Fiserv, Inc. (FI) had an impressive run in the past year. The company's shares have risen 16.9% compared with its industry and the Zacks S&P 500 composite's growth of 7.3% and 2.9%, respectively. Three-Months Price Performance Image Source: Zacks Investment Research FI's revenues are expected to increase 6.3% year over year in 2024 and 9.1% in 2025. Its earnings are estimated to grow 16.2% in 2024 and 15.7% in 2025. Fiserv's Positive Earnings Surprise FI has delivered a decent earnings surprise in the trail ...

Fiserv clients will be able to more easily enable PayPal, Venmo and related services, and accelerate guest checkout flows in the U.S. via a simple connection point to Fastlane by PayPal. These enhancements are enabled by an expansion of the global strategic partnership of Fiserv and PayPal, the companies said in a Thursday (Aug. 29) press release emailed to PYMNTS. "Our expanded partnership with PayPal supports our mission to enhance client value by providing simple, cutting-edge solutions to our clients th ...

JHVEPhoto Fiserv, Inc. (NYSE:FI) has reported a good operating momentum in the last quarter and its valuation remains attractive, making it a good growth play for long-term investors. As I've covered in previous articles, I see Fiserv as an interesting growth play within the digital payments industry, as the company has strong fundamentals and growth prospects, but this was not reflected in its valuation. Since my last article on Fiserv, back in December 2022, its shares are up by more than 60% and have out ...

Company Overview - Fiserv Inc. is a leading fintech company with a market cap near $90 billion and revenue approaching $20 billion, providing technology services to financial institutions [1] - The company has double the market share of its closest competitor, Jack Henry, in the bank core processes market, which is essential for handling deposits and processing loans [2] Revenue Growth - Fiserv's revenue has significantly increased over the past decade, particularly after acquiring First Data Corp. in 2019, which enhanced its payment processing capabilities [5][6] - The company’s revenue segments include Acceptance, Fintech, Payments, and Corporate or Other, with all segments generally showing an upward trend in revenue [5][6] Market Potential - The global core banking software market is projected to grow from $58.01 billion in 2024 to $17.19 billion by 2031, indicating a strong growth trajectory for the industry [4] Operating Expenses and Margins - Although expenses have risen, they are increasing at a slower rate than revenue, leading to improved operating margins across all segments [6][9] - The operating margins for Acceptance, Fintech, and Payments segments have shown a steady increase since 2019 [9] Valuation Metrics - Fiserv's current price-to-earnings (P/E) ratio is just below 20, significantly lower than its 10-year median of 28, suggesting a valuation discount [10][11] - The PEG ratio is around 1.04, which is more than 30% below the industry median, indicating favorable growth prospects relative to its valuation [11][12] Investment Appeal - Fiserv has a GuruFocus score of 94/100, positioning it as an attractive investment compared to other software companies [13][14] - The company’s markets exhibit strong growth potential, and its margin expansion is notable, making it a compelling investment opportunity [20] Financial Health Indicators - The Altman Z-Score is at 1.60, indicating a higher risk of bankruptcy, while the Altman Z2-Score is at 1.77, which is above the distress level, suggesting some financial stability [15][17] - The Z2-Score has improved by about 15% since 2019, reflecting a gradual recovery post-acquisition of First Data [18][19]

As time moves through the hourglass, so does the lifespan of sectors. One such domain is the financial services sector, which is experiencing rapid change. The fundamental shift in the financial services sector is due to technological innovation. However, large banking entities have been slow to adjust their business models, due to cumbersome restructuring processes. Therefore, early-stage financial technology, or FinTech, firms are provided the latitude to tap into the radical change experienced within the ...

Revenue Growth - Revenue in the Merchant segment increased by $204 million, or 9%, in Q2 2024, and by $461 million, or 11%, in the first six months of 2024 compared to 2023 [152]. - Small Business contributed 8% and 9% to segment revenue growth in Q2 and the first six months of 2024, respectively, driven by increased payment and transaction volume [152]. - Revenue at Corporate and Other increased by $13 million, or 4%, in Q2 2024, and by $30 million, or 5%, in the first six months of 2024 compared to 2023 [347]. Operating Income - Operating income in the Merchant segment increased by $137 million, or 18%, in Q2 2024, and by $314 million, or 23%, in the first six months of 2024 compared to 2023 [349]. Net Income - Net income for the first six months of 2024 was $1,661 million, an increase of $390 million compared to $1,271 million in 2023 [159]. Cost Efficiency - Cost of processing and services as a percentage of revenue decreased to 32.4% in Q2 2024 from 34.4% in Q2 2023, indicating improved operational efficiency [348]. Stock Repurchase and Debt - The company repurchased $3.0 billion of common stock in the first six months of 2024, compared to $2.5 billion in the same period of 2023 [160]. - The company completed a public offering of $2.0 billion in senior notes in March 2024 for general corporate purposes, including share repurchases [357]. - Total long-term debt increased to $24,401 million as of June 30, 2024, compared to $22,363 million at the end of 2023 [163]. - The board of directors authorized the purchase of up to 75.0 million shares of common stock, with no expiration on this authorization [367]. Tax and Compliance - The effective income tax rate for the first six months of 2024 was 18.2%, down from 19.2% in the same period of 2023 [351]. - The company was in compliance with all financial debt covenants during the first six months of 2024, with expectations to maintain compliance moving forward [362]. Risk Management - The company actively monitors market risks, particularly from fluctuations in interest rates and foreign currency exchange rates, and utilizes derivative instruments to hedge against these risks [364].

Core Insights - Ponce Bank recently celebrated the graduates of its Small Business Bootcamps in the Bronx, Manhattan, and New Jersey, aimed at providing essential business planning and growth tools to local entrepreneurs [14] - The program has successfully engaged over 1,100 participants since its launch in 2020, highlighting its impact on underserved communities [5] Award Recipients - The Bronx award recipients include: - Jennifer Silvestre, Nasir + Idie Kids, received $10,000 for apparel and fashion for children with special needs [2] - Melissa Groneveldt, Yummy Tummy, received $7,500 for gluten-free, sugar-free sweets [2] - Saraciea Fennell, The Bronx is Reading, received $5,000 for promoting literacy [2] - The Manhattan and New Jersey award recipients include: - Wioletta Sudol, The Helper Bears, LLC, received $10,000 for tech education for older adults [3] - Emely Martinez, Roxanna, received $7,500 for affordable fashion [3] - Chere Montgomery, WealthStorm Consults, received $5,000 for business consulting [3] Community Impact - Ponce Bank emphasizes the importance of small businesses in providing jobs and cultural diversity, supporting community leaders through educational initiatives [4] - The collaboration with The Business Outreach Center Network aims to improve economic prospects for traditionally underserved groups [5][16] Program Structure - The Small Business Bootcamp consists of a four-session program covering essential topics such as small business banking, accounting principles, and business planning [6] - Fiserv provided subject matter experts to enhance the educational experience for participants [9] Company Background - Ponce Bank, founded in 1960, focuses on improving financial outcomes for minority and immigrant communities, with $2.8 billion in assets and a strong presence in the New York Metro area [10] - Fiserv, a Fortune 500 company, is a global leader in payments and financial technology, recognized for its commitment to innovation and excellence [11]

During the event three local business owners from the Bronx and three from Manhattan and New Jersey, who previously pitched their business ideas to a panel of judges, were recognized and presented with awards they can use to grow their businesses. The awards are sponsored by Fiserv, a leading global provider of payments and financial technology, including the popular Clover point-of-sale and business management platform. The Small Business Bootcamp Man/NJ award recipients are: With the support of The Busine ...

Earnings Performance - Fiserv reported mixed Q2 2024 results with adjusted EPS of $2.1, beating the consensus estimate by 1.9% and increasing 17.7% YoY [1] - Adjusted revenues of $4.8 billion missed the consensus estimate slightly but rose YoY [1] - Processing and services revenues of $4.1 billion increased 5.5% YoY but missed the estimate of $4.2 billion [3] - Product segment revenues of $967 million rose 16.2% YoY and exceeded the estimate of $911.7 million [3] Segment Performance - Merchant Acceptance revenues of $2.4 billion increased 9.2% YoY and met estimates [4] - Financial Solutions revenues of $2.4 billion rose 6% YoY and met estimates [4] - Merchant Acceptance adjusted operating margin was 36.6%, up 290 bps YoY [4] - Financial Solutions adjusted operating margin was 45.9%, flat YoY [4] Balance Sheet & Cash Flow - Fiserv ended Q2 2024 with $1.2 billion in cash and cash equivalents, flat QoQ [5] - Long-term debt increased to $24.4 billion from $23.8 billion in Q1 2024 [5] - Net cash from operating activities was $958 million, with free cash flow of $1 billion [5] - Capital expenditure was $420 million, and the company repurchased 10 million shares for $1.5 billion [5] 2024 Guidance - Fiserv raised its 2024 adjusted EPS guidance to $8.65-$8.80, with a midpoint of $8.73, higher than the consensus estimate of $8.69 [6] - The company increased its YoY EPS growth guidance to 15-17% from 14-16% [6] - Organic revenue growth is expected to be 15-17% YoY [6] Stock Performance - Fiserv stock gained 21.2% over the past year, outperforming the industry's 11% rally [2] Peer Performance - IQVIA Holdings reported Q2 2024 adjusted EPS of $2.6, beating the consensus estimate by 2.3% and increasing 2.4% YoY [8] - IQVIA's total revenues of $3.8 billion surpassed the consensus estimate and rose 2.3% YoY [8] - Omnicom Group reported Q2 2024 EPS of $1.95, beating the consensus estimate by 3.7% and increasing 7.7% YoY [9] - Omnicom's total revenues of $3.9 billion surpassed the consensus estimate by 1.1% and increased 6.8% YoY [9]

Financial Data and Key Metrics - Adjusted EPS for Q2 2024 was $2.13, up 18% YoY, driven by strong revenue growth and operating margin expansion [9] - Adjusted revenue growth was 7%, with organic revenue growth at 18% [9] - Adjusted operating margin increased by 160 basis points to 38.4% [9] - Free cash flow was $1 billion in Q2 and $4 billion over the last 12 months, with $1.5 billion returned to shareholders via share repurchases [11] - Full-year adjusted EPS outlook raised to $8.65-$8.80, up from $8.60-$8.75, with organic revenue growth guidance maintained at 15%-17% [23][54] Business Line Performance - **Merchant Solutions**: Organic revenue growth was 28% in Q2, driven by Clover revenue growth of 28% and small business volume growth of 4% [24][37] - Clover's annualized payment volume grew 17%, with value-added solutions (VAS) penetration at 20% [37] - Enterprise organic revenue growth was 27%, driven by transaction growth of 8% and higher VAS penetration [38] - Processing organic revenue declined by 7%, with year-to-date growth at 1% [39] - **Financial Solutions**: Organic revenue growth was 8% in Q2, with digital payments and issuing growing 8% and 9% respectively [46][47] - Zelle transactions grew 43%, and 32 FIs signed up for FedNow in Q2 [46] - Banking organic revenue grew 6%, excluding periodic revenue [50] Market Performance - **International Expansion**: Pilots for Clover in Brazil and Mexico set to go live in August, with Australia following in September [25] - In Brazil, instant payment transactions reached 400 million in Q2, up 21% from Q1 [44] - In EMEA, partnerships expanded with BNP Paribas, H&M Group, and Deutsche Bahn [41][42][43] - **Latin America**: Sequential volume growth in Brazil was over 20%, with Pix platform pilot going live [44] - **Asia Pacific**: Merchant acquiring services launched in New Zealand, targeting hospitality and retail segments [45] Strategic Initiatives and Industry Competition - The company is integrating solutions like CashFlow Central and Experience Digital (XD) to enhance revenue generation for clients [16][19] - New partnerships with Apple enable features like "pay with points" and installment loans on credit cards, enhancing consumer choice at checkout [20][21] - The company is leveraging its data capabilities, including the Fiserv Small Business Index, to provide actionable intelligence and anti-fraud solutions [64][65] Management Commentary on Operating Environment and Future Outlook - Management highlighted the company's ability to sustain double-digit organic revenue and EPS growth, with 2024 marking the 39th consecutive year of such growth [23] - The company is focused on expanding its global footprint, particularly in Brazil, Mexico, and Australia, with full ramp-up expected in 2025 [70][72] - Management expressed confidence in the resilience of the business model, citing strong demand for Clover, CashFlow Central, and other value-added solutions [110] Other Important Information - The company is celebrating its 40th anniversary and the 5th anniversary of the Fiserv-First Data merger, highlighting the success of the integration and the vision set in 2019 [12] - The company is investing in AI and data science, with plans to launch client-facing anti-fraud solutions in the fall [63][64] Q&A Session Summary Question: International expansion in Brazil and Mexico [70] - Pilots in Brazil and Mexico are set to go live in August, with full ramp-up expected in 2025 [70][72] - The company has a strong growth trajectory in Brazil, with expectations for continued performance [71] Question: Margin outlook and productivity [81] - The margin outlook was raised due to strong organic growth and ongoing productivity improvements [81] - The company expects continued margin expansion driven by scale and operational efficiency [82] Question: Small business and enterprise transaction growth [83] - Small business volume growth slowed in Q2, with July showing growth in line with Q2 expectations [89] - Enterprise transaction growth was impacted by declines in processing volumes, but overall performance remains strong [87] Question: CashFlow Central monetization [92] - CashFlow Central is expected to generate revenue through subscription fees and transaction fees, with strong demand from financial institutions [96] - The product is part of a broader SMB strategy, integrating Clover, digital banking, and other solutions [95] Question: Banking sub-unit growth [98] - Banking organic revenue grew 6%, driven by strong demand for services and Finxact wins [99] - The company expects sustainable growth in this segment, supported by ongoing client demand [98] Question: Financial solutions segment growth [101] - The financial solutions segment is expected to accelerate growth into 2025 and 2026, driven by CashFlow Central, XD, and Finxact [102] - Large client wins like Verizon and Target will contribute to growth in 2025 and beyond [104] Question: Merchant segment guidance and macro factors [106] - The company maintained its full-year organic growth guidance despite easing transitory benefits from Argentina [108] - Growth is supported by strong performance in Clover, value-added solutions, and CommerceHub [109] Question: Clover growth and customer retention [113] - Clover continues to outperform in terms of customer retention, with strong demand for value-added services [115] - The company is focused on expanding Clover's product set and vertical expertise [117] Question: M&A strategy [119] - The company remains focused on value creation through acquisitions, with no preference for public vs private targets [120] - The strategy is centered on leveraging the company's distribution channels and embedded finance capabilities [120]