FISV - Earnings call transcript Q1 2018

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Operator

Welcome to the Fiserv 2018 First Quarter Earnings Conference Call. All participants will be in 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 Paul Seamon, Vice President of Investor Relations at Fiserv.

Paul Seamon

Thank you, and good afternoon. Jeff Chief Chief Financial are Bob Officer; today our Hau, Officer. me Yabuki, Executive our and With Please note Relations that for the our earnings release are on and available the Investor section fiserv.com. quarter of supplemental presentation

today XXX. operating financial tax expected reform, remarks other impact accounting the initiatives, and will about, results, statements Our among forward-looking changes matters, and the strategic from include in ASC

release number refer from may results and earnings a differ to to Please uncertainties. materially actual a these of statements of and Forward-looking subject risks discussion risk for our are factors.

non-GAAP an materials meaningful with You otherwise, discussed non-GAAP current of forecasting provide refer throughout GAAP references and those in basis that results measures reported as to stated should to the These and measures reconciliation this for a are comparisons. also results for to are planning our management Unless today's financial performance uses indicators comparisons to periods. between be along and year-over-year a assumed call for applicable made measures explanation call this of call, conference future additional nearest for the prior measures.

are of split for year the of EPS All been Lending turn business. and amounts comments to share our the our release over the share interest supplemental XX. our and two-for-one sale per Solutions press the stock me revised the And impact for March of completed materials full of on that, in also the adjusted Jeff. adjusted majority has call XXXX the the completion of With let

Jeffery W. Yabuki

above and results in and the good for pleased our strong adjusted increase year, financial EPS; solid start our client and our plan; We're to everyone. afternoon, advocacy measures. Paul, internal Thanks, the experience quarter, slightly an achieving with

operating revenue Market year. strong to track XX% Adjusted kicking in was momentum X% lower was off Internal XXXX earnings per up quarter, growth the achieve financial up a flat, XX%. with on was year. share prior periodic adjusted are even our revenue. on margin sales and for the and the commitments strategic We continued, versus

$XXX in the quarter; proceeds received and two voucher Solutions also of of Monitise. business business approximately retail from with We million business the interest Lending acquired our XX% sales closing

longstanding capital to hundreds held edge sessions. client expected more explore deploy than financial with this to Forum of Fiserv weeks place and in our technology year, our we for consistent Forum. unique leading executives methodology. conference, our networking ago, Two trends, experience allocation connect X,XXX is annual attendance this and across the latest a We solutions, educational With

attendees the hosted also experiencing during prospect reinforces record of are Forum, momentum portfolio a which XXX solutions. We we our across innovative

and high-quality revenue to shareholder deeper key which free stronger believe advance year's we to Investor strategies corners our lead and which high-quality even meeting provided continue corner, commitments. and this biller account build solutions, cash are: client horizontal growth digital, vertical increased growth priorities XXXX last of continue relationships, to at opportunities, We shared flow. processing, we differentiation payments meaningful Each First, Day. earnings Earlier revenue, our four has while year, for the will

result deliver relationships low accelerated which in revenue led emphasis guidance year. in of XXX quarter. XX.X% the was was the the in growth rate segment growth integration, and in generally differentiated internal expected which Adjusted operating X% earnings Consistent Internal This digital our by includes will growth of client and year. third, an included for year, the tax growth with the both for up and points solutions. revenue across internal revenue quarter of guidance, provided the the would enhance watermark We increase XX%, the And Next, throughout growth lower comparable divested believe periodic quarter. benefit by the that combination XXXX we X% Adjusted revenue, share Payments the periodic of value pressured with the segments business. lower a basis margin pressure Lending be on rate. the flat approximately assumed acquisitions was this clients. enables corporate innovation payment from reduction which versus margin per

priority is digital Our to client relationships second emphasis enhance solutions. an with payment and on

We our to add continue solutions. across processing new – processing clients account market-leading

Our the DNA clients signing platform in seven had a new great start, quarter.

half nearly number which year, expect increase of live the We implementations. this more also have go And greater in that, than assets a $X XX than significant clients the is institutions of billion. to

continue our success the platform, with have market. client largest We in also to the base Premier which has

our accounts. extend renew Bank, provider and Optum the UnitedHealthcare's We country's pleased largest are Premier relationship with HSA to of

Two addition to signed competitive solutions as in payment Bank full a assets $X that, CheckFree over suite also River a account RXP with with takeaway such Community Notifi. and and We included Mobiliti, digital and processing, billion

which progress of payment to country continue new billers We the the some enabling includes our with our biller integrated strategy, in solutions. largest

of million. XX% services thousands renewed subscribers from over which customers country. WellCare government more also care users to million continue in bill payment products to quarter capabilities over Mobiliti commercial to signed pay bills BillMatrix allows sequentially we payments XX% move walk-in Digital We chain. the managed seven as and bundle our with business provider Walmart omni-channel of a Plans, During than expanded to members, to across Health technology partnership by ASP at a digital our sponsored solution. continues value with of four a the grew their to headlined quarter, mindset. X% Walmart, up the locations transform the Mobiliti

continue revenue. subscriber differentiated as a number and for suite at which to Given the digital digital digital growth and of of These future. transaction adoption, recurring base leverage size intersection our solutions, long-term across foreseeable our and payments customer We've and our launched our the strong such value CardValet the create SecureNow, of experience. enhance client of and solutions early rails stages anticipate we

largest Bancorporation with billion. to over signings, top contracted Including of provide have these headroom in our of transactions solution. new with the turnkey clients. announce financial banks pleased Our clients over along innovation billion driving Financial integration our $XX over growth. industry, that the and in the We, sequentially more we're value $XX signed billion third has Zelle, on strong priority Zelle Zelle to is still meaningfully to and and focus We to the increased the Union, with selected Zions Federal XX assets network. XX We're differentiated top assets Navy two for Zelle continue to and two enables size Zelle to Credit the deliver banks XX% of XX which with than $XX is to solution, union also which transaction our turnkey quarter. expand our world Synchrony in assets, credit

Zelle a more including far, we've a in than play money movement. is as the of to to solution. statement It unions enabling So Overall, financial signed capability. a is the own Federal, excited country clients. Navy in that institutions continue We're fundamental three this credit five key Zelle strong we believe will role full largest

Our newest enterprise interest look to payments infrastructure. the payment significant financial modernize solution, continues generate as to Dovetail, institutions

half On XX significant top have technology. moved that recently position Aite Estimates recognized selected the Fiserv the U.S. runway was cash Dovetail, hub having quarter. of strength which Since clients our we've Commercial around sold new a the about in institutions are acquired year. S. by the into world. the leave commercial payments prior in in the owning that market-leading Group solution growth business of five in and digital sophisticated clients, both XXX added the for times a as Center, the solution management last U. nearly were anniversaried year

short, we was remains institutions Commercial Center Australian above them pipeline consumers, important, the and Payments and the when a launched real receive was ability Fiserv, New the Australia, it NPP February. is agencies, payments nationwide. providing multiples As for addressing financial Swift NPP closed collaboratively PayID. or where in acquisition. to service, In conveniently designed the for government the real-time and Platform, XX/X transformation Australian corporates including send

most recognized application were of voice Alexa PYMNTS.com at Finally, technology we the Awards April. creative the in as

as a Our tasks, advanced our bill balance our more solution such into Alexa. with that, as makes with conversation features call me reminders. Designed payment turn financial for banking banking results. with over provide capabilities, to easier Bob AI everyday detail solution let the voice to consumers With turns inquiry, such on

Robert W. Hau

and Jeff, afternoon, everyone. Thanks, good

this not standard new revenue transition prior XX-Q XXX, recognition XXXX, for approach, know, our did will the to In disclosure financial you on standard modified we the restate retrospective and statements. ASC additional accordingly of include As using we new related adopted each impact period quarter financial statements. the our

will financial changes do impact As these cumulative our results. to full shared be of previously, believe material we not the year

However, we lines. seen in we've during variation past revenue do of quarterly more this some year expect the the than for bit a

rate instead was under X%. was growth for of X%. we to restate For have prior up elected would the internal new revenue quarter our and billion, growth quarter, comparative retrospective had Adjusted the X% the revenue approach, internal standard using year purposes, in the revenue $X.X been periods the

Solid revenue difficult quarter execution an million for down quarterly on first expected comparison. drove $X internal even with our periodic the growth revenue

grew year customers, Adjusted As PXP over margin transaction accelerate consumers for Jeff combined to the growth compared continue XX% the very prior Adjusted rapid revenue per of our Zelle. was Services basis $X.XX. perform grow and due retail and transactions, to in while are mid year. and Biller will the year. live to single-digits was impact we year-over-year mentioned, and earnings subscribers XXXX believe lower XX% was and Zelle internal We $XXX growth from flat digital Mobile the more grew clients well was continue more million. to revenue slated quarter sequential nearly segment growth Solutions continues during share market-leading from and the Payments year-over-year. and expect to businesses. quarter to in to X% by led Mobiliti sequentially clients strong to XX% points up Performance Lending small in XXX X.X was operating as a business. the now this continues quarter Architect, banking lower quarter to related acquisitions, as XX% in business decline XX X%, our revenue, to than the quarterly from had growth adopt go in our margin internal ASP Debit platform divested periodic performance as growth the to Card in grew million. serving revenue X% transactions results adjusted

continued businesses, processing the quarter XX.X%, up basis item impact in was focus the primarily points. revenue and X%, segment to litigation the the was operating Adjusted million income to to in XX.X%, by by operating due loss of lower million drop-through XXX was on due slightly of for due operational of revenue. expense which segment Adjusted segment was million. processing XXX item revenue quarter, the by was for and business in late due in adjusted U.S. income segment adjusted divested divestiture quarter. down to unplanned $XXX this and quarter. the was was dilutive a adjusted Financial in in business year was basis $XXX up growth higher margin compress led XX acquisitions points the growth points Financial up X% decline effectiveness down adjusted Payments periodic offset XX% to our $XXX Corporate quarter; Lending the This to segment. and the margin segment lower the Internal operating primarily operating to was increase Our an which quality account the basis and last up the in our revenue periodic Australian to the operating X% in despite was margin outside revenue

up year full the be XXXX. slightly We corporate segment versus loss to expect

Our adjusted and benefit due the the rate tax federal excess was share-based quarter reduction income from effective rate a tax largely to compensation. XX.X%, tax for

As stock we restricted vesting benefit anticipate the with to the frontloaded the due and be units. year, of excess timing exercises of option to last

year's, rate year. We million, cash the to of adjusted expect XX%, conversion we timing effective in the working Free the down Free flow full year due expect in quarter continue was from cash to last slightly which was of remainder improve flow a XX%. capital. to the quarter tax of to XX% $XXX throughout

X.X at quarter. was the from the EBITDA. not the year-end The As level quarter trailing billion late $XXX receipt proceeds $X.X free Transaction include times debt-to-EBITDA or million debt the Jeff outstanding end of XX-month flow decline the of of the proceeds the in in is from business divestitures nearly adjusted received the Total due does in our primarily cash Lending ratio the mentioned, quarter. to

returned through to deploy quarter along mentioned, longstanding in with consistent lines, allocation the capital of intend shares. we methodology. Jeff we to our repurchase these shareholders And As million proceeds X.X those $XXX million the

call authorization. under there share repurchase back that, With million turn to XX, March shares of were As let and me million XXX Jeff. outstanding the shares XX.X our existing remaining

Jeffery W. Yabuki

excellent, led first and Thanks, pipeline and a our the us attainment a $XX and up XX%, in strong at strongest Bob. XX% of areas very five-year positions the also sales QX, very to performance to quarter. was number and quarter optimization Even after labor We're sales year in The increasing for XXXX. strong were off was quota services. Sales million attainment in in solution were program, commercial our benefits. since a quarter up including XX% effectiveness start biller XX% with achieving strong healthy, end, quarter, sales Integrated $XX sales million of operational three the digital, of remains a savings year. procurement good quarter's domestic by

significant will have preliminary We million planning expect to coming for begun achieve show our believe for X, year, the and the phase $XX we opportunity. which objective

financial rates, the environment. strength market loan the and losses continue overall to on benign hopefulness in sense around the rising We of optimism regulatory

idea is platform accepted growth to to we've a ways an number an seen that digital proactive institutions stay, of more is are as here use as As lever before. exploring increasing the than

expect for and, to ways ever equally the spend bring cyber update Given important, security office, their and environmental continue an ensure would enhanced in complex further to backdrop, to current risk, financial technology institutions invest capabilities to as and in see system. to customers security increase fraud look back safety we

the number around payments emerging trend modernization of long-term. be Lastly, opportunities, The I'm this address over depth continues ecosystem environment. that conversations solutions the the lead new bullish around quite to to the to payments more mid real-time significant. including will to and of delivery

achieve As I to track goals stated we're year. upfront, financial for our on the

range a We year. step-up us expect midpoint XX% for of the to the growth to to adjusted revenue the the which with $X.XX of least We over expect adjusted continue $X.XX, to of year growth throughout X.X%, $X.XX to internal XXXX. EPS split rate at now above XX% the acceleration of is buy in

achieve year between range points that of the full year, that pleased we're and anticipate the adjusted to operating the basis expand to our and to our margin regularly who on financial, and I will conversion will year. conclusion, the points, our our our operational making flow value in while strategic and objectives. to deliver cash associates continue We shareholder XX mid with clients to XX XXX% around each Most important, the thank to We're financial day. for to each long-term. goals and client full basis free well-positioned short, progress start for XXX% beyond of XX,XXX drive above investing world In be Fiserv and go

catalyst You let's for With are us the makes our very collective questions. best. open the that line that, operator,

Operator

speakers. Certainly,

now the question-and-answer will We begin session.

is Our from ISI. of first Togut Evercore David question

Jeffery W. Yabuki

David?

David Mark Togut

signings, before. had product just year DNA could strong of pace the you the the comment very some over on balance the of Jeff, the year? You conversions both of year last and

Jeffery W. Yabuki

second half Yeah. I mean, primarily would year. it to will the think, of bias, I the

through QX, momentum momentum into start good good have well. pretty the signings seven And and We in year, to the we're December. live, the as starting about feeling continue carry to will number a that institutions will go then of XXXX the given

David Mark Togut

saw plan in you're different ahead annualized Understood. target, $XX operational And year, that of annualize be reason the Is least we from any savings QX? this million then, it on like for effectiveness what you if that well why should showed looks there QX. we in rate at the of

Jeffery W. Yabuki

$XX phase. doesn't quarter. we X this in say Yeah. around start some we're million necessarily our where given we little up. variability up to are that. mentioned, about phase quite a starting already – I given the work It's this at There feel million bit as and good But And in move our existing I $XX not will be ramp that million it $XX achieving would

good we're that. So, feeling about

David Mark Togut

signal announced Card Understood. your And Services, business, then, do bigger recently change Services your that Card you in to Kim a hire that intending business? Crawford big run to in ambitions Does Goodman. for anything a

Jeffery W. Yabuki

strong to experienced as and robust that and that Kim have an to business a She's onboard. business, continue to as up going leader. happy us. is ended very We're a very world – that prepared we in business as can. We make opening to in we're think a we're So, having payments strong kind she's And that. right emerging in I seeing and my interesting of of we at the mentioned lot real-time to as the real-time the of, money time a, in solutions right remarks, movement, the help deliver us important leader

David Mark Togut

Got was in term what between The it. there breakdown Quick question. million decline a decline revenue, in periodic year-over-year revenue? final in versus fees a contract $X software decline the

Robert W. Hau

The actually the majority in of is licenses decline quarter. driven by the

guidance, when our on we full ago term actually As down we year be original fees days a meaningfully we said gave in XX comments basis. anticipate to

If last more see prevalent. have fourth strong very you year, that of in and we the recall, we'll quarter term where decline that's fees

David Mark Togut

you much. Thank Understood. very

Jeffery W. Yabuki

Thank you.

Operator

you. Thank

Dave Our next of question is Baird. Koning from

David J. Koning

Hey, question. guys. my yeah. Oh, Thanks for taking

Jeffery W. Yabuki

Dave. Hi,

David J. Koning

Yeah.

So, I guess, I'm about. of couple a things first of all, in just wondering sequentially, QX there's

in late much quarter. – is, $XX running the the segment, business be quarter in you given I First Lending said sequentially down, million was the away, like think should it that FI at, how probably a that went

I disclosure somewhere around think that. was the

So, million should down that be like sequentially? $XX

Robert W. Hau

Yeah. that's correct. On revenue adjusted a basis,

out on March revenue a and will So, for adjusted it. Essentially, that XX, GAAP was closing I the be date basis. of an think, our

order in to of the will first there balance the full quarter, be your for magnitude, about right. it's year. So, out number's In

David J. Koning

segment last up margins, a Okay. that margins for just remember And XXX in easy – this or points, that million you the a points Cool. basis had comp something, Does of headwind. basis I kind be create Payments Payment at XXX $XX so QX then, secondly, one-off really could quarter?

Robert W. Hau

are correct. you So,

year, charge not million in in see the XXXX. repeating we $XX We You're did of a second last do that remembering certainly correctly. and have quarter

provide will a benefit. that So,

Jeffery W. Yabuki

is, that But to year, to QX. as agree last making when potential expect would be we were in of And mentioned ramping guidance investments. say recurring have wouldn't gave I we money, will offset that with that investments. Bob we that some would be spending certainly Dave, the anything I only like those going there we

David J. Koning

thanks, Good guys. job. Well, Great.

Jeffery W. Yabuki

you. Thank

Robert W. Hau

David. Thanks,

Operator

Thank you.

of Our next Jefferies. question El-Assal is Ramsey from

Ramsey El-Assal

taking for Thanks my question, Hi. guys.

Jeffery W. Yabuki

Hey, Ramsey.

Robert W. Hau

Hi, Ramsey.

Ramsey El-Assal

a Is You bit gradual three if Can speak drivers it the dovetails we may deceleration expect low some also, could of you've in on just a you which quarters? for – the already growth. revenues quarter-over-quarter? this a later that have them? QX others answered, mentioned to bit the overall year? cover little that missed of And the and Jeff, speak is the you cadence of steeper in little acceleration remaining you there in of just can with sort of increase question segment you Is but to in terms just should and QX, went I through, Financial off watermark

Jeffery W. Yabuki

Sure.

take for weak. the going I'll that expected QX we QX to make – think second periodic part acceleration was then that's at good a QX, I'll way in quite And we Bob the if lower to growth last was and I knew was part. inverse we Bob and last revenue to was about we comparable of I'll a the part, how guidance let the So, somewhat think and look was first strong. and to the have happen down little take QX QX our bunch QX, that bit and year We whole year that would you it a we the first then had because indicated more let rates will difficult. correct QX where year, in then the When so gave and be QX

at how revenue. our happy if think our our with you recurring look building processing you if So, quite we're revenue, we're revenue, about high-quality

in the that programs that believe year layer we recovery expect with a we regular over top also then periodic the normative be the Biller, will level and those the see we adding as in then Bob? a started well year. of Architect, on revenue we'll on that in. have But going going up to throughout to get as against We have comparables. more on everything in will of some Zelle, continue we that of implementations – significant We DNA, from basis, where which step to next quarters back and couple kinds else would

Robert W. Hau

overall quarter and good your around Financial internal segment of X% question rate for account in saw our some segments, item then And saw the growth. growth the the up majority Financial the processing We but businesses, we revenue segment. that the that periodic Financial million. company, decline I the manifests The about for itself did we see about $X of that from talked

for that from the So, that got helps accounts growth item and mitigated – some the benefit we processing. of

Ramsey El-Assal

Got it.

capital the On here, Okay. for one me. fintech and And are pretty then, stretched. valuations balance in feels it deployment strategy deployment like more sheet

flow Is that cash contemplate dividend? free with always could it's of saving excellent, when time to now conversion tax Is your rate, need you powder of rolling long-term are Your may that has some better. in your thinking, capital? better even sort still in and uses been lower or you other dry a something be the potentially for a for it

Jeffery W. Yabuki

would biasing pretty that. basis, about it should Yeah. on dividend and repayment. kind Ramsey, of think also, But of we on, we then think pay disciplined we say we're how should a an we terms debt repurchase acquisitions or year how umbrella our allocation share look I in capital about the each about strategy,

this of year, that, and will it again we do so course. we And do

feel strategy think our like the now, we makes I sense. for most

had for them. continue to vis consider about very think focused or again, We on law we'll to what formula and try is intrinsic significant our basis, a recent determine the we what's would how value for a to value shareholders. share change we maximizing and repurchase on how right with to value. are And pretty But that vis impact optimizing we're tax year-in NPV, year-out delivering intrinsic about à allocation right. about and, obviously, That to on the disciplined value think how

Ramsey El-Assal

that. Thanks Great. a lot for

Jeffery W. Yabuki

Thank you.

Operator

you. Thank

of from is Guggenheim question Securities. next Cantwell Our Jeff

Jeff Cantwell

Hi. Good evening.

Jeffery W. Yabuki

Hi, Jeff.

Robert W. Hau

Hi, Jeff.

Jeff Cantwell

just that it's specific whether this of about year you're how been terms evolving my the and on, I any wanted to question. you've environment, what terms there's touched It's something ask seeing. you're opportunities regulatory Europe seeing for in so taking of in Thanks far but in

so seem I Europe's to capitalize payments. payments trend if around I'm a you pipeline, seeing calling see bit you shift can think talk to net-net on? from curious strong and faster out it's to and what changes to whether a there, you're just want about little You over you could benefit just regulatory be a you stand whether And the specifically,

Jeffery W. Yabuki

Sure.

– just a and the great idea of most interesting here. on watch Jeff, So, extrapolate banking of it's how now that us might trying to areas question implications. would parts always world that Europe the we're other right and the in and are impact open The to going it's what's focused on what the in be

the of banking-ready. and the open technology, that we FINkit have fabulous helping a APIs we for really tool purposes which opportunities be Monitise their financial enable that institutions One is to year is of bought last acquired

as business can I in Asia and the is we're we opposed the further nice as outside of see And other couple using banking and for there. had the excited we on purposes. the LatAm And about selling Dovetail, in open hub leverage some we're and how product Dovetail that a Europe over very making well presence capability business to have progress Dovetail. expect focused us that the that Dovetail announcements so opportunities. we're as very of on area to And the which to mentioned. We're U.S., to and the reach as extend Dovetail, payment the next very, quarters technology,

basically regulatorily that but payments you and I'm what's to to – agent here, we move like specific us will are money as bank open in the think have do I as capability, we interesting around, payment faster sure space. as might agent we On on some use to institutions Europe, going and very that another in looks capability, have specifically, you front-facing have interested there. of for focused we in in the have don't certainly in forward. kind know, UK and Basically, financial Europe, opportunities watching we're it So, up create move payment

Jeff Cantwell

to of you seeing any for Great. meaningful I over – a Zelle in you – to saying comments. – from revenue revenue want the quarter. the way? starting is change And terms understand of whether in I of in can you And in how I you're Zelle make update appreciate thinking that then, there as about perhaps course And the appreciated a layer in I source you're about just talk is this you Zelle what were year? your terms that.

Jeffery W. Yabuki

to we're growth I to a part basis piece XX is contribute Zelle up revenue Zelle year-over-year. our Yeah. internal It's to that. of revenue. why is mean, going points least expecting of go at

number signings, there the other terms terms be opportunities in Now, experiencing are live. the Zelle, the opportunity, itself to constrained of is growth a seeing right are we're PXP of like payments some clients in But there. in now get in what growing bullish the our both itself. we Zelle pieces will But bit we're transactions that but the but new That's pains. And network really of significant. network a we resident very, very on sequential within in both and Zelle in ability is

while. a we'll be So, for talking about Zelle

seeing big it to before are I and be, we'd XXXX. calling we like think it'll be being results also as are enthusiastic out but it quite measurable as we're as a while in

Jeff Cantwell

Great. very Thanks much.

Jeffery W. Yabuki

you. Thank

Operator

you. Thank

is Matt from question next O'Neill Autonomous of Our Research.

Jeffery W. Yabuki

Matt, Hello? you there?

Matt C. O'Neill

gentleman. I on I'm was Can sorry, mute. me hear now? you

Jeffery W. Yabuki

Yeah.

Robert W. Hau

Perfect, perfect.

Matt C. O'Neill

Sorry. Apologies. traditional with whether of update or hoping competitive just some to maybe it's Temenos. players, QX could newer on Thank both the kind give you. respect a and a a quick landscape you the I was of

Jeffery W. Yabuki

balance, about moved from because traditional always question ago. investigation And we're a the platforms. say, would in more it's ago. on is there talking other integration talk spaces in a need is specific very and more spaces competitors. would and on a technology common there have we year digital was today year modernization much There really more the landscape mindset, available interesting is than It has a I distinctive to spend is competitors balance, a some to a – competitive than Temenos going on whether technology Sure. opposed certain of the for because competitors seeing more or in as competitors, is about I QX or

been have of or layer a integration modern series whether FINkit on technologies middleware a it just others. around or be We or DNA truly strategies, working ala

more we So, exploration. are seeing

with We be have we results seeing, consistent portfolio with behaviors we're are are the competitively. that the that today, pleased what been. well-positioned generally we and have they pretty just given we're seeing And are comfortable some that frankly, of

Matt C. O'Neill

you. Thank

Jeffery W. Yabuki

Thank you.

Operator

you. Thank

Huang Tien-Tsin Our next question is from Mr. JPMorgan. of

Tien-Tsin Huang

you so much. Thank

ahead Just easier license a if aside, comp forward? creates to on going this tough to just sales good just Or for trying sales. look is year see compare? it QX by an lower the license guess, is also to I'm design? baseline lower I the use next and

Robert W. Hau

really Yes. is it of Tien-Tsin, I'd a matter year. just within the timing say

One make our reasons future processing growth we sure it we're revenue which why periodic to from year focused basis. underlying good we expect quarters on a growth. in of that calling full distinguish back it come to some on But the had and revenue, see

Jeffery W. Yabuki

sold And Tien-Tsin, in revenue, said gave you down fee may acquire down. instead meaningfully actually I solutions don't XXXX. more termination on guidance, cloud hosted more and of we or term meaningfully would periodic the we time, to basis. on desire to licensed, that revenue same institutions were the we We be remember we when traditionally would revenue and expect but say At now that be a said using more are of a license seeing

And so is intentional. not it's demanding. more what the market but an that It's does effect, have

Tien-Tsin Huang

hosted for on or the Got basis was of I idea for a what stuff it. clarification. that what basically That's at, have Thanks getting Okay. you. looking

that operational you phase Just the mentioned. on X effectiveness

it up little bit. a You teed

the of tools sort to – about going digital look what it. Is from some tools I talked Just it, talked seen guessing using might firms here, think Fiserv that actually about business more this leverage and the phase like, enhance that is digital these that of next idea have other your existing of maybe AI we've to offerings?

Jeffery W. Yabuki

utilizations would other through utilization effectiveness to but I cringe automation way; I of Yes. RPA meaningful capabilities. the and , to start Everything create a of across grab the of technology because forward-looking into X, and automation, all a very have Bob our say, of significant fall those the you'll this of category will phase ala in way we'll efficiency kind Fiserv. that technology and and think VCA to from X, fairly will absolutely the see entirety building statement, phase

for will of think to very going that technologies. quite nicely actually important. I cloud the yes, movement dovetail the to our with be And that's the majority So,

Tien-Tsin Huang

fine. That's Okay.

So, last one.

Sorry to many. ask

some on versus complexity is trend in mind your survey we outsourcing Just our insourcing given work? because the changing that, hear mixed in of things this

Jeffery W. Yabuki

mean, a Give little Tien-Tsin? color. you do bit more What

Tien-Tsin Huang

Fiserv to More re-platforming add it thinking maybe behalf for breed the internally; about in-house, but of? on looking service doing of it providers third-party firms best do or a full or doing like opposite, things vendors,

Jeffery W. Yabuki

it's the of size – Number invest third, one. related institutions feel And depends to a think will That's economic they psyche depends and institution. absolutely pieces do three because number it then two, that be have on So that do Do compelled not It I to the customer cheap? the in the – question. of building is institution. it on probably It fortitude directly absolutely to the what is Yeah. actually experience the great control? things. of they own

Tien-Tsin Huang

Yeah, yeah. Thank insight, for you Jeff.

Jeffery W. Yabuki

Thank of you. Sure, course.

Operator

you. Thank

of Joseph Our Cantor is Fitzgerald. next question from Foresi

Joseph Foresi

Hi.

a Are spoke where are up demand. it? And seeing that so, about in you if as competitors Your pick you seeing well?

Jeffery W. Yabuki

in yes, exploration. two, products then about in office little And manifest XXXX. that we to I I we really Number period after kinds quite of and then payments. back we I there going – better some comments AI four, it's Remember there's number in of certain that three, lastly, tick-up think are that revenue around and lot in modernization. – had one, translate focus. that demand, if around increase. follows and Number seeing those around that. a some the out So, mentioned but implementation would the it's early category say put a when it's number itself seeing did certainly a RPA, it's it's sales discussion prepared so doesn't innovation, And we We demand in about geared of But I perimeter, capabilities. digital. think say, to would period was And cyber a said in in sales and safety at security, in we absolutely QX QX expect our for were spend technology we that a

Joseph Foresi

the there. out given with key sort growth so contributor process, that X.X% given know thought break the – demand? you And a us on just Got you target? large it. puts top you But then, what over what Zelle opportunities sticking where of that was other on I could comments said for your

Jeffery W. Yabuki

to Sure. in I we Yeah. most of would see revenue. the won't say demand fair it's really that that probably remember convert increase to

will But been tailwind, drive of is we the a Mobiliti. pieces the in has us what's think around and of in implementations, bits year. of this bit majority little it's I in process late growth And that this in implementations continuing going – sales really for and may of have biller, Architect already strong implementations, year. or the end but talked You'll very really and about to some be the XXXX revenue and a as DNA get the of sold larger towards the implemented that's Zelle about, implementation

I think in we had around XX% Mobiliti. growth subscriber

interesting part – of good thing some earlier growth And We acquisition those are have talked important and not we've last last ease from some calculation we're the in card. is to being growth about years move then compare. over starting organic seeing several the that's the of We of done part to the on, network organic being calculation. innovation volume flow,

growth giving well. looking not not to as XXXX it's the pieces when would but in see a step-up the, in but So, contributing all be or moving basket the to we X.X% those throw that are in you XXXX, stir to guidance, us of it also all looking into – and that up, just obviously certainly

Joseph Foresi

Helpful. Thank you.

Jeffery W. Yabuki

you. Thank

Operator

you. Thank

Bret question of is Huff Our Incorporated. from next Stephens,

Jeffery W. Yabuki

Hey, Brett.

Brett Huff

your fingers going as of in of banks those a investing and about have see to seems There's adoption what guys and of pies. what payments you to lot in little where as a Can puck's behind? confusing. try are it be, a And lot consumer interest you the change going talk guess kind and I bit on, you of versus terms

like faster versus from things faster investment think How I payments point versus a is both a that traditional bill consumer peer-to-peer bank or of and evolving pay view? payments.

Jeffery W. Yabuki

don't a a faster deliver think the they like same it's Milwaukee that money expectation, say, basis. question. fact if They about that's from in I be should day package delivered their payments. perspective, things Brett, be So, to consumer's day a able about Amazon the would can in same on think Milwaukee basis, great on a

the to faster idea. seeing both to or move payments And ACH the the in of what the but as network, we're way; we a not the so, about rails allow expediting start traditionally thought to modernization

them And a or rails so ACH to different using or the like in having or connecting enabling requesters that to billers network creating we're – to that or think broader whether about TCH financial card we capability our capabilities same connects institutions, day connected, creating whatever the of it's are, world, within about money.

will creating happen choice. consumer-facing kind the period money to biller's long an company of and So, to and of consumer of example, instead to our as about just a quite enable that that the which speed ubiquity check, the PXP. also billers having capability, digital then the over ubiquity seamlessly by which of application, Zelle insurance at – an excited tapped be as facing We're let's or allow business-to-business disbursements move or to different example allowing so time,

playing going kinds – different thing won't I how Brett, And movement we Bill as important facing. the creating real-time "bank" does digital So, the, frontend is, to payment, on wallet really the of manage quite But of the even the that our how of my my check. I think, get money modernization cases excited the this both do of place does about backend that's the movement. things are – as and all side experience, of to then other I via example, use we experience? how be like initiated go So, the network, digitally-oriented electronified on. money in have that unique on is well for

to I websites, working of want, payment Biller team you go different the pay place to that in completely Direct, but how the can are to do XX what like pay bill one much of I and whom We at in change speed on I having want, experience, way more take I go to instead a bill to advantage a to have want.

enable to to consumers things think that playing do I sure ecosystem. across we're way, it's very different our So, and a that emerging make goal going is to in

Brett Huff

software helpful. you How model sort license? is is that or the That's do that a infrastructure of economics an of dealer Dovetail, it bit sort or little of guys arms economic of evolving? And related, economics network see kind

Jeffery W. Yabuki

kind the the it do. high world same would economics, hosted we want that's on of advantage about. network upon wouldn't institution depending and they of I of that of – acquiring to I is economics, so call size, I kinds talk cloud "the a the out to revenue" it But would it quality be I would that size it. taking institutions economics ASP old license it would is dependent say, AS combination see of that economics, what as the It the you and calling economics. bold be call comfortable – of or

Brett Huff

the answers. Thanks Great. for

Jeffery W. Yabuki

you. Thank

Operator

you. Thank

is Goldman Sachs. from of Jim question next Schneider Our

James Schneider

Jeff, clients. the us Good could if update an landscape I on was question. bank you my valuations Certainly, the wondering industry afternoon. are M&A you higher lower. see taking at are across Thanks your give fees to term for your what maybe but relative

So, the to out? do we're despite a significant limits? that in you plays Or increase do unlikely this you think (XX:XX) uptick see how in consolidation think

Jeffery W. Yabuki

And and predicting be why meaningful least time level the reduction at X,XXX say a we're just activity with and number over I expect which revenue. having, to size that this Well, acquisition valuations. do representatives a spend conversations I that's is it say we're I a the year in that I to of associates institution. activity, on be the everything lower the where bit them opportunity inverse we're would transactions. happens had last, majority client expect – the of partners. termination again, course, would there expect continue at end Jim, majority of the fee there sit. – would to of the asset is say, in tier depends precisely transactions low to the to of the And the numbers obviously, of seeing banks the I to we we be because, of

of and And exploration good see the reasons that feeling to certainly that. like organic different it's bullish out high, time that valuations with on why one capability, are spend a the so rates we're would people going we is up, mostly their technology feeling supports build which are and

I that. So, see

of, a We institutions larger activity, novo in war for you'll ways think typically tick-up on I the – to broadly to of look And expand as, the more de a kind continues are sign. seeing some that's SLIGHT good see and so accelerate. deposits

James Schneider

And maybe capital That's question. a then, structure thanks. helpful context,

than if peers. touched You comfortable can of dividend ratio about I with Is talk lower it's earlier, you of think X leverage do even of can't up but that fund of leverage M&A times, candidates? increase kind many your that at comfortable you think many, maybe Or on just question even the taking permanently? would it's attractive find if you buybacks, kind feel you you feel to something

Robert W. Hau

if some of for towards X.X due timing us. mentioned more to there's certainly cash of draw leverage the And of divestiture a of comfortable very debt-to-EBITDA run up. there. that to to. we to receipt acquisition, earlier, cash times leverage joint in our up business, the would opportunity to the is, where venture more that down were needed to quarter of seeing answer Lending the in the to we from question. of expect typically to back time our the period our we to large December. pieces do have strength a ratio in drop the and able the be two much in So, certainly be We're run go higher the extended an relative and there's One flow we up. X.X the as times where back of We be sheet fact, typical the If to balance that would strength really Certainly, for is then we first go

Jeffery W. Yabuki

Yeah.

an kind think – Jim. We I of deal, check on day? a large what it's odd got

Robert W. Hau

The XXth.

Jeffery W. Yabuki

is, up the a maximizes to value. think shareholder end have think X fairly leverage X capital March, But much year. really prefer way that I deploy been that times, And at have had record so on took times the XXth the down way answer we that or the which our continue times. of we're our in in of The leverage towards below we'll we we and I last to the X.X

James Schneider

Very clear. Thank you.

Jeffery W. Yabuki

Thank you.

Operator

you. Thank

last in Citigroup. Our of queue question Ashwin Shirvaikar is from

Jeffery W. Yabuki

Ashwin?

Robert W. Hau

Hey, Ashwin.

Jeffery W. Yabuki

mute are on or Ashwin, we you you? lose did

Ashwin Shirvaikar

can Hey, hear you me?

Robert W. Hau

Yes.

Jeffery W. Yabuki

Yeah. There you go.

Ashwin Shirvaikar

terms and and contracts? So, different? going guess that a to hosted call is, everyone contract Is about digital lot delivery this Are more forward? does the on mandate. the has I your shorter cloud discussion lower a Can you digital, of question change my the talk due how that? pricing about

Jeffery W. Yabuki

I'm typically depends would trying get bit of that an I'm on – a I'm I contract say type client. pausing to the a only with have. Ashwin, it the terms be And idea. that little we normal process moment. would are it for – consistent the contracting

in a itself. they it So, that But a consumer-facing are client? customer solution that facing depends right via who is because solutions this I Is – answer So, to digital-only a other would way client to tend buys base. are engagement? the I fact think it professional be is it institutions least believe Is services? services say on XX convert likely to ones their we the are the that that something

can they customers. than less to terms best And so are that we're important our their contract service sure making so high-quality themselves the delivering a clients serve

Ashwin Shirvaikar

right. was Understood, as that asking particularly should go probably you I about explained the understood. cards? Is question, context And on, focused an forward? we use you which opportunity cards got to Can that speak dual you're contactless I but the have

Jeffery W. Yabuki

on least years of by through a that we're for about if prepared suspect year seeing to or a one to to weren't We getting the the market in matter lot U.S. at move It's The and I fair contactless mean, – once encouraged. of me started. a market And but move I really the it base we started. movement quite starts starts talking away, ready spent adoption, more XXXX of, their were Sure. still amount continues quite burn would it and quickly brands contactless. slowly. surprise how larger it the of continues it's U.S., of a the focused move it to two the commentary end front.

think the much be whole we're have I contactless payments, just – center. with front screams to it and intersects way digital more card-based

but think we'll the really market see matter when make the of I So, does move. it's it, a

Ashwin Shirvaikar

Got it. you, Thank guys.

Robert W. Hau

Thank you.

Jeffery W. Yabuki

Thanks, Ashwin.

Jeffery W. Yabuki

We us And thanks have to everyone this for appreciate and joining opportunity your the dialogue always afternoon. support. to

contact Relations please any have our If great you don't Investor a questions, team. night. further have to And hesitate

Operator

very today's for speakers. much that your Thank call. concludes And participation. you very you thank Everyone, much,

You may disconnect. now

Fiserv (FI) 1 May 182018 Q1 Earnings call transcript