FISV - Earnings call transcript Q3 2018

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Operator

Welcome to the Fiserv 2018 third quarter earnings conference call. All participants will be in a listen-only mode until the question-and-answer session begins following the presentation.

As a reminder, today's call is being recorded. At this time, I will turn the call over to Tiffany Willis, Vice President of Investor Relations at Fiserv.

Tiffany Willis

Thank you and good afternoon. here my be Investor role to Relations. pleased today new in leading I'm to of with future. look connecting I forward many you the in With Hau, call Executive the me Yabuki, today Chief our are Officer, Chief our Jeff Bob Financial Officer. and for and earnings are the section that Relations for fiserv.com. on presentation release note the supplemental Please Investor of our quarter available

of the remarks Elan and and financial operating today matters, other expected processing the and will Our Services, debit strategic Financial include acquisition initiatives, impact among related reform. the forward-looking solutions statements about, tax of results, from

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

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

the turn Solutions over the And which Jeff. March. amounts As earnings in completed the March materials, per-share interest adjusted closed reminder, in XXXX adjusted a this amounts release, Lending X-for-X year along stock me split period to of adjusting in supplemental for with that, sale per press share business, the call let comparable and and year, the comments with are majority this the each of our for of in

Jeffery W. Yabuki

first earnings first internal growth us in the afternoon done quarter nicely of delivered strong everyone third both the call. nine joining Good X% financial revenue Tiffany, including months and results, year. Thanks, the on today. We to your

for XX% third year's track XX up the growth and this ending XX% to in the to $XXX financial in remain flow XX% of year and invest year your grew is date. $XXX up for been while quarter months divestiture company. year cash X% well business. million quarter which in the quarter. We to revenue has to very date, was Adjusted over impact over commitments our to internal Free is strong rolling our the EPS Additionally, million include meet of a both Lending the on continuing

$X.X on benchmark, to focus We to share year million primary quarter $XXX in date continue have our billion. allocating repurchased the the as capital and for repurchase

the to payments associates excited the increasingly the solutions for franchise proposition results, Before to extend talented existing Fiserv. opportunity million becoming on Elan and debit-based reach solutions me XXX processing value we into Financial of and annual new with X,XXX $XXX about businesses. our the important payments and more provides perspective client in than our debit welcome is network revenue extends in enhance million, which of payments, over dive the broadens acquisition, leadership let today. and provide the acquisition closed $XXX Services, This clients. scale, assets approximately Scale to We're our of

to to than We X,XXX platform successfully We couple the primary spent debit advanced Elan next with single our see our areas. of quietly last to clients to over migrating opportunities We a three capabilities. the more have more years. migrate platform than several synergy X,XXX the plan most those revenue years acquired across leverage clients experiences

contribute to capabilities acquisition card our new couple production, existing are Valet. and to should our enhanced a of which of solutions revenue a as First, portfolio also clients Network, to the available Card Accel the internal number card to growth. such additive make areas The such we existing solutions digital in in have portfolio as provides and risk,

As we XX,XXX in-network in the Money part second U.S., surcharge-free network the Pass, ATM ATMs. with over of the transaction, acquired largest

but services acquired extends managed we ATM addition, small In capability, strong a offerings ATM payments and which our differentiation. existing

the other the clients solutions are Fiserv substantial time, outside by revenue clients demonstrating Card to months. to market-leading The the next synergy believe integration and strength the benefits third our from and deliver clients. Fiserv acquired to as we we to will of Payments, solutions advantage. compete of majority meaningful opportunity consolidating value acquired opportunity not platform scaled processing this account expect add opportunities cost for Overall, is new a provide Over over currently XX

will times. significant, over We revenue rate given a longer revenue and period. five-year the expect generally client but to We synergies be believe ramp to contracts to synergy run existing four-year a also be the have lead equally sales at

our commitments; Given our we accretive expect on enhance to to that, client and emphasis to for shareholder integration earnings our earnings relationships XXXX and continue for clients. solutions; time. and this in three grow synergy timing, modestly meeting an with to to be innovation to payment to key first, XXXX, third deliver which enables digital build let's while value transaction differentiated are: next, high-quality With and move revenue which over priorities

points a we the As trailing quarter including Card, Bank the nine-month date, number period and Solutions. of growth is strong and driven X% is in revenue revenue by I year basis results XXX mentioned, comparable X% achieved the versus internal Biller, our up XX months. and growth to Internal from businesses, for

earnings tax and year adjusted year-over-year expectations. to established pool are was consistent primarily from basis of have spite quarter sustained in basis the acquisitions, end, XX investments and making year. delivers Lending As the These to to deployment. for delivering continue combination tax leverage, XX% capital that in to quarter XX% your operating adjusted excellence will points EPS To operating clients, and very quarter to prior ensure we decline we for the basis The rate operating to the to a and up from delivered business and that adjusted a were against strong But advantage reductions, points make due for XXX margin XX investment in and our share date, compared results per balanced competitive and are know, date. up was of decline with these you point basis the the items, XXX adjusted in been the savings in date points year. margin divestiture, respectively margin-dilutive and year down earlier would year results

consistent will first achieve revenue to earnings our commitments the with We priority. our for shareholder year, continue believe we and

Market leading process, as to the enhance the solutions, quarter. DNA. Our suite, since to addition competitive In selected CFCU be comprehensive DNA platform XX Edge billion and by than of and digital-first assets, DNA. is processing integrated of longer-term announced the in relationships, eight on signings We members and differentiator in their will is emphasis quarter charter-agnostic leading our is with DNA's with into over second solutions live which clients Community eight We focus had market. of Union, more CFCU for our in a digital a platform total it with we account new growing, access payment January. a Digital Digital digital-centric to interest the digital Edge provide believe to go solutions. payment an position anchored the real-time Credit client our and $X continued

a DNA would number record We expect annual live in XX nearly of go the to clients implementations. year, be which

XX for number banking sales Mobiliti bring the assets, modernization for with sales, implementation billion with and subscribers XX% which Dovetail our by We to were activity to see connectivity to to the and us important expect continuing in sign seeing clients clients solutions. platform our $XXX their network. strong year. in strong QX our growth with Union X to of teams the across recently anticipate both implementation ASP continue the the to just acquired real-time expanded in grew million. quarter demand, exiting Architect and double we full platform. Bank, We under year enable alone, backlog, a interest have Due We're digital in momentum. to our TCH payments payments go-lives of will market We Architect live pleased large

recognized nearly Award payments with footprint. to capabilities Dovetail instant the leading Sanpaolo, solution in enabling strong of for $XX Intesa our a for enterprise modernize their next-generation billion with IDC were international Real We assets, for a towards the by the BBVA shift also We payments in help Results signed and bank Italy settlement. for real-time Compass, payment quarter in

new Our is to differentiated Bank, live continues the innovation which priority pleased enables garner significant in integration were XX quarter. attention, also to quarter. clients leading third deliver Dollar the and billion Zelle clients. to in our in assets, sign $X.X and bring than with value more Zelle focus us to We market for

cycles implementation than acceleration meaningful Zelle more remain September We to in We XX the and Zelle XX% expect accelerate than new ways through times market and were meet ramp the transactions clients demand. focused continuing sequentially, of more XXXX. the level. growing on prior-year in QX to XX are up

Our financial and in high, the Zelle digital their money conviction focus remains capabilities at real-time accelerate of institutions intersection as movement.

which A are in instant and on their access the we opportunity selected with Lastly, financial our solution, their the additional provides Immediate Funds funds. opportunity service over this to the customers our me let offer for results. more to evolving to plans financial multiple With this detail provide solution in customers deposited seeing institutions turn to that, bank address our interest top Bob to across quarter call channels. to XX

Robert W. Hau

in good to the and strong in period. year Jeff, and quarter, was of up afternoon. revenue by driven Internal billion quarter across up also you, the is the X% to growth to businesses, X% a number date. our nine-month billion $X.X and for X% revenue Thank was X% $X.X Adjusted performance

for in Lending through X% quarter points, strong expand our our opportunistic the million XX. we the the million in adjusted months been higher in businesses combination year quarter was leverage. up and and transaction for basis end ASC total year, reported acquisitions, Popmoney to PXP operating Card transactions, which Adjusted $X.XX a given basis XXX operating including quarter high offset and $X.X funded margin which up of date. we driving to XXXX billion the basis to Increased We EPS both by adoption comparison, basis billion, expect client-focused range, and transaction. year. to This today, elements transactions internal XX% points would to the Adjusted XX and Elan nearly September down headwind of partially $X.XX the drove by of quarter, date, quarter and nine low and from Strong last the the ramp first down headwind revenue tax through closed for point XX year double both decrease incremental investments. to the quarter grew In Biller increased revenue through performance now growth the to of model investments nine internal XX of to XX% our debit growing $XXX in-year was X% to up September date effectiveness the including slower operating Adjusted divestiture, the restated revenue was basis volumes adjusted which and at high-quality under $XXX the X% both of Zelle, acquisitions income about a a XXX. remain And was of operating in impacted points through points, had months were was year. operational our impact was performance the growth. expect X% savings. For points Services and were basis consecutive X% in $X.X margin our XX up XX%. revenue and to closed important up on from Based growth and adjusted Lending includes of XXX first results of digits. our quarter to the performance the XXrd The year. for segment Payments the growth of have XX.X%, achieve the double-digit strong EPS performance was

operating XX% to points $XXX quarter XX has the our investments guidance year. of adjusted of operating $XXX the quarter points to of margin in X% points and to operating continuing nearly a at the in year to date. income margin in the reinforce million acquisitions expanded basis included the of to to from the in for Additionally, million, the XX.X% experiences. grew digital tax basis Payments evolving which were segment in grew financial from to landscape X% Mobiliti million savings, and quarter basis Adjusted XX headwind and X contracted in ASP results negatively Adjusted the subscribers importance from shared were combination date. to the the beginning year XXX impacted Segment XX.X% by the

points compare, performance plan rate rate. nine adjusted income due X% $X date, line driven XX.X% to businesses. but X% contracted consistent But The Lending effective periods $XXX revenue For segment, for transaction, tax the of realized quarter points third have for transaction. $XXX year quarter the XXX quarter solid which third for in account a by divestiture, decreased the and in both loss largely XXX million operating to months The the million for transaction. for XX in billion with quarter, than for margin segment's basis processing to the the the quarter the expanded decreased the prior-year to to XX.X%, our up in basis XX.X% due up to segment respectively. $X.X was year for fully by revenue due basis X% in the to quarter primarily quarter our expectations declined and the better corporate X% to X% a and Lending first the XXXX strong and and adjusted was a primarily and the and Financial Financial the considers run difficult million period. adjusted growth, item Internal our discrete was XX year-to-date to to slightly from the due quarter. and Lending been million the to tax Adjusted operating the the nine-month at with adjusted operating margin in date, again, would to $XXX points up The benefit year

And our through rate. strategies focus XX%. our to Our And rate adjusted full-year adjusted we September effective tax to on accordingly, lower XX.X%. continue be sustainably expect rate to tax effective now just was tax below we

by deliver conversion was cash nearly first rate this ASC in XXX. combined year is year. the to of continued Free the QX, $XXX the impact have We XX% flow, the capital the of significant the results year. free quarter for nine generating for cash now pressured timing the and months working at months better million flow nine from and double for The the been of XXX%, impact

billion low in Now, expect free and have year. the end through rate of viability for we We million repurchased QX, million over given into X.X the our around September $XXX for be shareholders quarter the our flow conversion full to XX. outlook returned $X.X to cash shares

XX.X all shares repurchase authorization, a now exceeded approved quarter. have of repurchased months year remaining September XXXX. for We for million our of first shares authorization We XXX the amount of nine in in includes in new the the million We the share million had total as XX which had shares outstanding XX.

of line XXXX, a we those During were X.X We in of million, down loan, the X and rate $X proceeds notes to average maturity our interest an billion $XXX of pay years. our that credit. XX-year off quarter rate our due issued blended term and retire and bonds new pay at revolving X.XXX% used X% of

of attractive sheet fully fourth the and it our sequentially rates to refinancing. Although in we will end in did opportunity ahead at lock market. Also, year, note payoff because the increase completed interest October, great XXXX a upward of an balance the quarter's in the reflect not was results expense quarter next trending

the our extended revolving line it credit the acquisition, we which and of of closed finance through Lastly, XXXX used earlier Elan to today. term

debt, excluding long-term entirely fixed rate. revolver, now Our is the

XX, XXXX the end completed retirement Our not have debt-to-adjusted X.X been debt-to-adjusted our does of times. times the quarter, as of at would note. of which ratio reflect been that the X.X the was EBITDA EBITDA Had September

me over Now Jeff. with to that, call the let turn back

Jeffery W. Yabuki

the large, transactions only, expected, XX% for X%, year. XX% is Normalizing came a term sales sizable declined over year. was up book down for pipeline the been bit long-tenured Thanks, quota, The the attainment prior-year from by X% but would the the Bob. of Quota two coming The down of XX% XX% was more performance in when at up to prior period. year prior in the from grow contract and Sales have in decline amount in term off than period. the to quarter Year-to-date date and domestic sales for the are XX%. continues differential. adjusting

fourth strong quarter. expect sales very the in We

We effectiveness the excellent months million to first the of progress We million our and of on interest services in We million of at make savings. financial nine expect goal are annual with year. our another achieved continue momentum, quarter $XX rates, of positive the a now $XX rising savings and operational environment strong, exceed The for to remains tax landscape. initiatives. credit $XX attainment benign

consumer industry the in such meaningful management, future. digital, see create remains demand and gaining continue invested, institutions continue risk for as claw financial as on and which robust space foreseeable we balances, the PXP focus commercial have and the technology Zelle back will looks We payments. to scale remains to increasing where we real-time as The to and optionality opportunity deposit future. M&A continue for the active expect areas

said track key up objectives to financial on for XXXX, includes an growth X.X% year. to the rate we least As at for internal our which front, revenue in we increase remain achieve our

last growth comparison, year's for reminder, revenue of a was strongest fourth year. quarter internal As our the quarter

expect also EPS year. for guidance adjusted to We our achieve the

to where of are than over of in $X.XX the in QX, $X.XX $X.XX, we to $X.XX. range we growth be range the and of higher the $X.XX the a year, year last now Given adjusted original expect XX% bottom to XX% to strong of full $X.XX

You that least reduction tax year. investments at results full will of recall full-year anticipate our savings million the for $XX from incremental funded

conversion Adjusted ahead we're XXX% points sustain further adjusted year. year-to-date includes and As our by growth and be incremental operating basis performance operational our Bob conclusion, a margin cash well last the operating around free expect is building and and X% In and up indicated, progress flow rate. very program to with about investments to year's your leverage full-year pleased for we to strong XX now competitive in company. supported also advantage. Internal effectiveness benefits, revenue of growth EPS XX%, is comparable be

capital shareholders, build of move value for in a enhanced shareholders. assets debit including for a repurchase, record pace debt Elan's and incremental structure, share continue we As clients deliver an important, acquisition value the to to to allocate and for both

a And employers We straight improvement, annual of after month, a of the also into crossed of of we associate results now remain of XX,XXX survey associates the engagement and their engagement Last employees. best and received XXX-degree our bring day participating our proud its committed fifth have recording to continuous year and, while associate let's are view operator, Fiserv aren't clients, excellence. line the the the quartile who top you, to their yet, X.X every grateful the million we more than done open that, for questions. we shareholders. for With company,

Operator

question from David first The comes Togut from Evercore.

Your line open. now is

David Mark Togut

with annual afternoon. revenue Thanks, EBITDA a be from Thanks question Elan like to the you on Services giving Elan. for basis? Financial Could acquisition. out good I'd an what the break start expected about will

Robert W. Hau

some that years synergies. we prepared nice Overall, existing impact of standpoint as remarks, we synergy years get our David, drive question. this prepared card couple as we a business now thanks years what quarter. fourth four scale revenue synergies a for remarks, to into for XXXX, the a meaningful for closing as morning, the today, add over out heard nice up some our will right in debit of opportunities us. revenue It's our And next be when Jeff of the in will from five that the about as processing just to his overall in over incorporate into it platform really Good of We're for results our so in and It's us pointed business or business million processing afternoon. the do alley XXXX nominal gives in debit and we'll you next bring $XXX that guidance. us. certainly cost

that looking cost driving So five that to over we're four business or forward revenue years synergies the getting online and and next years.

Jeffery W. Yabuki

I we we the maintain as our as with moving breakdown, of expect it the to that migrate give David, of debit But we couple over migrate processing on to a is business. years, next Bank. having we EBITDA, our going own that would consistent to the provide don't We're Bob would platform. we that Especially run U.S. through will margins over migrate, them you question they mentioned, kind business I to exact So, platform to know. we're platform our know obviously say from answer of as their

benefits that So synergy meaningful we will in. think come are cost there that

One clients of next moderately saying platform. accretive be our forward reasons it's over the obviously why we'll year to that moving migrate we're is we as

David Mark Togut

third is the split-adjusted gave earnings on of basis. Understood. a share margin quarter Based last $X.XX trends, underlying a business, XXXX of terms you you $X.XX And intact earnings on on see outlook expansion revenue outlook what year, a call bookings, then preliminary the of for in still XXXX? the that

Jeffery W. Yabuki

making Bob say normal sure look. is that would he I gives the So me

at everything perspective. one we you I going but on and I was time. we think the saying I'm else not nothing and that expect in that's we that there a but will additional can saying we we changed some giving Conversely, since say say be that has I I we from we mentioned, would than cover is, told quarter, range. that we talked expense, that specifically and same exception, what interest won't way time are guidance, be would bit Elan. previously about to what that's last we in meaningful fairly we've think operating the we when add I'm a one that's there, cover not we am an not refinance little were based with which to I the it be acquired did thing saying see we is Bob could to where the talked as that to that today, expected different

that accretive. expect be to We

when with give been along. saying giving guidance have we'll think all I guidance, be consistent that's we we So what

David Mark Togut

Exchange MoneyXX/XX, then and new question Bill for curious. quick just I'm and final At debuted Pay it, Got me. a MasterCard offering, just

a does so Is feature or this not functionality CheckFree's it competitive a bill pay stack basis compare significant If offering, much? on how you to threat, that up? core

Jeffery W. Yabuki

much. so Not

David Mark Togut

why that be? And would

Jeffery W. Yabuki

much. so not It's

time. Not any we that has move And we been we for know, market-leading the the know risk a to know you technology payment on long wants, payments. a with can a technology our is to consistent data. how what As but in speed consumer how only beauty the manage perfect and those technology money at

to consumer when to And because money But wants we patented out smart, basis. the that the us will the that take a accounts it we know part allows of have risk the intelligent how most able wrong supposed so on important where who make we a model model, are make us it's decisions the goes thing. sure money to tell is if to go, consumer even occasionally risk

we to it's moving technology. opportunity still not the electronic that we very same of half are see payments the So By advanced all on just an think bill a nearly significant rail. token, each a the electronify more year

others talking now are meaningful advantage. believe it, So strategic and but we're about competitive and glad right we we a important maintain

David Mark Togut

you much. very Thank

Jeffery W. Yabuki

you. Thank

Operator

of Baird. next The Dave Koning you. comes from question Thank

open. Your now line is

David J. Koning

Hey, going? guys. it How's

Jeffery W. Yabuki

you? are How Dave. Good,

Robert W. Hau

afternoon. Good

David J. Koning

Good, thank you.

revenue weak, that Because and first lighter all, is almost a were happening some little QX? QX So that revenue that's into margins. I here? little periodic maybe a little than guess than of thought a pretty and margins there in wondering, usually QX better carries moving what's periodic QX seems just Is we revenue I'm so Was high thought. we

Jeffery W. Yabuki

actually said we we from to QX. periodic QX, to that well know it we bit come In a it had you and to pull comes in a when, have QX little it in. decides QX, a of revenue remember, QX. degree, wants large QX shifting from Yes, In to

of And so follows. margins, also because the that

do to we for we first give similar, half we're clarity on – we that. quarter a little tried to second and track expected be the and think So absolutely we the expect last indicated half I when substantially

nothing a revenue, bit than know. And revenue periodic to just look other QX And other clarity, our And three reason. last most an be margin, if years, of sorry, just then question, to has been – movement the quarters. more revenue between you piece for margin comes unusually so little on So shift the at periodic revenue it in QX some add to weakest the the that of quarter quarter. as happens periodic weak from your tends you that,

David J. Koning

guess was year I down And how Okay. QX? in year much it over

Jeffery W. Yabuki

It quarter prior. for was our expectations meaningfully flow the through relative It the down the would to was the down not to how periodic year. in revenue

Robert W. Hau

David, very second quarter, a if had quarter. good had first strong you point. to think about We it, Jeff's we a

Some third We up periodic actually X%. at shifting timing of revenue was of in ended first of out that of the year quarter. half the

fourth a thing per quarter. be normalized more we'll because will lighter se. bit still We And expected It's little be be within a bit be quarter first rate in half in case, year-over-year QX That's half. to but little versus a being lighter the with stronger, second QX not growth the half, similar a the little the to bit and came QX QX but the given expect strong the tougher a in in total it's quarters. comp shift within

David J. Koning

first quick Lending includes Okay, The bit, the months of thank a couple the one business little think I $X.XX $X.XX you, a quarter. just follow-up. year to and this in

than So next year. the bigger lose the Is you year? Elan, that Elan, from you accretion Lending that from benefit the lose EPS next that

Robert W. Hau

in from quarter No, bit be little will stronger the operating first a income Elan Lending the the business. income, It's XXXX first than bit of a in bigger little quarter XXXX.

David J. Koning

Okay.

I thanks, it. Okay, appreciate guys.

Jeffery W. Yabuki

you. Thank

Operator

Thank from comes Andrew Jeffrey of you. The next SunTrust. question

is now open. line Your

Andrew Jeffrey

the question for this Thanks taking here Hi, afternoon. guys.

Jeffery W. Yabuki

Sure.

Andrew Jeffrey

have a actually may. both actually I you could guys of I weigh maybe couple, in. and Jeff, if

deploy little quarter others. how deploy bit business? and You a you thresholds than so you talk capital terms about a so you maybe when do the investments, and to call this bit out little Could of in consistently just more or and IRR reinvest you philosophy in

Jeffery W. Yabuki

Sure.

think trade-offs a traditional we make, we IRR. that investments the philosophically, as So opposed maybe about capital to more the

it acquisition, investments, So an value make if share repurchase, to compare do terminal IRR things is up impacting going like of you be. how about want would competitive how to that lots market? be end think to the our problem does to in we're just and whatever IRR with that with position the we can make you The does we incremental with

quarter bit metric were $XX even out And from first which we $XX little was quarter, I stay it hit. so more very the large, next an call not. trying we're the little doing think quarter. to that to a that and this a why allocations The third capital, this lighter to least the incremental we maybe margin really which people in was in idea very as quarter that away pool, we expected, We'll large referenced we the million perspective, that in a are that tend your because quarter have is million, coming at in bit started of unless bigger reason than hit to

so that going about invest where, is expedite think to a and right investments year or opportunities technology capital looking feature for out the for think to And EPS, XX% we to pointing function deliver in looking in XX% we're overall. way other also to ways frankly, to

Andrew Jeffrey

Okay.

in sustained the guess? growth context So of I organic and revenue growth, earnings

Jeffery W. Yabuki

right, That's and hopefully sustaining right. That's increasing.

what Our in increase that see revenue increase right to moving on basis see into expect growth. now, strategy the can some point would internal XXXX. an is Based to this is we XX X.X% roughly at in we lift year

to we but guidance, we as not move expect to Of course, continue see that's that would formal forward.

Andrew Jeffrey

about you're you managed provide you and may, that there's that recognizing processing, outsources then, as party talk a a little whether you fit around services outsourced into an I opportunity business. bit debit Pass Okay. banks is for also, that more Fiserv generally a else acquired about everything how bank's about a thinking Money just Can Elan ATMs about lot the to do community and if And mentioned, third ATMs? and like how priorities they services

Jeffery W. Yabuki

digital about world ATMs that be perspective, how and will talk hear when center in device-centric clients type we the the front intersect our physical From world, continue with to Sure. strategy.

seeing we're still we're to so people And add ATMs. hearing actually that, want to more those and sophistication

drive – and our have, X,XXX them that to proposition, be we outsourced us over For debit attractive given we most this service the see and EFT a service, we for who clients incremental actually scale so can ATMs pretty that provide. part of as we we of –

given use didn't have the and we for takes capital number that reasons. going expertise. tend bit like We away than two, one, more And have to we two ATMs. acquiring it services stayed the a for from out little add historically Number now, to see sense, it spend we'll we years can couple offerings X,XXX those clients. some of the in morphing make right the just service terms how what of think But world to and we is looking could next

Andrew Jeffrey

I thank you. Okay, appreciate it.

Jeffery W. Yabuki

Thank you.

Operator

you. Thank Jeff Securities. of next from The question comes Guggenheim Cantwell

now is line open. Your

Jeff Cantwell

evening. Good Hi.

Jeffery W. Yabuki

Hi, Jeff.

Robert W. Hau

Jeff. Hey,

Jeff Cantwell

years. Thanks you've for company taking this my questions. led for many Jeff,

You've it various through business seen how cycles. performs

focus risk months right last a there's even three with ago clearly Now, when more on now you us. spoke versus lot macro

what you at then point time ask to is you this moderates to going thinking expect operational cycle. and some U.S. order leverage this far future, as in to pull to the in company able your I'm if degree how through manage what might in be as to would economy So the you perform the

Jeffery W. Yabuki

Sure.

slow to soon Jeff, need the period So, that a technologies how hard mandate are move see to ecosystem. of linked of and It's in along will a economy digital services bit. the begins be with for we to me the real-time a are even trends moderate, we to those with if up significantly to itself in financial where – either digitization investing are monetary

you'll increased one think our revenue seven our and the future years, most be continue you current model the of negatively starts down three, been if that and that services, we growth internal fairly frankly beauties other think take We the over last in spend cycles. at slowdown if steps, financial fact I us of and a defensive we would percentage as drives we expect revenue create pull of in growth. of is that to level that see That all of all internal to of of as see the a where of impact of our meaningfully go five, level we've free And strategically, look cash. a are back play, incremental be revenue such based flow-through impacting one things, as back without as needed able said, strong investments. will I that So the to slowing have the to can on we data, that

I I'd So imagine. like that as think think as have fact all time, the well well we've rein reduce, ability our as to that to and us lever overall. for operational the about you be about needed. and that strong do that able well years as expect XX-plus in, effectiveness, costs it a think I pretty And restructure might talk as more we we're last to demonstrated We of We positioned. we the as

Jeff Cantwell

Okay, great. Thanks very much.

Jeffery W. Yabuki

Thank you.

Operator

next Brett Stephens. Thank of from you. comes question The Huff

is Your now open. line

Brett Huff

guys. evening, Good

Jeffery W. Yabuki

How you? are

Brett Huff

Good.

Robert W. Hau

Hi, Brett.

Brett Huff

got us, pay. acquisition especially on big you in on a maybe know lot and right processing? moving serve in I specific and of up question like of bill maybe or more you moving core up pretty banks, a immediate couple a thoughts about verticals interesting contracts. that guys market about or you're where the to digital market, One large it now? in But is payments and going That very is Any was strategy And maybe sounds just in Dovetail. is even there this demand account an

Jeffery W. Yabuki

as a who a really number bill have pay. you with It's of combination us Brett, both. work clients We, know, of on large

strategy. of work us large the door we and us also back to to And the the interaction in number was evolving, digital. a see clients We rails have how interesting about talk that to that who with and allow open just are come on

you other thing over ACH The owned which the fit nice is majority today, PEP+ and PEP+. by PEP+, see Dovetail the in is we goes the that a know is of and U.S., probably between us,

who payments of for is clients part we've strategy. Dovetail to on help served able being the modernize So with also years

the to move pipeline continue market it's hopefully But pace it at we pleased good, and looks So coming with we'll the quarter, make and results will the the The were that in progress. together. moves.

Brett Huff

own think, focus, that. there's to then to more gathering, partners, or And thanks. having lot I Great, not a banks the more alternative on banks looking also helping gathering necessarily using like things do deposit itself, been function deposit

were like that? just things kind of focus do, of What things I you us Some alternative guys lending, of you you that. digital MoneyXX/XX. remind some been it's know developing? those you the whether various Can featured of have do at your products given

Jeffery W. Yabuki

certainly that on of the majority are work. things on we're lending doing The – focused we're doing

seeing with of across this are we mentioned, a look gather things Internet things more we're some parties who banks Immediate integration like moving be who is to deposits attracting into to basis, around basically bit and that. brands deposits are around go set I partnering is then, on more which brokering and of able We the about to And but branches, non-customers Funds, as more As little an third deposits. offshoot, separate out mentioned, and do work up some a ecosystem.

Brett Huff

Great, I that's Thanks, I appreciate needed. what it. guys.

Jeffery W. Yabuki

Thank you.

Robert W. Hau

Thanks.

Operator

The from you. Thank Huang Tien-Tsin next question of comes JPMorgan.

is open. line Your now

Tien-Tsin Huang

Hi, thanks so much.

Jeffery W. Yabuki

Sure.

Tien-Tsin Huang

I replenish What Happy to the concept I expectation strong but flush for in I Halloween the what your to want being every you you able see – of do to guys. and ask fourth on there beneficial? Jeff, the maybe type backlog sales you of quarter. and comment on this year, whatnot? ask might the like budget be that feel a is pipeline

Jeffery W. Yabuki

do as about it, talk We we should.

the the Part digital from to case. front, year-end the some We others. of That's lot it QX Zelle, is also larger had to Fourth have those sales, lot you've around whether the transformation, from due payment Architect movement of going DNA, that. is strong. there, always – QX. on a You it budgets. have QX QX have a rail revenue slip And so to or we on are always quarters got some the whether sales be we

trends the we we've for connected same to it to get next but year. off I can the also kinds spin going of so and get got project this urgency think done of So year the

Tien-Tsin Huang

it. Got

that's Okay, good.

reinvestments it, contemplated, my to on the just the Because a I covered lot follow-up better Elan? you trying change front, So contemplated. just side, understand margin of is know on the maybe I'm clear wasn't changed. But it to what incremental know. the is outlook, be margin you my timing I in the tax

Jeffery W. Yabuki

Are about Sure. to being be to you XX% XX% going from to to it's about going saying talking XX%?

Tien-Tsin Huang

to Right. the What's to get XX%? incremental

Jeffery W. Yabuki

a are cycles acquisitions well one the a a There slower. of biggest couple ramping as last of we in Elan. as things. little took The They're little the is bit say would brought the that sales impact year I longer.

us of X instead Y we signing signed So deals. deals,

Elan million, there one. impact. point up it say of dilutive So tax got and but moderately million material investments. was would has few well. I that things the some for, like incremental the adds basis by acquisitions, to incremental that's be then few them looking million not few diminish are here can is given the year That how are that progressing, will We've been themselves And there, around as we a and to reform. due none but a investments make a just it a you've

things. So it's of those kinds really

Tien-Tsin Huang

that clarification. for thanks it. Okay, appreciate I

Robert W. Hau

Sure.

Jeffery W. Yabuki

Thank you.

Operator

The Sachs. Goldman Thank comes next question you. Schneider of from James

Your open. now line is

James Schneider

of quarters. the quite the the think just the And couple basis Because sales my for maybe I taking topic to returning over deals? for just attainment new question. the to whole light. some you of robust size sales can still competitiveness the or Thanks slippage Is But seems feels your QX. the the core think question from maybe afternoon. year QX commentary some bit you of date, Good a full-year deals? peers past some that a of I talked address moment, of of on Maybe a about of little to from

two square just issues. I wanted to So those

Jeffery W. Yabuki

Sure.

around the that had that really to we which the sales. an term on was first the answer have so were question the they of comparative So fact ones We were had slipping, impact. mentioned the adjustment, issue part an our deals larger the

environment. it, up a in I we squaring over sales it's year, stage. year robust think as the the as as and XX% seeing strong early are stage Pipeline late at very is both well

in more that. and than we think give others percentages exact like terms bit information of a probably things I

quite how up quarter next very and fourth we're little bit agree well easier XX% for that our positioned a be also So a see bit But ends quantitative is strong playing to expecting a we'll little again, out. year. would I data it's think light. the

James Schneider

we of back That's talk financial cash flow conversion of into side, cash investments a issue good that revenue free maybe able where talked you're that is that it levers about maybe of there, an what to some was of CapEx is the XXXX, get are slightly or hear. actually to I date, on just percent or you pull to maybe that. and percentage, as playing an about Can to factors into it down are to the up and be? assume head factors of as some And that that driving the the year you And free some to would normally flow lower please? then issue

Robert W. Hau

Jim. It's Bob.

and We a The down number. the that's performance is we few largest million dollars, a the $XXX a cash million year-to-date business Lending don't driver anymore. good are just divestiture, that dollars, an nominally have million of couple on generated year-over-year that

actuals. our make it's adjust or year year's So didn't to last last modifications any we in numbers,

So the biggest that's driver. probably

up saw expect, numbers conversion nicely bit timing third to XXX%. a conversion year-to-date behind. driven CapEx jumped as of spending. what been very well capital the quarter that's working and our would we typically as really rate is overall We've You in rate by The not

investments tax Some those savings of with reinvestment of we've spending. the also that talked about bringing capital that is

next year. into moderate will that So

guidance of and in hit the have for of to year into XXXX expect a range fourth beyond. the and We XXX% end very strong quarter be good shape bottom and this

Jeffery W. Yabuki

really business back little matter it's a the Lending a CapEx, should to things that it relates cash of clarify as flow to more a come normalized just the more route. But bit to itself,

James Schneider

thank Great, you.

Jeffery W. Yabuki

you. Thank

Operator

Thank Northcoast Kartik you. Research. The question next comes from Mehta of

Your line is now open.

Kartik Mehta

Good Bob. evening, and Jeff

Jeffery W. Yabuki

Kartik. Hi,

Kartik Mehta

the already percentage of at backlog what sales of to word, use you – revenue to anticipating still fourth bag for have business, the look you and hate what you're but the in quarter, this I in the as the XXXX, Jeff, backfill? do is

Jeffery W. Yabuki

balance, recurring range year to the depending you're on in our XX% So revenue XX% in. on what is

that's a to that's bag. notion the think the using in of say, So I proxy certainly reasonable

number. we revenue additional of sight of into I think whole recurring revenue it. that a bunch also to think have about way a But that's fair line above

and in to it's point quarter And million change. $XX because get is $XX million. fairly X%, ultimately So is the a small million go a Bob me in number if even it's it's that going tell roughly, $XXX really is But a it's category.

Robert W. Hau

Roughly.

Jeffery W. Yabuki

range. million But you $XX of in the to that is shifts month because million those just that have a X% it's range, $XX in can that

Kartik Mehta

you that And for are to then, it XXXX, things be anticipate for Bob, do or tax XXXX, XXXX? might change just rate to there the similar

Robert W. Hau

for had. that guidance we'll of I just items original manage, pointed looking No, we we type normalized of of would the in look one we for XX%, to but that of things rate more It's always is out That's we're tax XX% to and thing. discrete of below we course, that given rate. that XX% think But prepared long-term to us. some remarks. an the the is expense dip year This line XX% a a came out with normalized

Kartik Mehta

Thank you appreciate much. it. I very

Robert W. Hau

Thank you.

Operator

Shirvaikar next question from Thank Citibank. Ashwin from comes The you.

is open. line Your now

Ashwin Shirvaikar

Thanks. Hey, Jeff. Hey, Bob.

Robert W. Hau

Hi, Ashwin.

Ashwin Shirvaikar

Happy Halloween.

Jeffery W. Yabuki

Okay.

Ashwin Shirvaikar

guess also You tend guys color larger competitive I gave happens. mean that. appreciate to many But I sales. a on lot larger of slippage, that deals deal good I ways. be in

that this the do suppose your So thinking quarters? internal rate, push believe you if out internal assumption is ahead future a can more rate don't into p\and ramps the growth or question you deals year's if good I win, is guess growth affect

Jeffery W. Yabuki

we up prevail pausing a sure, not. will these competitive basis deals is is deals that have I'm talking – or about belief because The actually that That pipeline element. of weighted smaller our tend on the and that larger XX% to we're

next year expecting you're that an on it were Now, impact and, bunch this sometimes think we don't and that we you you things happen lose. if transactions lost to a win, year. have to lose of certainly going things revenue And frankly, could

always we are that's we'll to product least and to a make we doing growth. have internal X.X% the time, sustain go-to-market that perspective now to obviously what feel sure we're We in revenue at pretty we're need And right win. the think continue we that that where do we'll achieve I But good to winning. to from a over about ensure case.

Ashwin Shirvaikar

and me you on executives the question and in it's the the the what right. and Got continue things debt, that. win on new for sign then of then things paying ways hearing like improve, a is bank And so that imply in that hypothesis rate, fixed of that I a And bullish a debt? environment and to cost as so rate for with technology it, ensure spending to end probably What about up the quick think will it guess of speak forth? intentions would you're you at because a implies to terms fair with spending is to that. regards some

Jeffery W. Yabuki

me the the know I'm – going though So I Ashwin. let take the one, answer last take Bob that, to even let to

Ashwin Shirvaikar

Okay.

Jeffery W. Yabuki

made on, to spending up on have The bullish. to financial quite what transformation knows to is digital the keep services with is front. technology everyone be going investments environment now, in that continue Right

cyber, on then payments other notion going lots there. There's whole a the of around still there's risk, revitalization. just ton in going of So kinds and on

going there's lot made that Most "decisions" things. a been those to do of So on. have of

resources finding Now making partner, own sure get the a have matter right it's decision, in shops right the this of their done. to making the they

to on movement, the focus. of lot out. side things see I going done side, RPA, to can to money the the even constraints the because new of a of we other not their other some side higher to this what's is us, of in just wave, of people in is do financial order and get say all that's And do digital up fact, technologies, And go. get payments, the you that, institutions of other experiences, financial now on talk to get there but cleaned pair And of of what's a own systems to about and have the wave level be begun where But that cognitive the energy that. all and to and intersection would motivation is haven't One resources legacy have able to there's done. things on

pretty pretty it's So overall. perspective, bullish good from that

Robert W. Hau

to Ashwin, refinancing, this just answer the going I'm cost After And, we're on tax. debt. about X%, of under X.X% after question your

Ashwin Shirvaikar

Can to to ramp? acquisitions that one issue, ramp. – slow in squeeze last a mentioned or on the slow you product get was a have that – very explanation full good. what the Is it, one a just Got I had led

Jeffery W. Yabuki

I'm sorry, Ashwin. about? Which talking product are you

Ashwin Shirvaikar

the No, no. have had slow said you a When acquisitions that ramp.

Jeffery W. Yabuki

said cycles. sorry. about something I you said activations. – thought all sales It's you I Acquisitions. I'm thought

so how payments the to terms cycles client Dovetail on took took then gone going have little about of platform announced in were just win. and couple side cycles longer. bit comfortable we to – how So invest about of transactions. we how the long a a And for continue long sales It's to people it the it's get that

is main sense? that the Does So slowdown to relative we've what happen. make that to that seen idea expected we

Ashwin Shirvaikar

yes. sense, makes That

Jeffery W. Yabuki

Okay

Ashwin Shirvaikar

Yes, got you. it. Thank

Jeffery W. Yabuki

for and afternoon. joining you, Thank everyone, this us thanks,

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

Operator

And that concludes today's participation. conference. Thank you for your

may You now disconnect.

Tiffany Willis	Fiserv, Inc.
Jeffery W. Yabuki	Fiserv, Inc.
Robert W. Hau	Fiserv, Inc.
David Mark Togut	Evercore Group LLC
David J. Koning	Robert W. Baird & Co., Inc.
Andrew Jeffrey	SunTrust Robinson Humphrey, Inc.
Jeff Cantwell	Guggenheim Securities LLC
Brett Huff	Stephens, Inc.
Tien-Tsin Huang	JPMorgan Securities LLC
James Schneider	Goldman Sachs & Co. LLC
Kartik Mehta	Northcoast Research Partners LLC
Ashwin Shirvaikar	Citigroup Global Markets, Inc.

Fiserv (FI) 31 Oct 182018 Q3 Earnings call transcript