Yahoo Finance Fiserv Inc (FI) (Q1 2024) Earnings Call Transcript Highlights: Strong Growth and Expanding Margins
Adjusted Earnings Per Share (EPS): Increased to $1.88, up 19%.
Adjusted Revenue Growth: Grew 7% to $4.5 billion.
Adjusted Operating Margin: Expanded to 35.8%, up 180 basis points.
Organic Revenue Growth: Reported at 20%.
Free Cash Flow: Amounted to $454 million for the quarter.
Merchant Solutions Segment Revenue: Organic growth at 36%, adjusted growth at 13%.
Financial Solutions Segment Revenue: Organic growth at 5%, adjusted growth at 2%.
Adjusted Operating Income: Grew 13% to $1.6 billion.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Great to see Clover revenue growth sustained at 30% with accelerating payment volume growth and higher VAS attach rates. When you look at the picture for Clover for the year as a whole, can revenue growth sustain in this high-20s to low-30s range when you look at the Brazil market entry, Argentina expansion and VAS growth opportunities? A: Frank J. Bisignano, President, CEO & Chairman of Fiserv, Inc., confirmed the positive outlook for Clover, emphasizing ongoing product launches, new market entries, and an increase in merchant numbers. He highlighted the company's strategy to expand its offerings and penetrate new areas, maintaining strong growth momentum for Clover.
Q: Just the increase here in the operating margin. How much of that 25 bps is from favorable mix versus other surprises, maybe the term fee and processing? And any callouts for the second quarter or the second half with respect to the margin? A: Robert W. Hau, CFO of Fiserv, Inc., attributed the margin improvement primarily to volume leverage and productivity enhancements across the company. He downplayed the impact of the termination fee and processing on the overall margin improvement, emphasizing ongoing operational efficiencies.
Q: On the financial segment, digital slowed a bit this quarter. Wondering just about that; and if Reg II, if you've kind of fully benefited from that or if that still has incremental room to benefit and accelerate growth in that part. A: Robert W. Hau explained that the perceived slowdown in the digital segment is more about quarterly fluctuations and a tough comparison to the previous year rather than a trend. He also suggested that there might still be more opportunities ahead with Reg II, particularly as it continues to impact the company's debit business.
Q: SMB grew so fast, 45%. Clover grew 30%, so non-Clover is actually growing faster, which I assume is just Argentina, but maybe how is non-Argentina non-Clover doing? And is there room for that to keep growing well too? A: Robert W. Hau acknowledged the significant growth in SMB and Clover, attributing part of non-Clover growth to Argentina. He confirmed strong growth across the entire SMB business and sees continued opportunities not just in adding Clover but in supporting small businesses with various merchant acquiring solutions.
Q: Looking at the gap between the 19% volume growth and the 30% revenue growth for Clover. Can you provide some context on the path to the $4.5 billion; how we should think about those other contributors, direct, hardware and pricing, contributing? A: Robert W. Hau outlined the strategy to achieve the $4.5 billion revenue target for Clover by 2026, emphasizing the importance of new merchant acquisition, selling more to existing merchants, and product penetration. He noted that value-added services (VAS) penetration is crucial and expected to increase significantly, contributing to revenue growth alongside volume and pricing strategies.
Q: I just had a 2-part question on merchant. Do you have the total segment volume and transaction growth for the quarter? And on the April comments, you indicated actually a little bit of an uptick in April relative to Q1, which could be viewed as a bit of an upside surprise considering Easter timing. A: Frank J. Bisignano responded to the April performance, noting a slight increase which he described as an early indicator and not necessarily reflective of the entire quarter's performance. Robert W. Hau added that the company now focuses on providing key metrics that directly drive business, such as volume growth for small business and transaction growth for enterprise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
