Earnings Call Transcript - FISV Q4 2024

Julie Chariell, Senior Vice President, Investor Relations

Welcome to the Fiserv Fourth Quarter 2024 Earnings conference call. All participants will be in a listen-only mode until the question-and-answer session begins following the presentation. As a reminder, today's call is being recorded. At this time, I will turn the call over to Julie Chariell, Senior Vice President of Investor Relations at Fiserv, Inc. Thank you, and good morning. With me on the call today are Frank Bisignano, our Chairman and Chief Executive Officer, Bob Hau, our Chief Financial Officer, and Mike Lyons, our new President and next CEO. To the call, Mike. It's great to have you here.

Frank Bisignano, Chairman and Chief Executive Officer

Thank you, Julie. And thank you all for joining us today. We wrapped up another successful year at Fiserv, Inc., and one that we are all very proud of. We set high expectations back at our 2023 investor conference and we exceeded those commitments. Fiserv delivered adjusted earnings per share of $8.80, up 17%, driven by strong and diverse revenue growth and further operating margin expansion across our businesses. Adjusted revenue growth was 7% and adjusted operating margin rose 170 basis points to 39.4%. Total company organic revenue growth was 16%. Our free cash flow was $5.2 billion and we returned $5.5 billion to shareholders via share repurchase in 2024. Throughout the year, we advanced multiple strategies and product offerings that take advantage of the unique construct of this company with strong assets across Merchant and Financial Solutions. We added large enterprise clients, both traditional and e-commerce merchants, on the strength of our unified offerings, modern gateway, and growing value-added solutions portfolio. At Clover, we laid the foundation for continuing our strong growth as we released new software, services, and hardware offerings and added three new countries. We extended merchant acquiring services to more financial institutions focused on winning small business clients. We built solutions to help SMBs navigate the complexity of running their businesses. Managing cash flow in particular is one of the biggest challenges. It's inefficient, time-consuming, and expensive. Cash Flow Central is our solution to this problem. We completed development of this new offering in the fall. Demand from financial institutions to offer it remains high. Cash Flow Central is a full small business suite, the single integrated, easy-to-use system that SMBs have been looking for. The products and clients for this SMB suite span our Merchant and Financial Solutions ecosystems, a combination that no single competitor has in a solution that no single competitor can offer today. From the merchant ecosystem, we provide Clover payments, hardware, and software, Clover VAS, including vertical software solutions, capital, employee, customer and operations management solutions, and the Small Business Index for localized insights. From our financial ecosystem, we provide Cash Flow Central, Pay by Bank for business card issuance, SpendTrac for expense management, Zelle for small business, and core banking account management and digital banking. The full SMB suite will be integrated this quarter with XD, our digital banking platform, which is already live for an implementation with hundreds of financial institutions. It will be available directly on Clover late this year. Lastly, we continue to be a partner of choice in real-time payments enablement with Zelle, PIX, and FedNow. And in our core modernization strategies, which include Finzact for simplified technology migration for our existing FI clients as well as new and larger financial institutions and embedded finance pioneers. We capped off all this progress with the naming of our next CEO, and we did it in trademark Fiserv style. Swiftly, efficiently, and with an extremely high-quality result. We announced Mike Lyons as President on a Thursday and he started work here the following Monday. That's the kind of urgency and determination that we bring to our work at Fiserv, Inc. It's the speed of execution and the operational excellence that I've committed to you for the last few years and that will continue under Mike's leadership. I know this not only because of what I've seen since he started, but because we have experience working with Mike over the last twelve years. As you know, Mike joined us from PNC, a long-standing Fiserv partner, and one of the nation's largest and strongest banks. Since he started, Mike and I and the full leadership team have been working tirelessly to ensure a smooth transition. Let me hand it over to Mike to say a few words.

Mike Lyons, President and Incoming Chief Executive Officer

Thanks, Frank. I'm thrilled to be here. I've known Fiserv for a long time, wearing a number of different hats, including as an investor, a banker, a large client at BofA and PNC, and a small client through my wife's business where she has been a Clover customer for years and utilizes it to its fullest. Fiserv is an amazing company with an outstanding track record of growth, innovation, operating efficiency, and, importantly, the proven ability to add value for our clients and create value for our shareholders. After just a week on the job, my excitement in being here has only grown stronger. The talent and work ethic of the team, the breadth and quality of our clients and partners, the products, the distribution and technology, and the ideas and opportunities — I couldn't ask for a better platform to build upon. Right now, our number one priority is to ensure a smooth leadership transition, keeping everyone laser-focused on executing the plan that Frank and the team laid out in late 2023. I believe strongly in that plan as it offers significant growth opportunities by meeting the needs of our merchant and financial institution clients. Fiserv has a very impressive thirty-nine-year track record of double-digit adjusted EPS growth that is matched only by the opportunity that lies in front of us. I look forward to meeting you all to discuss this in the coming months. As Frank mentioned, we've worked closely and effectively together for the last twelve years and I've had a front-row seat watching him and the Fiserv leaders build this incredible company. I thank both Frank and the board for the opportunity to lead Fiserv into its next era. And, of course, we all thank Frank for his future service to our country.

Frank Bisignano, Chairman and Chief Executive Officer

Thanks, Mike. Now I'd like to cover some highlights from the fourth quarter and full year. And then I'll turn the call over to Bob to discuss the numbers. The growing connections between businesses and financial institutions are a key part of the Fiserv story. And our ability to address them makes Fiserv unique. Embedded finance is the most complete use case combining merchant issuing and banking assets. And last quarter, we announced our first large-scale win here with DoorDash to offer its delivery contractors full banking services from within a single app. Our cross-platform capability and Finzact as a real-time ledger are true differentiators for us here. We've been executing with speed and quality and have already onboarded a significant number of accounts and cards since the October announcement. And our pipeline of other embedded finance opportunities continues to grow. We reinforced our position as a partner of choice with the Q4 signing of a key strategic partnership with ADP. Together, we serve millions of small businesses and now we'll bring them a full solution that includes Clover, our cloud-based point of sale and business management platform, and Cash Flow Central, our accounts, payables, and receivables management platform. Integrated with ADP Run, its industry-leading small business payroll and HR solution. Essentially, ADP will be the integrated payroll solution on Clover, and ADP will resell Clover and Cash Flow Central. The integrated solution will make it easier than ever for small businesses to manage the flow of money into and out of their businesses — whether they are selling to customers, paying bills, or managing payroll. In Q4, we initiated mutual client referrals to our respective offerings as our teams work to deliver the fully integrated solution in the coming months. For the last few quarters, you've heard me recount how, as old is new again, financial institutions are reinvesting in the merchant acquiring business, especially for SMB merchants. We have seen acceleration of outsourcing by financial institutions as merchant acquiring referral partners. In 2024, we added 65% more bank partners than we did in 2023, including NBT, a $14 billion New York-based bank. We are approaching one thousand financial institutions as merchant partners with significant opportunity to drive further penetration within our existing FI partners. While others offer merchant acquiring solutions, only Fiserv can deliver a higher SMB integrated solution including Clover. The full suite gives financial institutions a deeper view into an SMB's full financial position. With this knowledge and breadth of product, they can better grow and retain SMB clients and generate deposits and noninterest fees. This year, we'll couple this capability with tools to help financial institutions readily find merchant customer leads and onboard them digitally. We had several other key wins in each of our businesses in Q4. In Merchant Solutions, CloverSport notched multiple venue wins — one with TD Garden, home of the Boston Celtics and Bruins, and another with the Milwaukee Brewers. We placed over a dozen Clover kiosks in TD Garden that have increased speed of sales and improved the fan self-checkout experience. At Clover Restaurant, a major hotel operator chose custom website solutions from Bento Box for their two thousand hotel-based restaurants in the US. This is the fourth large hotel chain to sign on for the Bento digital and e-commerce package. In the enterprise space, clients continue to sign up for Commerce Hub, our API-based orchestration layer that connects businesses to our enterprise product suite and value-added solutions. In Q4, AT&T decided to add a data-as-a-service offering, and a large petro company signed on to add Pay by Bank and TransArmor fraud protection. Merchants overall are increasingly recognizing the importance of payment data to drive business decisions. And Fiserv is uniquely positioned to deliver cross-platform datasets to support their business intelligence and security needs. We are driving our enterprise solutions further into government with Tyler Technologies, an integrated software provider. We signed a strategic expansion of our relationship that supports processing for state governments to include all omnichannel solutions, more devices including Clover, and value-added solutions such as digital wallets, fraud mitigation, and authorization optimization. E-commerce providers are increasingly coming to Fiserv as well. We fully ramped our US relationship with PayPal in the fourth quarter, and when ONTU signed PayPal in Latin America for payment processing and other value-added solutions, we were positioned to serve those needs. We also landed Leap Financial, a fintech firm focused on international remittances and embedded payments that will add commerce, and we'll be providing card-not-present acquiring and debit routing optimization for the mortgage operations of Bilt, the loyalty rewards platform for housing payment. And finally, Curb Mobility, a leading taxi and mobility services company, decided to migrate to Commerce Hub. Curb will be our first client to deploy Android Tap to Pay enabling drivers to use the Android device that runs their driver app as payment-accepting devices as well. This will significantly reduce their cost for dedicated in-taxi terminals, hardware, and maintenance. In EMEA, Fiserv reached a first-of-a-kind opportunity in Spain with Unicaja, one of the country's leading banks. We signed a strategic agreement to work together to develop advanced solutions in payments and e-commerce, including tools for omnichannel processing and point-of-sale systems in response to growing market demand in Spain from merchants of all sizes and in all verticals. And we saw further traction in Spain in January with Rio Hotels where we will be providing Clover Flex terminals and card-present acquiring across their hotels in the US and Canada. In the Financial Solutions segment, we saw several large core banking wins. South State Bank, now a $65 billion Florida-based regional bank, on our premier core plans to add approximately $20 billion of assets to the platform following its recent acquisition of Independent Bank. Modernization via our DNA core continues as well with our new relationship with Third Federal Savings and Loan, a $17 billion asset bank headquartered in Cleveland. This next momentum is clearly building. According to analysis performed by Prometic, a global consulting firm, Finzact has more accounts in production and clients in the US than all other next-generation competitors combined. Speed to market is one important reason we win. In just ten months, we powered the US super app of Brazil-based Banco Inter to support international debit and money movement, investing loyalty points and cash back. And for DoorDash, we enabled access to sponsor bank accounts and real-time payments for DoorDash delivery personnel in just a few months. Finzact was chosen by FirstRand Group to power its digital transformation and ongoing growth objectives. FirstRand is one of the largest banks in Africa with over $130 billion in assets and will become the first financial institution outside of the US to select our cloud-native real-time banking platform that offers enhanced access to data. Cash Flow Central had a very strong Q4, signing twenty-nine banking clients for a total of thirty-nine since we launched. Some of the biggest in Q4 included BMO Harris Bank, a large federal credit union, UMB Bank, and City National Bank of Florida. Cash Flow Central is starting to pull through other sales, including CheckFree and XD. Overall, 2024 was a strong year with important signs of continuing success based on the development and early uptake of many new products designed to be easy for clients to adopt and integrate on our leading platforms. Compared to the guidance we had laid out at the start of 2024, our final results have beaten on adjusted operating margin, adjusted EPS, and free cash flow based on strong execution. While we met expectations with 16% total company full-year organic revenue growth, if we exclude transitory factors from Argentina's inflation and interest dynamics, total company organic revenue growth in 2024 was 11%, a healthy and sustainable level. For the full year 2024, we returned value to shareholders in the form of share repurchases worth $5.5 billion or thirty-four million shares contributing to a nearly 5% decline in average shares outstanding for the year. Today, we are sharing a plan that continues down the path we outlined at our investor conference in November 2023. For 2025, we are guiding to 10% to 12% organic revenue growth, greater than 125 basis points of adjusted operating margin expansion, 15% to 17% adjusted EPS growth and roughly $5.5 billion of free cash flow. This guidance assumes zero contribution from transitory factors as Argentina's economy stabilizes. With 85% recurring revenue in our model, natural operating leverage, ongoing efficiencies, new products, continual investment, and healthy cash flow, we are well-positioned to extend our lead and to drive shareholder value and deliver a fortieth consecutive year of double-digit adjusted earnings per share growth. So with that, I'll turn it over to Bob to cover the numbers for the quarter and full year 2024 and some details behind the 2025 guidance.

Bob Hau, Chief Financial Officer

Thank you, Frank, and good morning, everyone. If you're following along on our slides, I'll cover the detail on total company and segment performance in the fourth quarter and full year. Starting with our financial metrics and trends. The fourth quarter capped off a year of strong revenue growth whether you look at the numbers as reported or on an organic basis, or even if you exclude the transitory benefit of inflation and interest in Argentina. The quarter also featured significant ongoing margin expansion and improved free cash flow. Total company adjusted revenue grew 7% while organic growth was 13%, driven by strong double-digit growth in the Merchant segment and mid-single-digit growth in Financial Solutions. The spread between these growth rates reflects currency translation. Excluding the transitory effects of excess inflation and the Dollar turista program in Argentina, total company organic revenue growth would have been 11% in the quarter. Total company adjusted operating margin reached 42.9%, an increase of 180 basis points versus the prior year, and adjusted operating income growth of 11%. Adjusted earnings per share for the quarter were $2.51, up 15%. For the full year on an adjusted basis, revenue grew 7% to $19.1 billion. Total company organic revenue growth was 16% representing our fourth consecutive year of double-digit organic revenue growth. Most of the difference between adjusted and organic growth rates came from the sharp devaluation of the Argentine peso through September and broader dollar strength in Q4. For the full year, if you exclude transitory effects, organic revenue growth would have been 11% for the year. Adjusted earnings per share was $8.80 at the top end of our guidance range, which we raised every quarter last year. Free cash flow for the quarter was $1.9 billion and $5.2 billion for the year. This very strong free cash flow included a positive impact from a working capital improvement project that we kicked off in Q3. We improved processes around both payables and receivables and the benefit accrued sooner than expected. We expect this improvement to be sustained in the future. Turning to our performance by segment, starting with Merchant Solutions. Organic revenue growth in the Merchant Solutions segment was 23% in the quarter and 27% for the full year. Excluding the transitory effects of excess inflation and the Dollar turista program in Argentina, organic growth would have been 17% in the quarter and 16% for the year. On a slide we included a summary of the contribution from excess Argentine inflation and interest and the temporary Dollar turista program along with the offsetting headwind from currency devaluation which impacts adjusted revenue for both the company and Merchant segment revenue. Small business organic and adjusted revenue growth in the quarter was 24% and 12% respectively. Payment volume growth was 4%. Clover revenue reached $2.7 billion in 2024 with nearly 90% in our small business line reporting. Clover revenue grew 29% in both the quarter and full year on Q4 annualized payment volume growth of 14%. This spread reflects growth in value-added solutions, some targeted value-based pricing actions, and strong hardware sales. In 2024, we rolled out five new hardware products that gained traction particularly in our ISO channel and among bank partners investing in their merchant acquiring businesses. VAS penetration continued along its path of roughly three points of growth per year, reaching 22% in Q4, driven by continued growth in Clover Capital and the enhanced Clover SaaS package. Enterprise organic and adjusted revenue growth in the quarter was 31% driven by transactions growth of 17%. As with small business, enterprise organic growth included a notable benefit from Argentina in the fourth quarter. Above-average enterprise growth also reflects the ramping of a large PayFac from a processing customer to a direct client, which started in earnest in Q3. For the full year, enterprise growth of 31% organic and 12% adjusted includes the impact of ramping growth from that large PayFac client as well as the transitory effects from Argentina. Commerce helped continue its positive momentum — roughly 250 clients and daily transactions up tenfold since Q1 of 2024. Through a single API integration, Commerce Hub clients can access a variety of solutions including fraud and security, routing optimization, Pay by Bank, and data analytics. And we continue to add to this portfolio. We found that on average after one year, Commerce Hub clients take over four BaaS products, or 60% more than non-Commerce Hub merchants. For our largest Commerce Hub clients, product attach is even higher, approaching five solutions per merchant. Partially reflecting the relocation of the large PayFac to our enterprise segment as a direct client, for the full year, processing organic revenue declined 1% consistent with our expectation of roughly flat growth over the medium term. Adjusted operating income in the Merchant Solutions segment increased 15% for the quarter and 20% for the year. Merchant adjusted operating margin expanded 290 basis points to 37% in 2024. As noted in prior quarters, interest expense from anticipation revenue is recorded below the operating income line. If the interest cost from anticipation were included in operating income, merchant adjusted operating margins would have expanded 120 basis points for the quarter and 230 basis points for the full year. Turning to Financial Solutions, organic revenue grew 4% in the quarter and 6% for the full year, at the midpoint of our full-year outlook of 5% to 7%. Looking at the business lines, digital payments organic and adjusted revenue each grew by 5% and 6% for the year. Growth in Zelle revenue reached a strong 28% for the year and we are now supporting Early Warning Services' newest offering, the digital wallet Pays. This is a clear example of the value Fiserv can bring at the integration of Financial and Merchant Solutions. We both enable banks to offer Pays to customers and integrate the Pays wallet as a payment option on our enterprise and Clover merchant platforms. We also continue to see demand for our integration on FedNow for real-time payments, with nearly 400 of our FI clients enabled or in process, many seamlessly thanks to our existing integration with our NOW network. In Issuing, organic revenue grew 3% in the quarter and 7% for the year. Below-trend growth in Q4 mostly reflects the timing of plastic and statements volume. Banking organic and adjusted revenue each grew 4% in the quarter and 3% for the year, in line with our expectations. Adjusted operating income for the Financial Solutions segment was up 10% for the quarter and 7% for the year, with full-year adjusted operating margin reaching 47.3%, a 130 basis points improvement. Now let me wrap up our 2024 discussion with some remaining details on the financials. The adjusted effective tax rate was 18.8% for the full year. This came in slightly lower than expected on benefits of our green tax credit program. Total debt outstanding was $24.8 billion on December 31st. Our debt to adjusted EBITDA ratio edged a bit lower to 2.6 times in the fourth quarter in line with our targeted leverage range. During the quarter, we repurchased six million shares for $1.3 billion bringing our total cash return to shareholders for the full year to $5.5 billion. Average shares outstanding declined nearly 5% in 2024 as a result, and we had eighteen million shares remaining authorized for repurchase at the end of the year. Turning to our 2025 guidance, we are setting our full-year 2025 adjusted earnings per share guidance to a range of $10.10 to $10.30 representing 15% to 17% adjusted EPS growth. Our organic revenue growth guidance of 10% to 12% is at the high end of our medium-term target range and consistent with our organic growth in 2024 excluding the transitory contributions from Argentina last year. Given the current macro environment in Argentina, we are assuming no contribution from excess inflation or interest in 2025 and an end to the Dollar turista program in the first quarter of 2025. The forecasted impact from foreign currency exchange is 1.5% in 2025 compared to 9% in 2024 since the Argentine peso devaluation is expected to slow, as is the recent U.S. dollar strength. This will bring adjusted revenue growth much closer to organic growth in 2025, and similar to a historical average spread. Our adjusted operating margin expansion outlook of at least 125 basis points is ahead of our prior target of at least 100 basis points annually through 2026. And we expect our free cash flow to be about $5.5 billion. Drilling down by segment, for Merchant Solutions, we see organic revenue growth of 12% to 15% in 2025, driven mostly by strong growth in Clover as we reach our $3.5 billion revenue target including an increase in VAS penetration to the 25% outlook. Our ability to achieve these goals is supported by opportunities we advanced in 2024, with five new hardware rollouts, new features and functionality for our three focused verticals of restaurant, services, and retail, and entry into three new geographies: Brazil, Mexico, and Australia. We expect the small business line to grow above segment average driven by Clover. Enterprise should be slightly below the segment average to more normal levels following the end of transitory benefits in Argentina and some one-time revenues associated with the large PayFac win. In the processing line, we see modest positive growth as we anniversary strategic shifts of certain clients in 2024. We will see an impact of the reduction of the Argentina transitory contributions more prominently in the first and second quarter this year, as they are tougher comparisons to higher benefits in the first and second quarter of last year. In Financial Solutions, we anticipate organic revenue growth of 6% to 8%. All parts of this business are expected to contribute with new revenue as we go live with Target and Verizon in issuing, embedded finance with DoorDash, several Finzact migrations, and early adopters of Cash Flow Central. The issuing and digital payments business lines should grow at or slightly ahead of segment growth levels, while banking grows a bit slower than average given the nature of the business line. While we don't give quarterly guidance, it's instructive to consider the quarterly cadence this year. Overall, we expect growth to be weighted toward the second half of the year. Several reasons for this: First, we had multiple new product rollouts in late 2024 that we expect will gain traction over time in the market — from Clover vertical software to Cash Flow Central and the SMB suite. Second, we had several important new wins that will take time to implement and generate revenue, including Target expected to go live in late March, and Verizon in September. Third, we entered three new countries with pilots in the fourth quarter, and full-scale go-to-market efforts are just getting underway this year. And lastly, the contribution from transitory items in Argentina was highest in the first half of 2024, creating tough year-over-year comparisons for the first half of 2025. Q1 is a particularly difficult growth comparison from one-time Dollar turista revenue and a LATAM processing client term fee in Q1 2024. So while we see better second-half than first-half growth, we have strong visibility and have confidence in the drivers of our full-year organic revenue growth. Lastly on guidance, both Merchant and Financial Solutions are expected to contribute to the at least 125 basis points of adjusted operating margin expansion that we are forecasting for the total company this year. Below the line, we see higher interest expense in 2025 due to refinancing and ongoing growth in the merchant cash advances. Our adjusted effective tax rate should be roughly 19.5%, and we expect to continue our share repurchase program with spending ahead of free cash flow. With that, let me turn the call back to Frank for some closing remarks.

Frank Bisignano, Chairman and Chief Executive Officer

Thanks, Bob. Those of you who know us know that we are passionate about small businesses. In Q4, we partnered with the U.S. Chamber of Commerce Foundation providing valuable insights on the impacts of hurricanes to guide response and recovery efforts. We are undertaking similar efforts in Los Angeles as we speak, all based on the data captured in the Fiserv Small Business Index. We also have people on the ground offering assistance to all of our clients including small businesses. To readily address this in future disasters, we have created a $10 million relief fund to support clients and employees as needed. Last week, Fiserv was again named among the top companies globally — our tenth recognition in the last eleven years — and we are proud to have moved higher in our ranking specifically in the areas of quality of product and service and quality of management. We're gratified to consistently rank highly on two other measures: innovation and long-term investment value, which I believe are inextricably linked. In reality, a single ranking or even multiple awards or recognitions can't capture the true value of our company. You've often heard me speak about the unparalleled assets of Fiserv: scale, broad product set, vast distribution, innovative technology, global presence, deep bench, and unique combination of diverse merchant and FI clients and solutions. I'm very proud of the strong returns we have delivered on these assets, and grateful to the team around me for their talent and support — the board, our management committee, and Fiserv associates, as well as our clients, partners, and investors who I've had the privilege of sitting down with over the years. Ultimately, Fiserv's success comes down to one thing you've heard me say over and over again: the construction of the company that can endure and transcend CEOs. On December fifth, I told you we would name a great CEO in a short period of time and then I'd be working every day to meet financial commitments. Now two months later, you can see that we've delivered. I give you my full commitment to be working side by side with Mike, pending the outcome of my nomination. So now, operator, please open the line for questions.

Operator, Operator

Thank you. We would now like to open the phone lines for questions. As a reminder, for today's call, please limit yourself to one question to ensure ample time to answer as many questions as possible. 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 Tien-Tsin Huang from JPMorgan. Please go ahead.

Tien-Tsin Huang, Analyst, JPMorgan

Thanks so much for taking my question. I have to ask a question for Mike — glad to have him on the call, of course. I'm curious to hear your response to what surprised you about Fiserv as you did your diligence to join the company, what was different from maybe what you thought looking at it as an investor and, of course, as a client and partner.

Mike Lyons, President and Incoming Chief Executive Officer

Yeah, great to hear from you. That's been a long time. You know, my relationship with the company goes back many years. I've known it both as an investor and as a significant client. Having worked with the teams on Zelle and Pays, it's an unbelievable company, obviously performing at a very, very high level as you can see today with visible revenue, cash flow, and earnings growth. There weren't a lot of surprises — it's a terrific franchise. I understand it and I understand the plan that we have in place. I firmly believe in that plan. Our big focus internally with the team, and we've been going hard since last week, is to make sure we don't miss a beat on the execution of the strategic priorities. There's a long list of really exciting growth opportunities both on the merchant side and the financial side of the business. The scope and potential of that set of opportunities and the ability to cross-sell across the two platforms is probably, if there's anything in the last eight days — still early — it's that that's an unparalleled opportunity that I hadn't fully appreciated until I got here. The potential on international was also a positive surprise. I've had a chance to spend time deeper into the organization and I'm incredibly impressed by the talent and innovation, especially the number of people focused on innovation. You talk about thirteen thousand engineers — many have reached out and expressed their excitement for the future. Even over the last seven or eight days, we've had ten or twelve client meetings and we've got incredible clients, and our ability to help them navigate both an evolving and exciting payments world is, again, unparalleled. So high-level stuff — obviously I have more as we go forward.

Operator, Operator

Next, we'll go to the line of Darrin Peller from Wolfe Research. Please go ahead.

Darrin Peller, Analyst, Wolfe Research

I guess we'll just start off with Clover. The sustainability of the growth has been outstanding. When you look at the trend line into next year, even against tough comps, remind us of what you expect — the more nuanced building blocks that can keep that afloat at that level, which I know it kind of needs to be to meet your targets. And then just thinking about VAS and the cross-sell, considering what you have in terms of new direct sales and new international growth, give us — once again — the building blocks for the sustainability. Thanks.

Frank Bisignano, Chairman and Chief Executive Officer

Yeah, maybe I'll take it. You know, I'd start with international. I was in Brazil for the launch and spent time with the president of the country — he was very enthused about how our small business efforts are being received. We are coming online in Brazil, Mexico, and Australia, and we see those geographies contributing. I think the ADP partnership is very meaningful — ADP has a huge installed base and its payroll footprint is a powerful back book and distribution channel. Our nearly one thousand FI partners and the tools we're building to increase penetration within each FI partner are also important. When you think about the integrated suite with Cash Flow Central bringing all the other tools — expense management, SpendTrac, attach it to XD — it just gives us an unbelievable opportunity to continue to expand. We think we're the heavyweight partner in this space. We build products across the stack — Clover software and hardware, more website management, more employee management, more capital — and we rolled out five new hardware products last year, which also helps. So demand is high, and we are building the tools to increase penetration. We're adding sales coverage and pushing more direct channels and more digital distribution. Mike is doing a great job, and there's no pivot here — we're doubling down on execution and growth.

Operator, Operator

Next, we'll go to the line of Timothy Chiodo from UBS. Please go ahead.

Timothy Chiodo, Analyst, UBS

Great. Thank you and congratulations to Mike as well. On DoorDash, a big contract and certainly supports the acceleration in Financial Solutions this year. You mentioned a pipeline of other embedded finance opportunities. I was hoping you could talk a little bit about the Payfare acquisition and how that plays into that. I gather that it brings on program management capabilities and previously Fiserv worked with smaller third-party program managers, and now you have that in-house. Maybe just talk about what this means for the revenue opportunity, not only with your existing clients, but also how it might help you with some of those RFPs particularly in light of the comments around the pipeline.

Bob Hau, Chief Financial Officer

Yeah, Tim, it's Bob. Thanks for the question. You're right on the mark. Obviously, we feel great about landing DoorDash and very rapidly accelerating our position with them, getting up to a full ramp in just a few months — that's going quite well. Program management is certainly part of the overall program with DoorDash and with embedded finance clients. We do some of that in-house and we partner with third parties. It's a combination. Payfare will bring some additional capability to us around that aspect. That transaction is not yet closed, but we feel like that's a good add to the overall capability that we have. If you think about what an embedded finance client would need, I don't think there's another company that has all the assets available within our own shop to really fully serve those clients. I think that's why DoorDash selected us and why we feel like we're in a great position to continue to see that space grow for us.

Operator, Operator

Next, we'll go to the line of Harshita Rawat from Bernstein. Please go ahead.

Harshita Rawat, Analyst, Bernstein

Congratulations, Mike. Bob, can you talk about January trends? Are you seeing kind of

Bob Hau, Chief Financial Officer

Sure. I would say that we're thirty-three days into the first quarter and it's in line with our expectations — off to a good start from an overall consumer spending standpoint. Consumer continues to do well and remain resilient. We certainly benefit from having the breadth of our capability serving discretionary as well as non-discretionary categories. A lot of folks are talking about experiences, and obviously we participate in that also. So we generally feel good about our ability to continue to grow nicely as we see consumer spending going on, leveraging our very broad distribution channel and the variety of verticals that we serve. Obviously, a lot is going on in the world and we've seen FX ease quite a bit. You heard us talk in our prepared remarks about 2025 outlook being much lower from an FX perspective. That, of course, plays into payment volume which is a reported number — we don't adjust it for FX. We also don't adjust it for the inflation and interest rate dynamic that we saw in Argentina in 2024. Looking forward, we expect not to have those transitory contributions in 2025 as that has now returned to more normal levels. Bottom line, feel good about where we are. January is continuing with similar trends we saw in the fourth quarter and we're excited to get the year going. Thanks, Harshita.

Operator, Operator

Next, we'll go to the line of Dave Koning from Baird. Please go ahead.

Dave Koning, Analyst, Baird

I guess my question is within Financial Solutions, Issuing — can you talk about that a little bit? Was that because Financial Solutions product revenue was really strong in Q2 and Q3 and it fell off in Q4 in Issuing? And then when does that pick up? When do Verizon and Target kind of hit in 2025 to reaccelerate that?

Bob Hau, Chief Financial Officer

Yeah. Overall, in the fourth quarter I would probably attribute the slowdown to Issuing where our print and plastic business sits. We saw some slower volume in that space and I think that's tied to the overall credit environment. For next year, 2025, we see Target coming on in very late first quarter, late March. Verizon will come in in September. And the other large project we've talked about in the past, Desjardins, will actually come to fruition in 2026. So we'll see an uptick late March as Target ramps throughout the second half of the year. Verizon will benefit us as it ramps into the fourth quarter.

Operator, Operator

Next, we'll go to the line of Dan Dolev from Mizuho. Please go ahead.

Dan Dolev, Analyst, Mizuho

Hey, guys. Great results. Great year. Congrats again, Frank. On the Walmart partnership, how do you envision this — using the NOW network and FedNow and all these things to maybe change the way people pay? Any early observations from your conversations there would be really helpful. Thank you.

Frank Bisignano, Chairman and Chief Executive Officer

Let's take the macro. I've had a long relationship with Walmart going back to the First Data days in 2013. Walmart has considered multiple providers over the years and we've had a tremendous partnership. We continue doing more with them. Look at their JV One — One Financial — running on Finzact. If we can service Walmart on Finzact, that speaks to the power of the platform. We continue to have an extraordinary relationship. We have a team that sits with them. We meet regularly. I meet with the leadership on payments and Mike also understands our clients, including Walmart, very deeply. We're generally working side by side with them on initiatives in payments or fintech. We're focused on serving our clients and partnering with them, not selling at them. It's a long-term relationship — twenty-seven years — and it's about consistent delivery and superior product and service. So I can't say enough positive things about Walmart as a client and partner. They demand superior product and service and we strive to deliver it.

Operator, Operator

Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.

Jason Kupferberg, Analyst, Bank of America

Thanks, guys. Congrats, Mike. Congrats, Frank. I wanted to ask on Clover. Bob, you mentioned that the spread between revenue and volume growth widened a little bit, and I know you talked about VAS penetration, pricing, and hardware sales. Could you break down the contribution to the spread among those three, and any thoughts on how that spread may evolve in 2025? Thank you.

Bob Hau, Chief Financial Officer

Sure, Jason. Overall, the items you listed are the main drivers. VAS penetration certainly continued to improve — we saw about three points of growth year over year and we'll see that continue into 2025 where we expect to hit 25% VAS penetration. Hardware contributed given that we rolled out five new pieces of hardware — kiosk, Clover Flex configurations, and other form factors — and saw strong uptake particularly in our ISO channel and among financial institution clients investing in merchant acquiring capabilities. The mix shift toward more direct relationships also gives us good opportunity going forward. So VAS expansion, hardware, targeted value-based pricing, and mix toward higher-value solutions were the primary contributors to the spread, and we expect those dynamics to continue to contribute in 2025.

Operator, Operator

Next, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.

James Faucette, Analyst, Morgan Stanley

Good morning. Congrats to Mike and Frank. Wanted to ask quickly about go-to-market on a lot of these new offerings. It seems like a lot of attractive potential for your financial partners to engage with small businesses further with the new offerings. How should we think about go-to-market support for those, what the implications for operating expenses are, and what kind of proof points we should be watching as your financial partners start to engage and roll out?

Frank Bisignano, Chairman and Chief Executive Officer

Great question. When we lay this out, we're adding to our sales force — we like adding to our salesforce because it supports growth. We also have worldwide distribution, so our ability to get product to market is strong. We have a very structured way to deal with our partners that's been tried and true. So while it sounds like a lot, much of it is integrated: technical integration with partners, leveraging distribution channels, adding sales coverage and digital distribution, and using strong partnership economics. For example, with ADP, these are revenue-sharing relationships and everyone is incented to grow the products. Bank partners like this because it drives revenue for them as well. So expect to see more sales investment tied to revenue opportunities and deeper technical integration, but much of the distribution leverages existing channels and partner economics.

Operator, Operator

And our final question will come from the line of Ramsey El-Assal from Barclays. Please go ahead.

Ramsey El-Assal, Analyst, Barclays

Hi. Thanks for squeezing me in here and nice to meet you, Mike, over the phone. I wanted to ask about Cash Flow Central. Can you give us your latest thoughts on when it will become a material contributor to the P&L? Will it gain enough momentum to be felt in 2025? Also help us understand the economic model there — is it volume-based, fixed fee, subscription fee — how do you actually price the thing? Thank you.

Frank Bisignano, Chairman and Chief Executive Officer

You know, in a twenty-plus billion dollar company 'meaningful' has a lot of variability in terms of definition. But we expect clients to be online and revenue to start to book in the second half of this year. I think you'll see numbers starting to run up in the second half. In our language, I'd consider it meaningful in 2026. We believe this has long-term sustainability and durability. Our ability to grow the company is tied to our ability to continue to expand TAM and add new products. Mike and I have been reviewing these plans and opportunities in depth, and we believe Cash Flow Central is an important long-term growth driver. On the specific economics: it's a mix of subscription and transaction-based components — pricing is a combination of fixed fees, subscription fees, and per-transaction or per-service charges depending on the client and scope. You'll see increasing traction in the second half of this year and more meaningful contribution in 2026.

Operator, Operator

Thank you all for participating in the Fiserv Fourth Quarter 2024 earnings conference call. That concludes today's call. Please disconnect at this time, and have a great rest of your day.