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Operator
Operator
Please stand by, the conference will begin shortly. Again, please stand by, the conference will begin shortly. Thank you. Welcome to the FISERV 2023 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 Julie Cheriel, Senior Vice President of Investor Relations at FISERV.
Julie Cheriel
Senior Vice President of Investor Relations
Thank you, and good morning. With me on the call today are Frank Bignano, our Chairman, President, and Chief Executive Officer, and Bob Howell, 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, over to Frank.
Frank Bignano
Chairman, President, and CEO
Thank you, Julie. And thank you all for joining us today. FISERV is off to a strong start in 2023. with first quarter adjusted revenue growth of 10% and adjusted earnings per share of $1.58, up 13%. Adjusted operating margin of 33.6% was up 160 basis points. Organic revenue growth was 13%, above our 7% to 9% outlook for the full year. demonstrating our ability to sustain accelerated growth. Importantly, the growth was multi-dimensional. It included elevated contributions from card processing, non-card payments, and digital banking solutions. Growth was also strong in all three of our international regions and in merchant acceptance. Investment on behalf of our clients and with our partners is paying off. We believe that accelerating our investment over the last three years, both organic and via M&A, has extended our leadership position among fintechs. This counters the narrative of the last few years that many startups in the payments and fintech space would disrupt and potentially replace the legacy companies. Our results show that our strategy to innovate and disrupt on behalf of, not in place of, our longstanding bank and merchant customers was on the mark. These competitors have indeed raised the bar for the tech and fintech, but we've met and in some cases exceeded that bar with our own investment in innovation. The power of our business model is in the virtuous cycle of generating revenue growth across a scaled business, leading to greater operating margins. That profit produces significant cash to reinvest in the business for faster organic growth and value accretive acquisitions. while the remainder is returned to shareholders through share repurchase. The market has shown that legacy companies across many industries with scale and willingness to innovate will offer sustainable value to clients and shareholders. Let's talk for a moment about how the benefits of our breadth, scale, and investment have driven innovations. For small and medium-sized businesses, we developed a cloud-based SaaS operating system for their payment needs with Clover. Now we're allowing these businesses to easily accept multiple payment types, and we are seamlessly integrating software and services to address their broader business needs. For large enterprise businesses, we developed an integrated omnichannel system called Carrot to manage payment needs across in-store and online sales channels, and we're adding SaaS-based solutions that improve our clients' efficiency and enhance their customers' experiences. For debit and credit issuers, We've already built the most comprehensive suite of solutions, and we continue to innovate. CardHub was built off of the tools acquired with OnDot, and now offers a comprehensive set of modern digital cardholder experiences. More than 1,000 financial institutions are now using CardHub, which can be fully integrated into their mobile banking app, allowing these issuers to offer their customers a unified digital card experience that only a few of the largest financial institutions can provide today. SpendTrack does for a bank's small and medium-sized business clients what CardHub does for its retail customers. This differentiated mobile-first platform offers card management and AI-enabled expense management with workflows specific to their business needs. Built from our Spendlabs acquisition, SpendTrack has helped us win more credit, debit, and network business with banks and issuers that cater to SMBs. For small and medium-sized banks, we provide a full suite of the digital banking tools that help them compete with the largest banks, from mobile apps to spend management to Zelle P2P payments. And in July, with the launch of FedNow, we'll help them participate in the new wave of real-time payments optimized on our now network that connects banks to each other, to all payment rails, and to essential applications. For banks of all sizes, we've built a path to the cloud through both our industry-leading DNA core platform and now with Finzac, our native cloud solution acquired last year. And in support, of our biggest investment of all, the combination of First Data and Fiserv, we are finding new opportunities across our client base that are aligned in ways that only Fiserv can enable. Here are just three examples of the power of our combined franchise. First, Star and Excel. the third largest debit network in the country, helps card issuers and merchants realize attractive economics on debit transaction routing and satisfy new REGII requirements for at least two unaffiliated networks on each card to route card-not-present transactions. Second, our FinTech cloud-native banking core is laying the groundwork as an operating system at scale for financial institutions and merchants looking to offer embedded finance. Third, our output solutions business offers a full range of capabilities beyond what either predecessor company had. For example, we are now able to offer communications and card manufacturing solutions to our entire client base, from retail private label issuers to general purpose credit issuers, healthcare providers, banks, and governments. As we look to the remainder of 2023, we start with a firm foundation of above-plan revenue and earnings. Still, we think it is wise to balance this strong start with the potential for macroeconomic headwinds in the second half of the year. So we are lifting the lower end of our prior 2023 guidance for both organic revenue growth and adjusted EPS and maintaining the upper end at this point. We now anticipate organic revenue growth of 8 to 9 percent and adjusted earnings per share of $7.30 to $7.40. So, let's discuss the trends we are seeing in each of our segments now and for the rest of the year. Merchant acceptance continues to be a very strong grower, posting 18% organic revenue growth in the first quarter, including significant strength in Latin America and Asia and continued gains in North America. This growth reflects overall consumer spending resilience, but is also a testament to our strong distribution channels, Ability to develop new products and services that resonate. Success in selling more solutions to our existing merchants. And the power of diversification across verticals, merchant size, and geography. It's not yet clear whether broader macro headwinds are beginning to impact consumer spending. But we did see payment volume growth slow a bit late in the corner. We continue to see good demand in the grocery vertical, as well as in restaurants, especially QSRs. We've started to see consumers rotate towards non-discretionary spending and reduced basket size. The decline in inflation is impacting volume growth, particularly in the petro vertical. This did not impact buy-serve revenue, which for large petro providers and other enterprise clients is based on transactions, not dollar volume. Our important advantages in this environment are our breadth of distribution, Businesses both large and small and a good mix of non-discretionary spending, about half of our volume. Still, we are mindful that higher interest rates may weigh on consumers, and thus we anticipate second quarter revenue growth in this segment to ease from the very strong first quarter levels. This, of course, is contemplated in our guidance. Corporate revenue growth remains strong, up 22% in the quarter. We continue to add merchants at a healthy pace and extended value-added services penetration another point to 17%. Now, one year since our Merchant Investor Day, We are on track to achieve the targets we set for 2025, $10 billion in merchant acceptance revenue, $3.5 billion in Clover revenue, and Clover value-added services penetration of 25%. For Clover, a consistent average rate of growth over this time period was not in our calculus. Instead, the growth rate should accelerate over the next three years as we add more products, increase software penetration, and reach new markets. In the first quarter, for instance, we integrated bill pay and enhanced fraud management into Clover and improved access to Clover Capital via our client dashboards. In the past 12 months, we introduced upgraded Clover Mini and Clover Flex hardware. Later this year, we'll add a low-cost smart POS pin pad to address the needs of smaller merchants who want simpler access to the Clover operating system and software. During the quarter, BICERB launched support for Apple Tap to Pay on iPhone for SMBs on the Clover platform and for U.S. enterprise clients. This will enable businesses from large enterprises through medium and small businesses down to micro merchants to securely accept contactless payments on iPhones without the need for additional hardware like an external card reader. As contactless payment usage rises, we are excited to enable new and existing clients to use this seamless and secure solution on iPhone to help run and grow their businesses. On our carrot platform, we continue to expand our capabilities in broad omni-channel solutions for enterprise merchants. We renewed and expanded our contract scope with several large merchants this quarter, including Fanatics and a major hotel chain. We also recently signed a pay-by-bank agreement with Walmart that includes traditional ACH processing and incorporates Fiserv's now network and real-time payments capabilities. Our payments and network segment also had a very strong quarter, posting 13% organic revenue growth that included double-digit gains in all three business lines. Issuer solutions primarily representing credit card issuing and output services. Card services, including debit processing and our debit networks, Star and Excel. And our digital payment services, including Zelle and our BillPay business. This strong performance drove growth that was above our medium-term guidance of 5% to 8% and includes a couple of points of growth from a few discrete factors, which Bob will cover in more detail later. Positive trends continue and should carry full-year growth toward the high end of the range. Several years ago, of large card issuer wins in North America will drive revenue growth in the coming years with a pipeline that includes new win opportunities as well as follow-on sales to existing clients as we extend our value proposition. Our issuer clients have been active in deploying three highly innovative products, Advanced Defense, our new AI-based fraud solution. New card controls and alerts developed by OnDot. And point-of-sale loan solutions that help issuers compete with BNPL providers. Recently, Citi signed on for our POS loan product, and PNC went live. USAA is in the process of implementing advanced events, while Credit One has signed on as well. International issuer solutions was another bright spot in the quarter, with wins across all three of our regions. In Latin America, a leading Argentine fintech, Lala, chose Fiserv to provide credit card processing services for its new digital-first credit card product launch. It's already live in Mexico and will go live in Argentina and Colombia in the coming months. Wallet shows our first vision platform for its local presence and global cloud API gateway that maximizes the digital user experience with APIs for instant card issuing, dynamic verification, and installment payments, among other services. We're excited about additional opportunities as we roll out the next generation cloud-based First Vision platform later this year. In Intimia, we signed a contract with National Bank of Kuwait, the country's largest bank, to process their debit acquiring business on our First Vision platforms. This follows a fourth quarter win with this client for prepaid processing. Turning to card services, our debit network and processing business. Growth remains strong as we continue to add new issuing business with our core and non-core bank clients and sign merchants for debit transaction routing via our network. The adoption of Reg II has brought another large merchant, Uber, to our networks. We will provide Uber the benefit of the added choice that comes from the dual network mandate for card-not-present debit routing. We see many more merchants in our debit networks pipeline ahead of the new rule set to take effect July 1st. Our digital payments activity continues to grow with Zelle implementations and transactions. We have over 1,200 financial institutions live on Zelle today, with the potential to add hundreds more to our installed base this year. Financial institutions that use us for Zelle services are connected to the Fiserv Now network. which also provides easy access to FedNow, the Federal Reserve's real-time payment system. We have six banks in the pilot phase and over 20 financial institutions committed to go live post-FedNow launch in July. We're encouraged by the opportunity to add many more banks and credit unions, especially since we think our now network as a single integration layer offers the ideal way to access FedNow. Now is a network of networks connecting financial institutions, billers, consumers, and businesses for real-time money and data movement across all rails, including CARD, ACH, Zelle, FedNow, and the Clearinghouse. In Asia, we're working with leading banks across the region on digital transformation initiatives. This includes Bangkok Bank, the largest bank in Thailand that will expand its mobility digital banking platform into new domains, and BDO, the largest bank in the Philippines, where we are bringing signature core banking microservices to enhance BDO's third-party systems integration. We're also working with National Payments Corporation of India to enable the unified payments interface on RuPay credit cards for issuers on our India processing hub. Turning to our FinTech segment, Organic revenue growth of 3% was slightly below our medium-term guide of 4% to 6%, which we attribute to timing and a strong first quarter last year, creating a higher comparison point. Implementations from the healthy series of wins over the past few years will provide growth in the second half of this year. We continue to see organic growth in this segment within the guidance range. Importantly, we have not seen an extended disruption from the banking turmoil that arose in March. Thus far, there are no follow-on effects across our banking client base as we continue to monitor it with our enterprise risk framework. We see the opportunity to sell our regulatory suite to banks who may increasingly need them. And we are well positioned to be a net winner among acquirer banks should M&A activity heat up. Many larger banks already use a variety of our services, and we've demonstrated the ability to scale our modern platform. In April, we marked the one-year anniversary of the FinTech acquisition and have been very happy with its progress. We've seen strong interest from new and existing clients, which has contributed to meaningful growth in our FinTech pipeline. Importantly, in the first quarter, Fiserv renewed the FinTech partnership with one. a leading banking FinTech backed by Walmart. FinTech will be the system of record for a growing number of one's expanding banking services. Ramping this opportunity will represent a high-profile achievement in scale that could attract other banks and merchants to the proven FinTech solution. Now, let me pass the discussion to Bob for more detail on our financial results.
Bob Howell
Chief Financial Officer
Thank you, Frank, and good morning, everyone. If you're following along on our slides, I will cover additional detail on total company and segment performance, starting with our financial metrics and trends on slide four. First quarter results largely outpaced both internal and external expectations. Total company organic revenue growth was 13% in the quarter, with strong performance in the payments and network segment and continue momentum in our merchant acceptance segment. Growth is tracking well ahead of initial guidance for the full year, so we are raising the lower end and now anticipate growth of 8% to 9%, which considers economists' forecasts for slower consumer spending and bank lending in the second half of this year. We note, however, that we are not seeing signs that these measures are slowing meaningfully at this time. First quarter total company adjusted revenue grew 10% to $4.3 billion, and adjusted operating income grew 15% to $1.4 billion, resulting in adjusted operating margin of 33.6%, an increase of 160 basis points. First quarter adjusted earnings per share increased 13% to $1.58, compared to $1.40 in the prior year, Free cash flow came in at $861 million for the quarter of 43%, driven by improved working capital. We remain confident in achieving our outlook of $3.8 billion in free cash flow this year. Based on a higher organic revenue growth, coupled with our focus on operational excellence, which supports our margin expansion outlook of more than 125 basis points, we are raising our full-year adjusted EPS guidance range from the previous $7.25 to $7.40 to a new range of $7.30 to $7.40, representing growth of 12% to 14% over 2022. Now looking to our segment results starting on slide five, organic revenue growth in the merchant acceptance segment was a strong 18% in the quarter well ahead of our medium-term segment guidance of 9% to 12%. Adjusted revenue growth in the quarter was 12%. Merchant volume and transactions each grew 5%. Turning to our merchant operating systems, Clover and Carrot, we continue to see gains across key metrics, including net new merchant ads, value-added services penetration, and partner relationships. Clover revenue grew 22%, coming off one of our toughest comparisons with last year, when the post-COVID return to normal was in full swing. Payment volume growth was 17%. Software and services penetration reached 17% of total Clover revenue, an increase of 150 basis points from a year ago, and up 80 basis points sequentially, with continued strength in services such as Clover Capital. Clover Connect for ISV is built on its momentum with very strong revenue growth in the quarter as we continue to execute on our vertical strategies, adding 37 ISV partners. We also delivered new client wins following product introductions last quarter for the payment facilitator or PayFac market. Carrot also had a strong quarter with revenue growing 16%. International merchant operations represented 22% of segment revenue in the first quarter and grew 39% organically, led by Latin America. Adjusted operating income in the acceptance segment increased 20% to $562 million, and adjusted operating margin was up 210 basis points to 30.5%. The improvement reflects strong operating leverage and cost management. Turning to slide six on the payments and network segment, Organic revenue grew 13% in the quarter and adjusted revenue growth was 11%. Organic growth was well above the high end of the 5% to 8% guidance range. As Frank mentioned, a few discrete items contributed a couple of points of growth. These included additional revenue carryover from state government stimulus work, above average digital bank transfers in March, and a slightly easier comparison against first quarter of last year. Even as year-over-year comparisons get tougher in the second half, we still expect 2023 growth to be at the high end of the segment's guidance range for the full year. The remaining growth was driven by a variety of impacts across our business lines. Our North American credit active accounts on file grew 12%, driven by both new business onboarding and a favorable credit environment. Our international issuing business continues to grow above segment average driven by macroeconomic improvement as well as onboarding of new clients. Interdebit business continues to post solid growth, supported by new solutions and new client wins across processing and network. Adjusted operating income for the segment was up 15% to $717 million, and adjusted operating margin was up 130 basis points to 43.8%. Operating leverage and a favorable mixed shift towards debit network revenue helped drive the margin improvement along with cost management. Moving to slide seven, in the financial technology segment, we posted 3% organic growth for the quarter, just below our 4% to 6% medium-term guidance range. We expect to achieve growth within that guidance range this year as implementation work on prior wins is completed in the second half. Meanwhile, new customer momentum continues, and we had 12 core wins in the quarter. Adjusted operating income was up 2% to $280 million. Adjusted operating margin in the segment was flat at 35.4% as we continued to invest in Finzec. We expect margin expansion to resume as we anniversary the Finzec acquisition in the second quarter. The adjusted corporate operating loss was $122 million in line with the prior year. The adjusted effective tax rate in the quarter was 18.9%. We continue to expect full year 2023 adjusted effective tax rate to be approximately 20%. Total debt outstanding was $22.4 billion on March 31st. The debt to adjusted EBITDA ratio increased a tenth of a turn to 2.9 times and remains in our target range of less than three times leverage. During the quarter, we issued $1.8 billion of five- and ten-year senior notes to replace notes coming due later this year and reduce our commercial paper program balances. Variable rate debt sits at 14% of total. During the quarter, we significantly stepped up our share repurchases, buying back nearly $1.5 billion worth of stock. After receiving board approval to repurchase up to an additional 75 million shares, we had 78.7 million shares remaining authorized for repurchase at the end of the quarter. We are fully committed to our long-standing capital allocation strategy, which includes investing in our business organically, maintaining a strong balance sheet, returning cash to shareholders through share repurchase, and pursuing high-value and innovative acquisitions. With that, let me turn the call back to Frank.
Frank Bignano
Chairman, President, and CEO
Thanks, Bob. Before wrapping up, I want to discuss our ESG efforts. Our approach to corporate social responsibility and ESG is one of the ways our business produces better outcomes for our clients, shareholders, and associates. Let me share some highlights of our soon to be published annual CSR report. First, our ongoing dedication to the progress of our associates through professional development. In 2022, we filled 45% of exempt roles with internal buy-serve associates. Second, our continued investment in minority women, veteran, ethnically diverse, LGBTQ+, and disability-owned businesses through our Back to Business program in the US and UK. We have awarded more than 1,600 grants to eligible merchants since the inception of the program. Third, our commitment to continue to improve our collection and disclosure of greenhouse gas emissions and energy data. Not only have we aligned our 2022 CSR report with the Task Force on Climate-Related Disclosures framework, but we have also provided three years of data and a foundation for measuring the impact of our ongoing GHG and energy initiatives. These factors are reflected in being named to Forbes' list of America's Best Large Employers, which is based on a poll of employee recommendations released in the first quarter. We are equally proud of another recognition received in the first quarter as one of America's most innovative companies by fortune. I started off this discussion by highlighting the importance of investment in innovation. And this is another proof point on just how seriously we take technology innovation on behalf of customers and our future. This time of year is often marked by the release of ranking figures tabulated for the prior year. And my time in banking left me with an affinity for league tables that I know you also share. I'm pleased to report that Fiserv has retained its number one position in eight categories. Core account processing, merchant acquiring, mobile banking, online banking, issuer processing, bill payments, person-to-person payments, and account-to-account transfers. And that brings me back to where we started our discussion today, the importance of scale in sustaining investment and driving innovation. I thank the 41,000 employees of Fiserv who helped get and keep us here. I know that I speak for all of them when I say we intend to maintain the privileged position we hold. And now operator, please open the line for questions.
Operator
Operator
Thank you. We would now like to open the phone lines for questions. If you would like to ask a question, you may press star one on your phone. If you would like to withdraw your question, press star two. Our first question comes from Tinjin Wong from JP Morgan. Please go ahead.
Tinjin Wong
Analyst at JP Morgan
Thanks so much for taking my question. Good results here. Just wanted to maybe ask you to elaborate a little bit more on the month-to-month trends, including April. I heard some of the commentary on consumer spend and gas, but I'm also curious around bank IT spending. I know you lifted the lower end of your outlook. Sounds like you feel confident in the timing of implementations on deals. So if you could just maybe elaborate on that and a little bit more on the consumer side, that would be great. Thank you.
Frank Bignano
Chairman, President, and CEO
Good to hear from you. Thank you.
Frank Bignano
Chairman, President, and CEO
I'd say as much turmoil as we had in March, our volumes were very high. You hear us talk about what I call a backlog, meaning our book sold that's being implemented right now. We expect that to have a very strong lift in the second half.
Bob Howell
Chief Financial Officer
Demands still very high from financial institutions. You know, I've spent a lot of time with our client base and the demand for digital.
Frank Bignano
Chairman, President, and CEO
You heard us talk about the demand for Finzac.
Bob Howell
Chief Financial Officer
Also, our clients are building bigger businesses and trying to gain share also. So we feel good about the bank IT spend, and we feel good about our position with our client base right now. I hope that answers your question.
Tinjin Wong
Analyst at JP Morgan
I'm glad to hear it. Just my follow-up then, if you don't mind, just I know you called out the Uber win on the Star Excel debit networks for C&P Riding. We've been, I think I've asked you a few times, Frank, on REGII. So you mentioned a strong pipeline. Do you see a burst in potential deals and revenue leading up to that, or is this going to trickle into the second half of the year? Just trying to understand that.
Frank Bignano
Chairman, President, and CEO
Oh, I think it's second half and beyond.
Frank Bignano
Chairman, President, and CEO
You know, I think, you know, it's probably more a 24 than a 23. We should see some of it in 23, but I think you'll see more of it in 24.
Tinjin Wong
Analyst at JP Morgan
So it's not a one and done thing. Great. Thank you for the time. Thank you.
Operator
Operator
Next, we'll go to the line of Ramsey Alisal from Barclays. Please go ahead.
Ramsey Alisal
Barclays
Hi, thanks so much for taking my question this morning. I wanted to ask you about the spread between merchant volume and revenues, which widened a little bit this quarter. If you could just update us on the primary drivers of that spread, you know, product mix, geographic mix, pricing, other factors, and also just on the sustainability of those drivers in terms of driving revenue over the year.
Bob Howell
Chief Financial Officer
Yeah, Ramsey, good morning. as you heard us talk about, there's lots of variation quarter to quarter in terms of that spread that you talk about. There's the combination of things like mix of small businesses versus enterprise, of hardware versus processing. As you heard, we introduced some new hardware in the last few months. We've got some more coming in the balance of a year. That will drive it. A mix of international, there are three regions, LATAM, AMI and APAC, with particular strength in LATAM and APAC right now. More penetration of value-added services. You heard us talk about that stepping up 150 basis points to 17% in a quarter. Mix of Payfax and ISVs and ISVs. So lots of different elements, which is why we try to push on tracking our overall revenue growth. And as you've heard us say, we're focused on getting more merchants and selling more to those merchants. And we're seeing that benefit the last several quarters, and we expect that to continue as we march towards our goal of $10 billion of revenue in this segment by 2025.
Ramsey Alisal
Barclays
Okay, so quite a few different factors contributing there. A follow-up for me is just on the international growth in merchant. It seemed just incredibly impressive. What are the kind of common threads between the different markets that are helping to drive that growth? Is there anything that's going on outside the U.S. that's sparking that kind of growth?
Frank Bignano
Chairman, President, and CEO
Well, I think, you know, you've watched us build out our international business for years now. I mean, There was a point in time where we didn't have a business in Brazil, as an example, and then we built it out. You heard us talk about CASA. That's still ramping up. When you look across Asia Pac, you can see us winning business there. So I think it's as tried and true as having our feet completely embedded on the ground in terms of our capability. In some cases, Clover leads.
Frank Bignano
Chairman, President, and CEO
But, you know, it's always been an investment for us in innovation, running a global franchise.
Bob Howell
Chief Financial Officer
And I think on top of it, it's beyond merchant. It's issuer along with it. which allows the payment segment also to get the benefit of our geographic dispersity.
Frank Bignano
Chairman, President, and CEO
So it's a continuation of our strategy we laid out going back to 2020, and we'll continue to invest in those markets.
Bob Howell
Chief Financial Officer
We like the growth in those markets. We run those regions separately, and we feel great about our leadership on the ground there too.
Bob Howell
Chief Financial Officer
Ramsey, I think that's one of the distinctions for us and it's been one of the keys to our success. We have local leadership. We don't have an international business. We have three regions, and those three regions are run by local leaders who are physically present in those regions and know those regions. We operate as a global business, and so products and solutions, Clover is a global solution, but it's brought to those regions through those local regional leaders. And of course, across All of the regions, we continue to be the partner of choice, and bank partners are one of the key methods. Frank talked about Kasha. In Europe, we announced our Deutsche Bank joint venture. We've got partnerships in Asia-Pac, in Singapore, and in India, et cetera. So it's a global reach with very local leadership.
Ramsey Alisal
Barclays
Great. Thanks so much.
Operator
Operator
Next, we'll go to the line of Lisa Ellis from Moffitt Nathanson. Please go ahead.
Lisa Ellis
Moffitt Nathanson
Hi, good morning. Thanks for taking my questions and good stuff here.
Lisa Ellis
Moffitt Nathanson
Frank, you highlighted FISERV's ongoing readiness efforts related to the rollout of FedNow coming in a few months. Can you just elaborate a bit on that? how you anticipate and I guess maybe how quickly you expect FedNow to begin impacting Fiserv's business and where we'll see that benefit. Thank you.
Frank Bignano
Chairman, President, and CEO
Yeah, I mean, you know, we've always had a philosophy that we are a commerce enabler, right? So as new payment types and changes to payment types, just like what we did with Zelle, You can go back to places like Apple Pay. It's just our philosophical belief that we are here to help our clients grow their business. We are here in a purpose-driven method to help them run their business better. When new initiatives like FedNow come along, and we have thousands of banks and credit unions across the country that are looking for different payment methodologies to allow them to deliver for their clients, we're going to enable it. So we partner obviously with the Fed on this. I see it as another payment type. I think it's good for our largest institutions and our smallest. And, you know, I suspect it will get volume. For us, it's a very good choice to enable payments, just like Zelle was a very good choice to enable payments. So we're pretty excited. Adoption will drive all. It'll be a single integrated interface to allow our clients to be able to come in seamlessly through our network.
Bob Howell
Chief Financial Officer
I look forward to reporting on it when we talk next quarter.
spk27
Terrific. Thank you.
Lisa Ellis
Moffitt Nathanson
And then maybe just for my follow-up, I'll ask about investment areas because you did call out how Finzact, OnDot, and some of your other recent acquisitions are having a very noticeable positive impact on Fiserv. So just looking forward, what are some of your priority investment areas, like sort of the hot areas right now, either for organic or inorganic investment? Thank you.
Unknown
Well, I would say you have to start with a series of items.
Frank Bignano
Chairman, President, and CEO
Carrot, clover, you know, we're leaning heavily on both of those. I think we've grown them organically very well, but we've also added, you know, bento box, merchant one, next table. so you'll see us do both. I think we have a very, very strong track record, starting with Clover, moving to VendoBox, Finzac, of bringing founders in and helping them grow their business at a different level, right? I think you can see a vertical focus. You see us with driving value-added services, so I would say that's a large part of the merchant story, and that, you know, will happen... in the U.S., and within our regions also. I think when you think about FinZac, you think about, you know, what I feel is the best next-generation platform out there. And both FinZac and DNA are very, very strong assets. We do have great assets like Signature also, but when you think about the build-out, you should think about us taking FinZac and DNA to the next level. It's the best cloud platform in the industry between the two by far. And, you know, when you see the investment we're making to bring Walmart up and they're up and running in the early stages, that'll industrialize us on that platform beyond anyone's expectations when we acquired it. If you look at, you know, payments areas, We will continue to bring in the issuing area a lot of digital innovation. We're cloud enabling those platforms to take them to the next level. I think you've seen that we've been hugely successful in the issuing area, you know, even as late as Desjardins and Target. coming on. So we'll continue to invest in those platforms, grow them out, and bring more value-added services there, more digital capability there also. I think along with that, what we're doing with things like SpenLabs is we're opening up a whole new SMB opportunity within our portfolio that we think will transverse our whole organization. And we believe deeply in SMB and the combo of Spendlabs and Clover and other assets that we brought on board will really allow us to even have more wallet from our SMB population. And then on that, you saw us take something that was a card control, card access capability. and bring it into the mobile banking platforms of over 1,000 institutions. So I think, you know, you also look at the speed in which we ramp these products, the way we integrate them into the company. We think we have a pretty strong expertise in that, and you can count on that continuing driving future growth for the company.
Bob Howell
Chief Financial Officer
Perfect. Thank you.
Operator
Operator
Next, we'll go to the line of Timothy Chiodo from Credit Suisse. Please go ahead.
Timothy Chiodo
Credit Suisse
Great. Thank you for taking the question. I want to dig in a little bit more on the recent star in a cell win. You mentioned numerous of those, the Uber, the large merchant acquirer last quarter, and more in the pipeline. I want to just recap the value proposition. When you're speaking with these acquirers and merchants, I'm assuming part of it is lower interchange, network fees, There might be a bundled sales approach. There might be an authorization angle. If you could recap those and maybe add to the list. And then lastly, if at all possible, if you could just comment directionally in terms of market share goals. Is the goal for U.S. online debit for Star to Sell to be in a similar position to your share for the in-store debit market in the U.S.? ?
Frank Bignano
Chairman, President, and CEO
So, first, I think you did a pretty good job, so thank you, in describing the opportunity. And I would say, you know, yes, we're in the client's office every day, right? Large institutions, and we're talking to them about helpful capability. I think we get a lot of imbalance from large institutions because, you know, if you're the third debit network,
Bob Howell
Chief Financial Officer
I think it's a very strong position. And the combo of Star and Excel is very, very powerful. It's good for our merchants.
Frank Bignano
Chairman, President, and CEO
It's good for our issuers. And I don't want to lose that. It's a two-sided benefit. That benefit is us having invested in these products for a long time. and consistently felt that it was a value add to our clients, both large and small. It is about technical capability, not just about a lower price. Of course, every one of our businesses, as the industry would call them, merchants, I think of them as businesses, You know, we're always working on how to get a better client experience and how to lower the cost of acceptance. We're here to provide them the enablement they need. When you think about market share, you know, you hear us rattle off those number ones, and then we rattle off a number three. And Debit, I think that's a pretty privileged position. Those are formidable and fabulous institutions, one and two. So our job is to give our client choice, right? And if we give them choice, we do come with an all-inclusive capable set of assets that we deliver to clients. It could be, you know, low-cost debit routing. It's the capabilities of Reg AI. It's also, you know, the pay-by-bank capability that you heard about. It over time will potentially be things like FedNow and Zelle capability. Our job is to have the bundle, have the capability, help both issuers and merchants be able to get a better outcome. And I think, you know, we're uniquely positioned out of everybody in the industry. It's really the power of having a merchant business, an issuing business, a banking business, And we're a horizontal company that allows us to partner across our businesses to give the best solution to our clients. And that's why sometimes, you know, when we look at it, we look at it, how did we deliver on the top in total? And how did we deliver in margin in total? And making sure we're doing the best job for our clients and our shareholders.
Debit
Great. Thank you, Frank.
Operator
Operator
Our next question comes from David. Dave Toget from Evercore ISI. Please go ahead.
Dave Toget
Evercore ISI
Thank you. Good morning. Within the fintech segment, the 12-core wins are certainly good to see. Can you talk about decision cycles, sales cycles, and how they might be evolving post the regional bank crisis from early March? Yeah.
Frank Bignano
Chairman, President, and CEO
I mean, first of all, I didn't see a regional bank crisis. I saw tremendous turmoil in
Bob Howell
Chief Financial Officer
I think, you know, we have banks of all sizes from the largest in the world to 13-person credit unions.
Frank Bignano
Chairman, President, and CEO
And there was not across, and this is me talking to you about my interaction with my client base, in their office during this period of time while I was on the road, whether it was Topeka, Kansas, Lee's Summit, Missouri, Springfield, Missouri, Raleigh, North Carolina, you know, all across, we have very, very sound banks across this country that really perform very, very well and have always ran their asset and liability structure in a manner that I've seen through my career. So a little bit, I'm sorry for that kickoff, but I wouldn't want to deem it as a banking crisis. There was turmoil. I see demand very high. Every one of those were creating opportunity that I rattled off during that week. I've been consistent on demand is high, opportunity to sell all products is very high. I mean, if you step back and look at, you know, our two FI-facing segments, you'd look at it over the past three quarters, Third quarter at 7.7% growth. Fourth quarter, 22% at 9.2% growth. And first quarter at 23% at 9.4% growth. Those feel good to us. Our pipeline is strong both in traditional products and then in our new opportunities like Finzec and Undone and others. So I feel very, very good about our – yes, there was – maybe as I called it a little coastal problem. Uh, but you know, I felt, uh, or, or throughout the country, um, it's been very, very strong and, and our banks leaned on us and we were all over how to help them through it and deliver what they needed, uh, during that, that turmoil. And, you know, I feel good about how the org performed.
Dave Toget
Evercore ISI
Appreciate that. And just as a followup, um, Perhaps, Bob, can you talk about the key drivers of operational effectiveness or operational excellence that will sustain margin expansion in your midterm range?
Bob Howell
Chief Financial Officer
Sure. And, Dave, this is, quite frankly, it's just old-fashioned productivity. This is really what has been at the core of our company for a lot of years now. the last couple of years have been focused on integration and cost synergies. And so this is returning back to basics with integration synergy behind us from the large merger back in middle of 19 and getting into productivity, re-evaluating how we do everything and why we do what we do. It's things like implementing our new SAP system and streamlining the process and getting more information out of the hands of our business leaders more quickly so that we can make decisions faster. And it is, like I said, evaluating what we do on a day-to-day basis and streamlining that process so we can be quicker, more nimble, satisfy our clients and serve them in the way they need to be served with greater speed and efficiency.
Dave Toget
Evercore ISI
Understood. Thanks so much.
Operator
Operator
Thank you. And for our final question, we'll go to Dave Koning from Baird. Please go ahead.
Dave Koning
Baird
Yeah. Hey, guys. Thanks, and great job. And maybe just my two questions on Merchant. First one, ex-Clover, it seems like you still did mid to upper teens revenue growth in acceptance. So I guess my question really is, are you taking share? Even without Clover, it seems like you're taking a lot of share in the industry. Is that fair to say?
Bob Howell
Chief Financial Officer
I think we had yet another very strong merchant quarter across the board. Contributions, yes, Clover continues to do well. We continue to serve our enterprise clients and gain their international business, as you heard, hitting on all cylinders. Clover is a big part of this segment, no doubt about it, and a big part of the growth. but we laid out our intent, our goal to get to $10 billion by 2025. Clearly, Clover is part of that, but our enterprise clients, our non-Clover SMB clients, our international regions, all part of that and all contributing to the growth in the first quarter and last year for that matter.
Dave Koning
Baird
Yeah, great. Thanks. And just as a follow-up, I I think there might be a little misconception on the street just that volume growth being mid-single digits seems to be losing momentum. But, you know, when I look at it, I think over a third of your volume comes from bank JVs that generate almost no revenue. And, I mean, I think that all could almost go away, and you still probably would have beaten consensus this quarter. Is it fair to say is that maybe where some of the slowness is, whereas the very high-yielding stuff actually is growing volume quite fast?
Bob Howell
Chief Financial Officer
Yeah, overall, it's hard to be concerned, in my mind, with 18% top line when we did 17% for the full year last year. And to your earlier question, I think taking share across the board, there's lots of different elements to that volume. It did ease a bit, and certainly the bank joint ventures are part of that. We have some processing revenue, processing volume that doesn't drive big revenue. continue to focus on that. And as we talked about, geez, a little more than a year ago now, and we think that holds going forward from a revenue standpoint, but isn't a big growth driver for us.
Dave Koning
Baird
Yeah, gotcha. Well, thanks and great job.
Bob Howell
Chief Financial Officer
Great.
Dave Koning
Baird
Thanks, Dave.
Frank Bignano
Chairman, President, and CEO
Yeah, I'd like to thank everybody for their attention today. Please feel free to reach out to our IR team with any questions.
Operator
Operator
Have a great day, and I look forward to talking to you. Thank you.
Operator
Operator
Thank you all for participating in the FISER first quarter earnings conference call. That concludes today's conference. Please disconnect at this time and have a great rest of your day.
Operator
Operator
Thank you. you Thank you. Thank you. Thank you.
Operator
Operator
Welcome to the FISERV 2023 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 Julie Cheriel, Senior Vice President of Investor Relations at FISERV.
Julie Cheriel
Senior Vice President of Investor Relations
Thank you, and good morning. With me on the call today are Frank Bignano, our Chairman, President, and Chief Executive Officer, and Bob Howell, 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, over to Frank.
Frank Bignano
Chairman, President, and CEO
Thank you, Julie. And thank you all for joining us today. FISERV is off to a strong start in 2023. with first quarter adjusted revenue growth of 10% and adjusted earnings per share of $1.58, up 13%. Adjusted operating margin of 33.6% was up 160 basis points. Organic revenue growth was 13%, above our 7% to 9% outlook for the full year, demonstrating our ability to sustain accelerated growth. Importantly, the growth was multi-dimensional. It included elevated contributions from card processing, non-card payments, and digital banking solutions. Growth was also strong in all three of our international regions and in merchant acceptance. Investment on behalf of our clients and with our partners is paying off. We believe that accelerating our investment over the last three years, both organic and via M&A, has extended our leadership position among fintechs. This counters the narrative of the last few years that many startups in the payments and fintech space would disrupt and potentially replace the legacy companies. Our results show that our strategy to innovate and disrupt on behalf of, not in place of, our longstanding bank and merchant customers was on the mark. These competitors have indeed raised the bar for the tech and fintech, but we've met and in some cases exceeded that bar with our own investment in innovation. The power of our business model is in the virtuous cycle of generating revenue growth across a scaled business, leading to greater operating margins. That profit produces significant cash to reinvest in the business for faster organic growth and value accretive acquisitions. while the remainder is returned to shareholders through share repurchase. The market has shown that legacy companies across many industries with scale and willingness to innovate will offer sustainable value to clients and shareholders. Let's talk for a moment about how the benefits of our breadth, scale, and investment have driven innovations. For small and medium-sized businesses, we developed a cloud-based SaaS operating system for their payment needs with Clover. Now we're allowing these businesses to easily accept multiple payment types, and we are seamlessly integrating software and services to address their broader business needs. For large enterprise businesses, we developed an integrated omni-channel system called Carrot to manage payment needs across in-store and online sales channels, and we're adding SaaS-based solutions that improve our clients' efficiency and enhance their customers' experiences. For debit and credit issuers, we've already built the most comprehensive suite of solutions, and we continue to innovate. Cardhub was built off of the tools acquired with OnDot and now offers a comprehensive set of modern digital cardholder experiences. More than 1,000 financial institutions are now using Cardhub, which can be fully integrated into their mobile banking app. allowing these issuers to offer their customers a unified digital card experience that only a few of the largest financial institutions can provide today. SpendTrack does for a bank's small and medium-sized business clients what CardHub does for its retail customers. This differentiated mobile-first platform offers card management and AI-enabled expense management with workflows specific to their business needs. Built from our Spendlabs acquisition, SpendTrack has helped us win more credit, debit, and network business with banks and issuers that cater to SMBs. For small and medium-sized banks, we provide a full suite of the digital banking tools that help them compete with the largest banks, from mobile apps to spend management to Zelle P2P payments. And in July, with the launch of FedNow, we'll help them participate in the new wave of real-time payments optimized on our Now network that connects banks to each other, to all payment rails, and to essential applications. For banks of all sizes, we've built a path to the cloud through both our industry-leading DNA core platform and now with Finzac, our native cloud solution acquired last year. And in support of our biggest investment of all, The combination of First Data and Fiserv, we are finding new opportunities across our client base that are aligned in ways that only Fiserv can enable. Here are just three examples of the power of our combined franchise. First, Star and Excel, the third largest debit network in the country. helps card issuers and merchants realize attractive economics on debit transaction routing and satisfy new Reg. I.I. requirements for at least two unaffiliated networks on each card to route card-not-present transactions. Second, our Finzec cloud-native banking core is laying the groundwork as an operating system at scale for financial institutions and merchants looking to offer embedded finance. Third, our output solutions business offers a full range of capabilities beyond what either predecessor company had. For example, we are now able to offer communications and card manufacturing solutions to our entire client base, from retail private label issuers to general purpose credit issuers, healthcare providers, banks, and governments. As we look to the remainder of 2023, we start with a firm foundation of above-plan revenue and earnings. Still, we think it is wise to balance this strong start with the potential for macroeconomic headwinds in the second half of the year. So, we are lifting the lower end of our prior 2023 guidance for both organic revenue growth and adjusted EPS and maintaining the upper end at this point. We now anticipate organic revenue growth of 8 to 9 percent and adjusted earnings per share of $7.30 to $7.40. So, let's discuss the trends we are seeing in each of our segments now and for the rest of the year. Merchant acceptance continues to be a very strong grower, posting 18% organic revenue growth in the first quarter, including significant strength in Latin America and Asia, and continued gains in North America. This growth reflects overall consumer spending resilience, but is also a testament to our strong distribution channels, ability to develop new products and services that resonate, success in selling more solutions to our existing merchants, and the power of diversification across verticals, merchant size, and geography. It's not yet clear whether broader macro headwinds are beginning to impact consumer spending. but we did see payment volume growth slow a bit late in the corner we continue to see good demand in the grocery vertical as well as in restaurants especially qsrs we've started to see consumers rotate towards non-discretionary spending and reduced basket size the decline in inflation is impacting volume growth, particularly in the petro vertical. This did not impact buy-serve revenue, which for large petro providers and other enterprise clients is based on transactions, not dollar volume. Our important advantages in this environment are our breadth of distribution, Businesses both large and small and a good mix of non-discretionary spending, about half of our volume. Still, we are mindful that higher interest rates may weigh on consumers, and thus we anticipate second quarter revenue growth in this segment to ease from the very strong first quarter levels. This, of course, is contemplated in our guidance. Corporate revenue growth remains strong, up 22% in the quarter. We continue to add merchants at a healthy pace and extended value-added services penetration another point to 17%. Now, one year since our Merchant Investor Day, We are on track to achieve the targets we set for 2025, $10 billion in merchant acceptance revenue, $3.5 billion in Clover revenue, and Clover value-added services penetration of 25%. For Clover, a consistent average rate of growth over this time period was not in our calculus. Instead, the growth rate should accelerate over the next three years as we add more products, increase software penetration, and reach new markets. In the first quarter, for instance, we integrated bill pay and enhanced fraud management into Clover and improved access to Clover Capital via our client dashboards. In the past 12 months, we introduced upgraded Clover Mini and Clover Flex hardware. Later this year, we'll add a low-cost smart POS pin pad to address the needs of smaller merchants who want simpler access to the Clover operating system and software. During the quarter, BICERB launched support for apple tap to pay on iphone for smbs on the clover platform and for u.s enterprise clients this will enable businesses from large enterprises through medium and small businesses down to micro merchants to securely accept contactless payments on iPhones without the need for additional hardware like an external card reader. As contactless payment usage rises, we are excited to enable new and existing clients to use this seamless and secure solution on iPhone to help run and grow their businesses. On our carrot platform, we continue to expand our capabilities in broad omni-channel solutions for enterprise merchants. We renewed and expanded our contract scope with several large merchants this quarter, including Fanatics and a major hotel chain. We also recently signed a pay-by-bank agreement with Walmart that includes traditional ACH processing and incorporates Fiserv's now network and real-time payments capabilities. Our payments and network segment also had a very strong quarter, posting 13% organic revenue growth that included double-digit gains in all three business lines. Issuer solutions primarily representing credit card issuing and output services. Card services, including debit processing and our debit networks, Star and Excel. And our digital payment services, including Zelle and our BillPay business. This strong performance drove growth that was above our medium-term guidance of 5 to 8 percent and includes a couple of points of growth from a few discrete factors, which Bob will cover in more detail later. Positive trends continue and should carry full-year growth toward the high end of the range. Several years of large card issuer wins in North America will drive revenue growth in the coming years with a pipeline that includes new win opportunities as well as follow-on sales to existing clients as we extend our value proposition. Our issuer clients have been active in deploying three highly innovative products, Advanced Defense, our new AI-based fraud solution. New card controls and alerts developed by OnDot. And point-of-sale loan solutions that help issuers compete with BNPL providers. Recently, Citi signed on for our POS loan product, and PNC went live. USAA is in the process of implementing advanced events, while Credit One has signed on as well. International issuer solutions was another bright spot in the quarter, with wins across all three of our regions. In Latin America, a leading Argentine fintech, Lala, chose Fiserv to provide credit card processing services for its new digital-first credit card product launch. It's already live in Mexico and will go live in Argentina and Colombia in the coming months. Wallet shows our first vision platform for its local presence and global cloud API gateway that maximizes the digital user experience with APIs for instant card issuing, dynamic verification, and installment payments, among other services. We're excited about additional opportunities as we roll out the next generation cloud-based First Vision platform later this year. In Intimia, we signed a contract with National Bank of Kuwait, the country's largest bank, to process their debit acquiring business on our First Vision platforms. This follows a fourth quarter win with this client for prepaid processing. Turning to card services, our debit network and processing business. Growth remains strong as we continue to add new issuing business with our core and non-core bank clients and sign merchants for debit transaction routing via our network. The adoption of Reg II has brought another large merchant, Uber, to our networks. We will provide Uber the benefit of the added choice that comes from the dual network mandate for card-not-present debit routing. We see many more merchants in our debit networks pipeline ahead of the new rule set to take effect July 1st. Our digital payments activity continues to grow with Zelle implementations and transactions. We have over 1,200 financial institutions live on Zelle today, with the potential to add hundreds more to our installed base this year. Financial institutions that use us for Zelle services are connected to the Fiserv Now network. which also provides easy access to FedNow, the Federal Reserve's real-time payment system. We have six banks in the pilot phase and over 20 financial institutions committed to go live post-FedNow launch in July. We're encouraged by the opportunity to add many more banks and credit unions, especially since we think our now network as a single integration layer offers the ideal way to access FedNow. Now is a network of networks connecting financial institutions, billers, consumers, and businesses for real-time money and data movement across all rails, including CARD, ACH, Zelle, FedNow, and the Clearinghouse. we're working with leading banks across the region on digital transformation initiatives. This includes Bangkok Bank, the largest bank in Thailand that will expand its mobility digital banking platform into new domains, and BDO, the largest bank in the Philippines, where we are bringing signature core banking microservices to enhance BDO's third-party systems integration. We're also working with National Payments Corporation of India to enable the unified payments interface on RuPay credit cards for issuers on our India processing hub. Turning to our FinTech segment, Organic revenue growth of 3% was slightly below our medium-term guide of 4% to 6%, which we attribute to timing and a strong first quarter last year, creating a higher comparison point. Implementations from the healthy series of wins over the past few years will provide growth in the second half of this year. We continue to see organic growth in this segment within the guidance range. Importantly, we have not seen an extended disruption from the banking turmoil that arose in March. Thus far, there are no follow-on effects across our banking client base as we continue to monitor it with our enterprise risk framework. We see the opportunity to sell our regulatory suite to banks who may increasingly need them. And we are well positioned to be a net winner among acquirer banks should M&A activity heat up. Many larger banks already use a variety of our services, and we've demonstrated the ability to scale our modern platform. In April, we marked the one-year anniversary of the FinTech acquisition and have been very happy with its progress. We've seen strong interest from new and existing clients, which has contributed to meaningful growth in our FinTech pipeline. Importantly, in the first quarter, Fiserv renewed the FinTech partnership with WAND. a leading banking FinTech backed by Walmart. FinTech will be the system of record for a growing number of one's expanding banking services. Ramping this opportunity will represent a high-profile achievement in scale that could attract other banks and merchants to the proven FinTech solution. Now, let me pass the discussion to Bob for more detail on our financial results.
Bob Howell
Chief Financial Officer
Thank you, Frank, and good morning, everyone. If you're following along on our slides, I will cover additional detail on total company and segment performance, starting with our financial metrics and trends on slide four. First quarter results largely outpaced both internal and external expectations. Total company organic revenue growth was 13% in the quarter, with strong performance in the payments and network segment and continue momentum in our merchant acceptance segment. Growth is tracking well ahead of initial guidance for the full year, so we are raising the lower end and now anticipate growth of 8% to 9%, which considers economists' forecasts for slower consumer spending and bank lending in the second half of this year. We note, however, that we are not seeing signs that these measures are slowing meaningfully at this time. First quarter total company adjusted revenue grew 10% to $4.3 billion, and adjusted operating income grew 15% to $1.4 billion, resulting in adjusted operating margin of 33.6%, an increase of 160 basis points. First quarter adjusted earnings per share increased 13% to $1.58, compared to $1.40 in the prior year, Free cash flow came in at $861 million for the quarter of 43%, driven by improved working capital. We remain confident in achieving our outlook of $3.8 billion in free cash flow this year. Based on a higher organic revenue growth, coupled with our focus on operational excellence, which supports our margin expansion outlook of more than 125 basis points, we are raising our full-year adjusted EPS guidance range from the previous $7.25 to $7.40 to a new range of $7.30 to $7.40, representing growth of 12% to 14% over 2022. Now looking to our segment results starting on slide five, organic revenue growth in the merchant acceptance segment was a strong 18% in the quarter, well ahead of our medium-term segment guidance of 9% to 12%. adjusted revenue growth in the quarter was 12%. Merchant volume and transactions each grew 5%. Turning to our merchant operating systems, Clover and Carrot, we continue to see gains across key metrics, including net new merchant ads, value-added services penetration, and partner relationships. Clover revenue grew 22%, coming off one of our toughest comparisons with last year, when the post-COVID return to normal was in full swing. Payment volume growth was 17%. Software and services penetration reached 17% of total Clover revenue, an increase of 150 basis points from a year ago and up 80 basis points sequentially, with continued strength in services such as Clover Capital. Clover Connect for ISVs built on its momentum with very strong revenue growth in the quarter as we continue to execute on our vertical strategies, adding 37 ISV partners. We also delivered new client wins, following product introductions last quarter for the payment facilitator, or PayFac, market. Carrot also had a strong quarter, with revenue growing 16%. International merchant operations represented 22% of segment revenue in the first quarter and grew 39% organically, led by Latin America. Adjusted operating income in the acceptance segment increased 20% to $562 million, and adjusted operating margin was up 210 basis points to 30.5%. The improvement reflects strong operating leverage and cost management. Turning to slide six on the payments and network segment, organic revenue grew 13% in the quarter and adjusted revenue growth was 11%. Organic growth was well above the high end of the 5% to 8% guidance range. As Frank mentioned, a few discrete items contributed a couple of points of growth. These included additional revenue carryover from state government stimulus work, above average digital bank transfers in March, and a slightly easier comparison against first quarter of last year. Even as year-over-year comparisons get tougher in the second half, we still expect 2023 growth to be at the high end of the segment's guidance range for the full year. The remaining growth was driven by a variety of impacts across our business lines. Our North American credit active accounts on file grew 12 percent, driven by both new business onboarding and a favorable credit environment. Our international issuing business continues to grow above segment average, driven by a macroeconomic improvement as well as onboarding of new clients. Interdebit business continues to post solid growth, supported by new solutions and new client wins across processing and network. Adjusted operating income for the segment was up 15% to $717 million, and adjusted operating margin was up 130 basis points to 43.8%. Operating leverage and a favorable mixed shift towards debit network revenue helped drive the margin improvement along with cost management. Moving to slide seven in the financial technology segment, we posted 3% organic growth for the quarter, just below our 4% to 6% medium-term guidance range. We expect to achieve growth within that guidance range this year as implementation work on prior wins is completed in the second half. Meanwhile, new customer momentum continues, and we had 12 core wins in the quarter. Adjusted operating income was up 2% to $280 million. Adjusted operating margin in the segment was flat at 35.4% as we continue to invest in Finzec. We expect margin expansion to resume as we anniversary the Finzec acquisition in the second quarter. The adjusted corporate operating loss was $122 million in line with the prior year. The adjusted effective tax rate in the quarter was 18.9%. We continue to expect full year 2023 adjusted effective tax rate to be approximately 20%. Total debt outstanding was $22.4 billion on March 31st. The debt-to-adjusted EBITDA ratio increased a tenth of a turn to 2.9 times and remains in our target range of less than three times leverage. During the quarter, we issued $1.8 billion of five- and 10-year senior notes to replace notes coming due later this year and reduce our commercial paper program balances. Variable rate debt sits at 14% of total. During the quarter, we significantly stepped up our share repurchases, buying back nearly $1.5 billion worth of stock. After receiving board approval to repurchase up to an additional 75 million shares, we had 78.7 million shares remaining authorized for repurchase at the end of the quarter. We are fully committed to our longstanding capital allocation strategy, which includes investing in our business organically, maintaining a strong balance sheet, returning cash to shareholders through share repurchase, and pursuing high-value and innovative acquisitions. With that, let me turn the call back to Frank.
Frank Bignano
Chairman, President, and CEO
Thanks, Bob. Before wrapping up, I want to discuss our ESG efforts. Our approach to to corporate social responsibility and DSG is one of the ways our business produces better outcomes for our clients, shareholders, and associates. Let me share some highlights about soon to be published annual CSR report. First, our ongoing dedication to the progress of our associates through professional development. In 2022, we filled 45% of exempt roles with internal by-service associates. Second, our continued investment in minority women, veteran, ethnically diverse, LGBTQ+, and disability-owned businesses through our Back to Business program in the U.S., and UK. We have awarded more than 1600 grants to eligible merchants since the inception of the program. Third, our commitment to continue to improve our collection and disclosure of greenhouse gas emissions and energy data. Not only have we aligned our 2022 CSR report with the Task Force on Climate-Related Disclosures framework, but we have also provided three years of data and a foundation for measuring the impact of our ongoing GHG and energy initiatives. These factors are reflected and being named to Forbes' list of America's Best Large Employers, which is based on a poll of employee recommendations released in the first quarter. We're equally proud of another recognition received in the first quarter, as one of America's most innovative companies by fortune. I started off this discussion by highlighting the importance of investment in innovation. And this is another proof point on just how seriously we take technology innovation on behalf of customers and our future. This time of year is often marked by the release of ranking figures tabulated for the prior year. And my time in banking left me with an affinity for league tables that I know you also share. I'm pleased to report that Fiserv has retained its number one position in eight categories. Core account processing, merchant acquiring, mobile banking, online banking, issuer processing, bill payments, person-to-person payments, and account-to-account transfers. And that brings me back to where we started our discussion today, the importance of scale in sustaining investment and driving innovation. I thank the 41,000 employees of Fiserv who helped get and keep us here. I know that I speak for all of them when I say we intend to maintain the privileged position we hold. And now operator, please open the line for questions.
Operator
Operator
Thank you. We would now like to open the phone lines for questions. If you would like to ask a question, you may press star one on your phone. If you would like to withdraw your question, press star two. Our first question comes from Tinjin Wong from JP Morgan. Please go ahead.
Tinjin Wong
Analyst at JP Morgan
Thanks so much for taking my question. Good results here. Just wanted to maybe ask you to elaborate a little bit more on the month-to-month trends, including April. I heard some of the commentary on consumer spend and gas, but I'm also curious around bank IT spending. I know you lifted the lower end of your outlook. Sounds like you feel confident in the timing of implementations on deals. So if you could just maybe elaborate on that and a little bit more on the consumer side, that would be great. Thank you.
Frank Bignano
Chairman, President, and CEO
Good to hear from you. Thank you.
Frank Bignano
Chairman, President, and CEO
I'd say as much turmoil as we had in March, our volumes were very high.
Frank Bignano
Chairman, President, and CEO
You hear us talk about what I call a backlog, meaning our book sold that's being implemented right now. We expect that to have a very strong lift in the second half. Demands still very high from financial institutions.
Frank Bignano
Chairman, President, and CEO
You know, I've spent a lot of time with our client base and the demand for digital. You heard us talk about the demand for FinZac.
Bob Howell
Chief Financial Officer
Also, our clients are building bigger businesses and trying to gain share also. So we feel good about the bank IT spend, and we feel good about our position with our client base right now. I hope that answers your question.
Tinjin Wong
Analyst at JP Morgan
I'm glad to hear it. Just my follow-up then, if you don't mind, just I know you called out the Uber win on the Star Excel debit networks for C&P Riding. We've been, I think I've asked you a few times, Frank, on REGII. So you mentioned a strong pipeline. Do you see a burst in potential deals and revenue leading up to that, or is this going to trickle into the second half of the year? Just trying to understand that.
Frank Bignano
Chairman, President, and CEO
Oh, I think it's second half and beyond.
Frank Bignano
Chairman, President, and CEO
You know, I think, you know, it's probably more a 24 than a 23. We should see some of it in 23, but I think you'll see more of it in 24.
Tinjin Wong
Analyst at JP Morgan
So it's not a one and done thing. Great. Thank you for the time. Thank you.
Operator
Operator
Next, we'll go to the line of Ramsey Alisal from Barclays. Please go ahead.
Ramsey Alisal
Barclays
Hi, thanks so much for taking my question this morning. I wanted to ask you about the spread between merchant volume and revenues, which widened a little bit this quarter. If you could just update us on the primary drivers of that spread, you know, product mix, geographic mix, pricing, other factors, and also just on the sustainability of those drivers in terms of driving revenue over the year.
Bob Howell
Chief Financial Officer
Yeah, Ramsey, good morning. As you heard us talk about, there's lots of variation quarter to quarter in terms of that spread that you talk about. There's the combination of things like mix of small businesses versus enterprise, of hardware versus processing. As you heard, we introduced some new hardware in the last few months. We've got some more coming in the balance of the year. That will drive it. A mix of international, there are three regions, LATAM, AMI and APAC, with particular strength in LATAM and APAC right now. More penetration of value-added services. You heard us talk about that stepping up 150 basis points to 17% in a quarter. Mix of Payfax and ISVs and ISVs. So lots of different elements, which is why we try to push on tracking our overall revenue growth. And as you've heard us say, we're focused on getting more merchants and selling more to those merchants. And we're seeing that benefit the last several quarters, and we expect that to continue as we march towards our goal of $10 billion of revenue in this segment by 2025.
Ramsey Alisal
Barclays
Okay, so quite a few different factors contributing there. A follow-up for me is just on the international growth in merchant. It seemed just incredibly impressive. What are the kind of common threads between the different markets that are helping to drive that growth? Is there anything that's going on outside the U.S. that's sparking that kind of growth?
Frank Bignano
Chairman, President, and CEO
Well, I think, you know, you've watched us build out our international business for years. You know, I mean, There was a point in time where we didn't have a business in Brazil, as an example, and then we built it out. You heard us talk about Kasha. That's still ramping up. When you look across Asia Pac, you can see us winning business there. So I think it's as tried and true as having our feet completely embedded on the ground in terms of our capability. In some cases, Clover leads. But, you know, it's always been an investment for us in innovation running a global franchise.
Frank Bignano
Chairman, President, and CEO
And I think on top of it, it's beyond merchant.
Bob Howell
Chief Financial Officer
It's issuer along with it. which allows the payment segment also to get the benefit of our geographic dispersity.
Frank Bignano
Chairman, President, and CEO
So it's a continuation of our strategy we laid out going back to 2020, and we'll continue to invest in those markets.
Bob Howell
Chief Financial Officer
We like the growth in those markets. We run those regions separately, and we feel great about our leadership on the ground there too.
Bob Howell
Chief Financial Officer
Ramsey, I think that's one of the distinctions for us and it's been one of the keys to our success. We have local leadership. We don't have an international business. We have three regions, and those three regions are run by local leaders who are physically present in those regions and know those regions. We operate as a global business, and so products and solutions, Clover is a global solution, but it's brought to those regions through those local and regional leaders. And of course, across All of the regions, we continue to be the full partner of choice, and bank partners are one of the key methods. Frank talked about Kasha. In Europe, we announced our Deutsche Bank joint venture. We've got partnerships in Asia-Pac, in Singapore, and in India, et cetera. So it's a global reach with very local leadership. Great. Thanks so much.
Operator
Operator
Next, we'll go to the line of Lisa Ellis from Moffitt Nathanson. Please go ahead.
Lisa Ellis
Moffitt Nathanson
Hi, good morning. Thanks for taking my questions and good stuff here.
Lisa Ellis
Moffitt Nathanson
Frank, you highlighted FISERV's ongoing readiness efforts related to the rollout of FedNow coming in a few months. Can you just elaborate a bit on that? how you anticipate and I guess maybe how quickly you expect FedNow to begin impacting Fiserv's business and where we'll see that benefit. Thank you.
Frank Bignano
Chairman, President, and CEO
Yeah, I mean, you know, we've always had a philosophy that we are a commerce enabler, right? So as new payment types and changes to payment types, just like what we did with Zelle, You can go back to places like Apple Pay. It's just our philosophical belief that we are here to help our clients grow their business. We are here in a purpose-driven method to help them run their business better. When new initiatives like FedNow come along, and we have thousands of banks and credit unions across the country that are looking for different payment methodologies to allow them to deliver for their clients, we're going to enable it. So we partner obviously with the Fed on this. I see it as another payment type. I think it's good for our largest institutions and our smallest. And, you know, I suspect it will get volume. For us, it's a very good choice to enable payments, just like Zelle was a very good choice to enable payments. So we're pretty excited. Adoption will drive all. It'll be a single integrated interface to allow our clients to be able to come in seamlessly through our network.
Bob Howell
Chief Financial Officer
I look forward to reporting on it when we talk next quarter.
spk27
Terrific. Thank you.
Lisa Ellis
Moffitt Nathanson
And then maybe just for my follow-up, I'll ask about investment areas because you did call out how Finzact, OnDot, and some of your other recent acquisitions are having a very noticeable positive impact on Fiserv. So just looking forward, what are some of your priority investment areas, like sort of the hot areas right now, either for organic or inorganic investment? Thank you.
Unknown
Well, I would say you have to start with a series of items.
Frank Bignano
Chairman, President, and CEO
Carrot, clover, you know, we're leaning heavily on both of those. I think we've grown them organically very well, but we've also added, you know, bento box, merchant one, next table items. so you'll see us do both. I think we have a very, very strong track record, starting with Clover, moving to VendoBox, Finzac, of bringing founders in and helping them grow their business at a different level, right? I think you can see a vertical focus. You see us with driving value-added services, so I would say that's a large part of the merchant story, and that, you know, will happen... in the U.S., and within our regions also. I think when you think about FinZac, you think about, you know, what I feel is the best next-generation platform out there. And both FinZac and DNA are very, very strong assets. We do have great assets like Signature also, but when you think about the build-out, you should think about us taking FinZac and DNA to the next level. It's the best cloud platform in the industry between the two by far. And, you know, when you see the investment we're making to bring Walmart up and they're up and running in the early stages, that'll industrialize us on that platform beyond anyone's expectations when we acquired it. If you look at, you know, payments areas, We will continue to bring in the issuing area a lot of digital innovation. We're cloud enabling those platforms to take them to the next level. I think you've seen that we've been hugely successful in the issuing area, you know, even as late as Desjardins and Target. coming on. So we'll continue to invest in those platforms, grow them out, and bring more value-added services there, more digital capability there also. I think along with that, what we're doing with things like SpenLabs is we're opening up a whole new SMB opportunity within our portfolio that we think will transverse our whole organization. And we believe deeply in SMB and the combo of Spenlabs and Clover and other assets that we brought on board will really allow us to even have more wallet from our SMB population. And then on that, you saw us take something that was a card control, card access capability. and bring it into the mobile banking platforms of over 1,000 institutions. So I think, you know, you also look at the speed in which we ramp these products, the way we integrate them into the company. We think we have a pretty strong expertise in that, and you can count on that continuing driving future growth for the company.
Bob Howell
Chief Financial Officer
Perfect. Thank you.
Operator
Operator
Next, we'll go to the line of Timothy Chiodo from Credit Suisse. Please go ahead.
Timothy Chiodo
Credit Suisse
Great. Thank you for taking the question. I want to dig in a little bit more on the recent star in a cell win. You mentioned numerous of those, the Uber, the large merchant acquirer last quarter, and more in the pipeline. I want to just recap the value proposition. When you're speaking with these acquirers and merchants, I'm assuming part of it is lower interchange, network fees, There might be a bundled sales approach. There might be an authorization angle. If you could recap those and maybe add to the list. And then lastly, if at all possible, if you could just comment directionally in terms of market share goals. Is the goal for U.S. online debit for Star to Sell to be in a similar position to your share for the in-store debit market in the U.S.? ?
Frank Bignano
Chairman, President, and CEO
So first, I think you did a pretty good job, so thank you, in describing the opportunity. And I would say, you know, yes, we're in the client's office every day, right? Large institutions, and we're talking to them about our full capability. I think we get a lot of imbalance from large institutions because, you know, if you're the third debit network, I think it's a very strong position.
Bob Howell
Chief Financial Officer
And the combo of Star and Excel is very, very powerful. It's good for our merchants. It's good for our issuers.
Frank Bignano
Chairman, President, and CEO
And I don't want to lose that. It's a two-sided benefit. That benefit, you know, is us having invested in these products for a long time and consistently felt that it was a value add to our clients, both large and small. It is about technical capability, not just about a lower price, right? Of course, every one of our businesses, as the industry would call them, merchants, I think of them as businesses, You know, always working on how to get a better client experience and how to lower the cost of acceptance. We're here to provide them the enablement they need. When you think about market share, you know, you hear us rattle off those number ones and then we rattle off a number three. And Debit, I think that's a pretty privileged position Those are formidable and fabulous institutions, one and two. So our job is to give our client choice, right? And if we give them choice, we do come with an all-inclusive capable set of assets that we deliver to clients. It could be, you know, low-cost debit routings. It's the capabilities of Reg AI. It's also the pay-by-bank capability that you heard about. It, over time, will potentially be things like FedNow and Zelle capability. Our job is to have the bundle, have the capability, help both issuers and merchants be able to get a better outcome. And I think we're uniquely positioned And of everybody in the industry, it's really the power of having a merchant business, an issuing business, a banking business. And we're a horizontal company that allows us to partner across our businesses to give the best solution to our clients. And that's why sometimes, you know, when we look at it, we look at it, how did we deliver on the top in total? And how did we deliver in margin in total? and making sure we're doing the best job for our clients and our shareholders.
Debit
Great. Thank you, Frank.
Operator
Operator
Our next question comes from Dave Toget from Evercore ISI. Please go ahead.
Dave Toget
Evercore ISI
Thank you. Good morning. Within the fintech segment, the 12-core wins are certainly good to see. Can you talk about decision cycles, sales cycles, and how they might be evolving post the regional bank crisis from early March?
Frank Bignano
Chairman, President, and CEO
Yeah, I mean, first of all, I didn't see a regional bank crisis. I saw tremendous turmoil. I think, you know, we have banks of all sizes from the largest in the world to 13-person credit unions. And there was not across, and this is me talking to you about my interaction with my client base, In their office during this period of time while I was on the road, whether it was Topeka, Kansas, Lee's Summit, Missouri, Springfield, Missouri, Raleigh, North Carolina, you know, all across, we have very, very sound banks across this country that really perform very, very well and have always ran their asset and liability structure in a manner that I've seen through my career. So a little bit, I'm sorry for that, but I wouldn't want it even as a banking crisis. There was turmoil. I see demand very high. Every one of those were creating opportunity that I rattled off during that week. I've been consistent on demand is high, opportunity to sell all products is very high. I mean, if you step back and look at our two FI-facing segments, You look at it over the past three quarters, third quarter at 7.7% growth, fourth quarter, 22 at 9.2% growth, and first quarter at 23 at 9.4% growth. Those feel good to us, our pipeline strong, both in traditional product and then in our new opportunities like Finzec and Ondon and others. So I feel very, very good about that. Yes, there was maybe, as I called it, a little coastal problem. But, you know, I felt throughout the country it's been very, very strong. And our banks leaned on us, and we were all over how to help them through it and deliver what they needed. during that turmoil. I feel good about how the org performed.
Dave Toget
Evercore ISI
Appreciate that. Just as a follow-up, perhaps, Bob, can you talk about the key drivers of operational effectiveness or operational excellence that will sustain margin expansion in your midterm range? Sure.
Bob Howell
Chief Financial Officer
Dave, quite frankly, it's just old-fashioned productivity. This is really what has been at the core of our company for a lot of years. The last couple of years have been focused on integration and cost synergies. And so this is returning back to basics with integration synergy behind us from the large merger back in the middle of 19 and getting into productivity, re-evaluating how we do everything and why we do what we do. It's things like implementing our new SAP system and streamlining the process and getting more information into the hands of our business leaders more quickly so that we can make decisions faster. And it is, like I said, evaluating what we do on a day-to-day basis. and streamlining that process so we can be quicker, more nimble, satisfy our clients and serve them in the way they need to be served with greater speed and efficiency.
Dave Toget
Evercore ISI
Understood. Thanks so much.
Operator
Operator
Thank you. And for our final question, we'll go to Dave Koning from Baird. Please go ahead.
Dave Koning
Baird
Yeah. Hey, guys. Thanks and great job. Maybe just my two questions on merchant. First one, ex-Clover, it seems like you still did mid to upper teens revenue growth in acceptance. So I guess my question really is, are you taking share, even without Clover, it seems like you're taking a lot of share in the industry. Is that fair to say?
Bob Howell
Chief Financial Officer
Yeah, I think we had yet another very strong merchant quarter across the board. Contributions, yes, Clover continues to do well. We continue to serve our enterprise clients and gain there. Our international business, as you heard, hitting on all cylinders. So this is, you know, Clover is a big part of this segment, no doubt about it, and a big part of the growth. But we laid out our intent, our goal to get to $10 billion by 2025. Clearly, Clover is part of that. But our enterprise clients, our non-Clover SMB clients, or international regions all part of that and all contributing to the growth in first quarter and last year for that matter.
Dave Koning
Baird
Yeah, great. Thanks. And just as a follow-up, I think there might be a little misconception on the street just that volume growth being mid-single digits seems to be losing momentum. But, you know, when I look at it, I think over a third of your volume comes from bank JVs that generate almost no revenue. And, I mean, I think that all could almost go away and you still probably would have beaten consensus this quarter. Is it fair to say is that maybe where some of the slowness is, whereas the very high-yielding stuff actually is growing volume quite fast?
Bob Howell
Chief Financial Officer
Yeah, overall, it's hard to be concerned, in my mind, with 18% top line when we did 17% for the full year last year. And to your earlier question, I think taking share across the board, There's lots of different elements to that volume. It did ease a bit, and certainly the bank joint ventures are part of that. We have some processing revenue, processing volume that doesn't drive big revenue and big profitability for us, and obviously we continue to focus on that. And as we talked about, geez, a little more than a year ago now, and we think that holds going forward from a revenue standpoint but isn't a big growth driver for us.
Dave Koning
Baird
Yeah, gotcha. Well, thanks and great job.
Bob Howell
Chief Financial Officer
Great.
Dave Koning
Baird
Thanks, Dave.
Frank Bignano
Chairman, President, and CEO
Yeah, I'd like to thank everybody for their attention today.
Frank Bignano
Chairman, President, and CEO
Please feel free to reach out to our IR team with any questions.
Operator
Operator
Have a great day, and I look forward to talking to you. Thank you.
Operator
Operator
Thank you all for participating in the FISER First Quarter Earnings Conference Call. That concludes today's conference. Please disconnect at this time and have a great rest of your day.
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