Core Insights - BlackBird Financial has established a significant ownership position in Fiserv, Inc., a leader in financial technology and payments infrastructure [1] - The investment decision was based on a detailed review of Fiserv's competitive position and long-term prospects, highlighting a gap between market perception and the company's potential [2] Company Overview - Fiserv is integral to the global financial system, facilitating the movement of billions of dollars daily for banks, merchants, and consumers [3] - The company is recognized for its deep integration into client systems, creating a substantial operational backbone that is difficult to replace [5] Leadership Confidence - BlackBird expresses strong confidence in Fiserv's CEO, Mike Lyons, emphasizing his strategic approach to the company's turnaround [4] - The firm supports management's long-term vision and does not intend to take an activist role [5] Competitive Position - Fiserv is one of the largest providers in core processing for U.S. banks and credit unions, with high switching costs that reinforce its market position [6] - In merchant acquiring, Fiserv competes with major players and benefits from the distribution of its Clover platform, making it challenging for merchants to switch providers [8] - The company also plays a crucial role in PIN-debit routing and bank connectivity, with embedded capabilities that are difficult to unwind [9] Market Outlook - Fiserv has generated over $5 billion in adjusted net income in the past twelve months, with expectations for increased earnings in the future [11] - The current market capitalization of Fiserv is around $33 billion, suggesting a favorable valuation opportunity for investors [11]

Investment Rating - The report assigns a 12-month rating of Neutral to Fiserv Inc (FISV) with a price target of US$75.00, while the current price is US$62.69 [5]. Core Insights - Fiserv is consolidating its 16 core offerings into 5 platforms, allowing clients to migrate at their own pace, with significant progress already made [2]. - Management is adjusting pricing strategies in digital payments and SMB segments to be more competitive, particularly in the Clover product line [3]. - The company anticipates a decline in total company margins by approximately 200 basis points for the full year, with specific segments experiencing varying levels of margin compression [8]. Summary by Sections Core Banking Consolidation - Fiserv is reducing its core offerings from 16 to 5 platforms, with a focus on migrating clients at their own pace. The company serves around 3,500 US financial institutions within an addressable market of approximately 8,000 [2]. Pricing Decisions - Management plans to adopt more competitive pricing in digital payments, particularly for debit networks, while maintaining premium pricing for Clover products. Some previously implemented fees have been eliminated based on partner feedback [3]. Non-Clover SMB Insights - The non-Clover SMB segment has seen revenue declines primarily due to issues in Argentina, but growth is expected to stabilize moving forward. Management is cautious about converting non-Clover clients to Clover, ensuring a clear value proposition [7]. Margin Expectations - Fiserv expects total company margins to decrease by about 200 basis points, with Q4 margins projected to decline by 750-800 basis points. Merchant Solutions is facing significant margin compression due to lower expected high-margin revenue [8]. Capital Allocation and Free Cash Flow - The company anticipates maintaining a free cash flow conversion percentage similar to historical levels, with capital expenditures expected to be around US$1.8 billion in 2025, representing about 9% of revenue [9]. Financial Projections - Revenue is projected to grow from US$16.613 billion in 2022 to US$22.201 billion by 2029, with net earnings expected to fluctuate around US$4.205 billion in 2022 to US$4.396 billion by 2029 [4][15]. Valuation Metrics - The report highlights various valuation metrics, including a P/E ratio of 15.4 in 2022, expected to decrease to 6.0 by 2029, indicating a potential undervaluation of the stock [16]. Additional Insights - Fiserv is expanding into new verticals, such as healthcare, and enhancing its distribution channels through increased sales personnel and partnerships with banks and ISOs [10][12].