Fiserv, Inc.

Welcome to the Fiserv Second Quarter 2026 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 Walter Pritchard, Senior Vice President and Head of Investor Relations at Fiserv.

Thank you, and good morning. With me on the call today are Takis Georgakopoulos, our Chief Executive Officer, and Paul Todd, our Chief Financial Officer. Our earnings release and supplemented 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 the reconciliation of those measures to the nearest applicable GAAP measures. Unless otherwise noted, performance references are on a year-over-year basis. 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 will turn the call over to Takis.

Thank you, Walter, and good morning, everyone. In stepping into the CEO role, I'm honored by the trust the board has put in me, deeply committed to our customers and motivated by what this company can deliver to its clients and shareholders. For those who don't know me, I joined Fiserv in late 2024 and shortly after took on the chief operating officer role before assuming leadership of the merchant business last fall. Prior to Fiserv, I held a variety of roles at J.V. Morgan, including running its global payments and merchant businesses, which grew to become one of the largest in the industry during my tenure. And as an engineer by trade and training, I'm energized by solving complex problems, and technology has always been central to my career. I have first-hand experience with the complexities of building, modernizing, and running bank cores and payment systems. I also understand the responsibility that comes with operating as a critical infrastructure provider from stability and reliability to cyber security and customer experience. With that context, I want to make a few comments. Our second quarter results are in line with our guidance. Our free cash flow generation was above $1 billion, and importantly, our clover GPV grew at 9%, while clover revenues grew at 13%, adjusted for anticipation and non-recurring revenue. Second, while maintaining the growth rates in our medium-term outlook, we are updating our guidance for the second half of the year, which results in full-year guidance for organic revenue to a range of minus 1% to flat, and adjusted operating margins to a range of 31% to 31.5%. This is driven by three factors. First, weaker macro conditions in Argentina and a slower ramp of client-driven implementation timelines, which were both factors outside of our control. Paul will be providing additional information on Argentina, given the volatility of that business. Second, a slower pace of execution of some of our growth initiatives, highlighting the need to further focus our efforts and improve operational excellence. And third, our decision to make incremental investments in technology, infrastructure, and cybersecurity that primarily supports our FS business. We expect these investments will accelerate our pace of progress in platform stability, resiliency, and cybersecurity, which we know is critical for our customers and for our franchise. With that, let me tell you why I'm excited about our prospects to drive sustainable shareholder value. Two months into my tenure as CEO, I'm more confident than ever that Fiserv is one of the most consequential businesses in our space. We process a third of U.S. merchant GPV. We have the number one share in U.S. issuer processing. and we serve 80% of US banks and credit unions with at least one of our products. And as a result, across our company, we interact with virtually all US big consumers and small businesses. We also have a fundamentally simple business. We are a critical infrastructure provider to our clients. We have incredible staying power. Because our products are deeply embedded in complex, highly regulated and secure workflows, this is really hard to replicate. This business has a consistent history of strong, profitable recurring revenue, and that remains intact. Recurring revenue makes up approximately 85% of our total adjusted revenue. The processing side of our business grows at around GPV, but the differentiated components with Clover first among them grow at multiples of that. And on top of that, we continue to see a number of significant opportunities that can accelerate our performance beyond the baseline level of recurring revenue we see today. These include our state-of-the-art modern stack, including Commerce Hub, Vision Next, and Finzac, the power of our data, and creating solutions that bring our merchant, issuing, and network platforms together. These are the types of opportunities that brought me to Fiserv to begin with, And AI is the great unlock to getting those to market in compressed timeframes. We are energized about pursuing those opportunities to solve problems for our customers, but realize we must deliver the basics first. This leads me to outlining where I'm focused and driving our teams to operate with increased urgency and accountability, namely capital allocation, focus, and product simplification. To the first point, capital allocation, we are significantly expanding the process to review our mix of businesses and associated capital commitments. To date, the process has resulted in a near-term focus on lower growth non-core businesses and led to our decision to divest our student loan servicing and manage ATM businesses, as well as exiting the unprofitable SMB and fuel segments within our merchant business in India. These were the right decisions, but these alone do not move the needle. Pfizer provides a large number of products to our clients, and we know that they want best-in-class solutions. As part of our expanded review process, together with the board, we will dispassionately assess how our products compare to best in class and whether we have the right to win in each. If we do, we will double down and make sure we execute. And if we don't, we'll evaluate the full range of actions to maximize shareholder value while making it imperative to ensure that we don't do anything that causes disruption for our clients. While the board and I fully endorse the One Pfizer strategy and the differentiated value we can deliver to clients through our independent, integrated model, that does not mean we should be building everything that our clients are buying from us. This is a meaningful shift with defined timelines and goals that I expect will create additional opportunities to drive shareholder value. This is a top priority for me. We are acting with urgency, and we will report back on our progress as we advance this work. Moving on to operational and technology excellence. We need to increase our pace of change and simplify in a number of respects. I started driving this as the leader of Merchant, and now I'm driving it across the company as CEO. In Merchant, we completed the move to organize like most leading tech companies. with a single integrated product and technology organization at the center. That helped us eliminate duplication and distractions while making swift progress modernizing our infrastructure around a single modern solution anchored on Commerce Hub, which is our gateway. We are following the same approach in our FS business, recognizing, of course, the differences and complexities of our banks, credit unions, and issuing clients. Just as important, we need to improve coordination across merchant and financial solutions. Going forward, we will look to more consistently leverage foundational capabilities like ledgers, pay-ins and pay-outs across both businesses. By adopting a common structure, we can consistently improve the client experience, speed up delivery, and lower costs. And as we drive simplification, we can move faster on the capabilities that are unique to Fiserv, including embedded finance, stable coins, networks, and settlement. These operational improvements will put us in a position to drive significant cost savings over the medium term in line with project elevate targets, and we will be very focused in speedy execution. Finally, on technology. I'm confident that we are moving in the right direction. We have made significant progress with a stable and highly scalable platform in merchant services and a 70% reduction in FS client-facing incidents. To continue to advance these priorities, we have chosen to invest over $100 million incrementally into our technology infrastructure in the second half of the year, especially in the financial solutions business. We believe this is the right move to position our clients and the company for 2027 and beyond, especially as frontier AI models reduce margins for error. Now moving to some business highlights. First, in merchant solutions, we continue to see progress on a number of fronts, especially with Commerce Hub and Clover. The progress that we have made in modernizing our merchant tech stack in record time under the Commerce Hub gateway is further reflected in a dramatic increase in our enterprise pipeline with both traditional and e-commerce businesses. We believe this positions us well in the global enterprise wallet against the best competitors in the space. And we look forward to announcing exciting new large deals in the coming quarters. Just this week, Fiserv and MasterCard entered into a strategic partnership that integrates MasterCard's Merchant Cloud into Fiserv Commerce Hub. This partnership adds value-added services together with global reach to our capabilities. Moving to Clover, I want to highlight Western Alliance Bank Going Live on Clover, bringing nearly 40 of the top 100 banks in the country working with Clover and highlighting one of the key synergies between RFS and MS businesses. Internationally, our partnership with TD in Canada is continuing to scale, bringing Clover to TD clients across their more than 1,000 branches nationwide. Our efforts will now shift to converting the existing TD client portfolio to Fiserv in 2027, extending our capabilities to over 80,000 existing TD merchant clients. We also rolled out digital activation to Restaurant Depot, our significant industry partner, reaching thousands of views and touch points with restaurants every month and continue to grow our business with this partner. Lastly, after launching Clover Practice Pay, We continue to see success signing up new merchants and have about 20% higher average volumes than our average SMB merchant, and we are expanding this offering into new channels in the second half of the year. In financial solutions, digital payments and issuing businesses fueled our recurring revenue growth. In banking, we are seeing progress with new core wins and related deal value from these wins versus the same period last year, while attrition remains stable. One notable example was the expansion of our relationship with the UW Credit Union, where they selected DNA as its future core platform, replacing their previous solution and incorporating additional Fiserv offerings. This significant win reflects the growing confidence customers have in our technology strategy and the progress we have made delivering key product milestones. We expanded our relationship with Flagstar Bank through the addition of Finzac. Finzact will serve as the foundation of the bank's core modernization strategy, replacing both our legacy core and a competitor's core platform at this $88 billion in assets institution. We are excited about the accelerated timeline of this conversion and the potential for this deal to drive further Finzact momentum with more banks. Staying on with Finzact for a minute. We grew positions and accounts over 75% and were selected by a firm as their ledger provider. We also renewed and grew our business with our significant customer OnePay, one of the fastest growing consumer fintechs in the country. Overall, these proof points are helping maintain our momentum in embedded finance where we continue to see a strong pipeline. Our issuing business had a significant win with a U.S.-based provider of investment and retirement services for their debit processing portfolio. We also onboarded new debit and credit portfolios for Huntington National Bank, and we further strengthened our strategic issuing partnership with Bread Financial through Advanced Defense, our AI-enhanced fraud prevention solution. In FS, we also continue to focus on delivering innovation. Among other initiatives, we expect AgentOS to lead the way in showing our FS customers the incremental value we can bring to the investments they made in our core banking platforms. We have seen interest from financial institutions grow significantly to over 100 since the initial announcement, and we look forward to providing further updates at forums. We continue to make progress signing new bank partners for Cash Flow Central and the pipeline of opportunities is large. We have cut implementation timelines by about 50% for our financial institutions compared with a year ago and see room for further improvement. We are now focusing on helping our banking partners drive adoption and use all of the CFC power and its complementarity with Clover to address all the needs of small businesses. Lastly, I want to thank our employees for their hard work and dedication and our clients for their continued trust. I look forward to spending time with the investment community. With that, I will turn it over to Paul to cover the details of Q2 and our guidance. Thank you.