% organic growth. This performance for 2024 would represent the 39th consecutive year of double-digit adjusted EPS growth. Turning to our segment highlights. In merchant solutions, starting with small business, we posted 4% volume growth. slightly ahead of the sales volume growth for the Pfizer Small Business Index, which rose 3.2% in Q2, as the pace of growth slowed from April to June. There are multiple reasons why outgrowth can differ from this U.S.-only index, including a global presence and different weightings across verticals. For Clover, we have a very active second half of the year, for new product rollouts. We plan to launch additional restaurant software features that target our sweet spot in casual dining to enhance table management, kitchen operations, inventory, and cost management. In the fourth quarter, we'll be rolling out new software offerings in our two other target verticals, services and retail. We are very pleased with initial sales of our restaurant order kiosk, and now we look forward to two new hardware opportunities. First is the Clover Compact, which we rolled out this month, giving us a broader market opportunity with smaller merchants. And next, an important solution for our restaurant clients, order and pay at the table via a new handheld Clover Flex Pocket coming in August. And we're on pace with our international expansion. Pilots are set to go live in Brazil and Mexico in August, and then in September in Australia, ahead of the 2025 launch. In the enterprise merchant business, a key driver is the ongoing adoption of Commerce Hub, the orchestration layer that allows for easy integration with our growing portfolio of value-added solutions. We now have 230 clients live on Commerce Hub and signed several more in Q2, including two large petro-retailers to extend a leading position in this vertical. Our financial solutions segment posted strong organic revenue growth at 8% in the quarter. above the high end of our 2024 guidance range. We delivered faster organic growth in our banking business, while our core banking and credit union clients continued to drive strong growth in our digital payments business. We're adding new clients as well. In the second quarter, we had another example of winning the core account processing business in an M&A transaction. In this latest case, Sunflower Bank chose Fiserv after announcing the intent to acquire HomeStreet Bank to create a $17 billion bank by assets in January. In issuing, we manage the credit and loan accounts for some of the world's leading issuers and provide technology to issuers and lenders in healthcare, government, and education. In June, we were very pleased to have won a strategic outsourcing agreement with Verizon to support their device financing activity and manage device payment agreements on Fiserv's Optus platform. Verizon chose Fiserv for the flexibility, optionality, and resiliency of our platform on the foundation of a trusted, long-standing relationship that spans multiple solutions. This is another example of extending our issuer and loan processing capability into adjacent verticals. In fact, we want another point-of-sale financing deal with an industrial equipment manufacturer to offer short-term loans through its dealer network across the globe using our First Vision platform. With that, I'll turn it over to Bob to discuss more on outperformance and financials.