Fiserv, Inc. (FISV) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A reveal a generally positive outlook. The company is addressing high attrition with strategic initiatives, and Clover shows promising growth potential. While non-Clover SMB experienced a decline, expectations for slight growth and international expansion are positive. AI initiatives are enhancing value for banking clients, and the competitive landscape remains stable. Despite some nonrecurring revenue headwinds, strategic actions are expected to normalize growth. Overall, the strategic focus on Clover, AI, and market expansion suggests a positive sentiment for the stock.

Key Financial Performance

Total Company Q1 Adjusted Revenue $4.68 billion, a decrease of 2.4% year-over-year. The decline was attributed to lapping higher nonrecurring revenue from the previous year.

Q1 Adjusted Operating Income $1.4 billion, resulting in an adjusted operating margin of 29.7%. This was in line with expectations.

Total Company Organic Revenue Down 3.6% year-over-year. The decline was due to a differential in organic-to-adjusted revenue of just over 1%.

First Quarter Adjusted Earnings Per Share $1.79. This included a $0.17 positive impact due to a lower adjusted effective tax rate of 11%, which was a timing-related impact.

Free Cash Flow for Q1 $259 million, reflecting typical seasonality where Q1 is the lowest free cash flow quarter of the year.

Merchant Solutions Organic Revenue Declined 1% year-over-year. Adjusted revenue was flat, impacted by lower inflation and interest rates in Argentina.

Small Business Revenue Declined 1% on an organic basis and grew 1% on an adjusted basis. Small Business volume grew 7%.

Clover Revenue Grew 6% year-over-year. Excluding higher nonrecurring revenue from the previous year, growth would have been in the mid-teens. Clover Payment Processing revenue grew 10%.

Clover Volume Grew over 9% on a reported basis and 12% excluding the gateway conversion.

Value-Added Services Revenue (Clover) Contributed 27% of Clover revenue in Q1, growing 18% year-over-year, driven by software attach and lending, including Clover Capital.

Enterprise Revenue Grew 3% on an organic basis and 2% on an adjusted basis. Enterprise transactions grew 8%.

Processing Organic Revenue Declined 14% year-over-year. Adjusted revenue declined 9%.

Financial Solutions Organic Revenue Declined 6% year-over-year. Adjusted revenue declined 5%, impacted by higher nonrecurring revenue in the previous year and above-target attrition.

Digital Payments Organic and Adjusted Revenue Both declined 5% year-over-year. Zelle transactions grew 18%, while Bill Pay transactions declined high single digits.

Issuing Revenue Declined 6% on an organic basis and 5% on an adjusted basis. Global accounts on file grew in the low single digits.

Banking Revenue Decreased 6% on an organic basis and 4% on an adjusted basis. Core counts declined 2% year-over-year, while overall accounts and positions, including Finxact, grew 6%.

First Quarter Adjusted Operating Income for Merchant Solutions $626 million, down 23% year-over-year, with an adjusted operating margin of 26.4%.

First Quarter Adjusted Operating Income for Financial Solutions $877 million, down 24% year-over-year, with an adjusted operating margin of 38.1%.

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Operating Highlights

Clover GPV: Solid growth supported by strategic initiatives and stable macro environment. Clover VAS revenue represented 27% of Clover revenue in Q1, growing 18% year-over-year.

CommerceHub: Transaction growth up nearly 200% in Q1, driven by omnichannel capability and new customer go-lives.

Finxact: Named Best SaaS for FinTech at the 2026 FinTech Awards. Accounts and positions up over 70% year-over-year.

Clover Healthcare and Professional Services: Launched two new verticals with promising early results, including double-digit GPV growth in healthcare and a 20%+ increase in new professional services outlets attaching paid SaaS.

Merchant Referral Partners: Signed 27 new banks as partners, including Western Alliance Bank, expanding reach across the Western U.S.

International Clover Expansion: Brazil Clover outlets up over 30% sequentially, and strong performance in Canada with TD Merchant Solutions integration planned for the second half of the year.

Client Service Metrics: Time to resolve client inquiries down 27% year-over-year. High-impact client incidents down nearly 60% year-over-year.

AI Initiatives: Launched AI initiatives to enhance client portal and call center performance, and to improve software development efficiency.

Project Elevate: AI-driven program identifying opportunities for revenue uplift, cost reduction, and productivity improvement.

Stablecoin Pilot: On track to launch a stablecoin pilot this summer for interbank money movement.

Clover Savings: Merchant Cash Management program set to launch before the end of Q2.

Capital Allocation: Focused on aligning businesses and assets with strategic goals, including potential dispositions.

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Risk or Challenges

Revenue Headwinds in Argentina: Lower inflation and interest rates in Argentina negatively impacted Merchant revenue in Q1.

Environmental Factors Impacting Consumer Spending: Higher gas prices from the Middle East conflict could affect consumer spending patterns, as observed in the Fiserv Small Business Index.

Core Bank Account and Revenue Attrition: Core bank account and revenue attrition remain above long-term trends, posing a challenge to Financial Solutions.

Nonrecurring Revenue Impact: The company is still lapping a higher mix of nonrecurring revenue, which affects reported financial results.

Client Service Challenges: Lingering impacts from prior client service challenges continue to affect financial performance.

Incremental Expenses from Investments: Investments in client-focused growth are leading to incremental expenses, impacting short-term financial results.

Attrition in Banking Revenue: Banking revenue declined due to actions taken over the last several years and higher nonrecurring revenue in the prior year.

Debt Leverage: The company has a debt to adjusted EBITDA ratio below 3.2x, which requires careful management to maintain financial stability.

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Guidance & Outlook

Merchant Solutions Revenue Growth: Expected to grow in the mid-single digits for 2026, with Clover revenue growth in the low double-digits and GPV growth of 10% to 15% excluding gateway conversion.

Financial Solutions Revenue: Expected to be flat to slightly down for 2026, with adjusted revenue decline at the high end of mid-single digits in Q2.

Adjusted Revenue Growth: Projected to grow in the range of 1% to 3% for 2026, assuming a stable macro environment.

Adjusted Operating Margin: Expected to be approximately 34% for 2026, with first half margins at 31%-32% and second half margins at 35%-36%.

Adjusted EPS: Guidance remains at $8 to $8.30 for 2026.

Capital Expenditures: Expected to remain approximately flat with 2025 levels.

Free Cash Flow Conversion: Projected to be approximately 90% of adjusted net income for 2026.

Clover Revenue Growth: Expected to grow in the low double-digits for 2026, with GPV growth of 10% to 15% excluding gateway conversion.

Clover Value-Added Services Revenue: Contributed 27% of Clover revenue in Q1, growing 18% year-over-year, driven by software attach and lending.

Second Quarter Revenue: Expected to be the trough in terms of year-on-year revenue decline.

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Shareholder Return Plan

Dividend Program: No specific mention of a dividend program or any updates related to dividends were discussed in the transcript.

Share Buyback Program: The company repurchased 3.3 million shares during the quarter for approximately $200 million. The CFO reiterated the company's commitment to returning capital to shareholders, with a focus on managing the leverage ratio.

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Key Q&A

Q:What is the visibility on the Banking side and retention given some of the bank conversions?

A:Michael Lyons, CEO, stated that core attrition has been above desired levels but efforts are being made to address it. Measures include increasing client coverage efforts, leveraging AI in call centers, enhancing client portal experiences, and supporting all cores to reduce pressure. The StoneCastle acquisition and embracing the consultant community have also been positive steps. While progress is being made, it will take time to return to historical attrition levels.

Q:Can you discuss the performance of the SMB back book excluding Clover and the testing of non-Clover merchants' conversion to Clover?

A:Paul Todd, CFO, mentioned that there were no unique changes in back book conversion in Q1 and expectations for the year remain unchanged. Testing has shown positive receptivity when there is a good product fit. The Clover GPV guide assumes minimal to meaningful back book conversion depending on the scenario. Michael Lyons added that new verticals in Healthcare and Professional Services have been launched to address back book conversion opportunities.

Q:Can you elaborate on AI initiatives and how they add value to Banking clients?

A:Michael Lyons highlighted four focus areas for AI: enhancing systems of value and collaboration, generating new revenue sources, improving client service, and increasing productivity. Specific initiatives include agentic commerce capabilities for merchants and a governed AI operating layer for financial institutions. Pilot agents are live with two financial institutions, focusing on use cases like loan originations and compliance.

Q:What is the addressable market for Clover PracticePay in Healthcare POS and who are the competitors?

A:Michael Lyons stated that the addressable market is massive, focusing on local doctor practices. Penetration is currently low, and the launch of Clover PracticePay addresses a key need identified by bank and ISO partners. The competitive landscape includes other players in the Healthcare POS space.

Q:What are the nonrecurring revenue headwinds in Financial Solutions, particularly in Issuing and Banking?

A:Paul Todd explained that Output Solutions had significant nonrecurring revenue in the first half of the previous year, creating a comparative headwind. Other nonrecurring revenues exist in Digital and Banking. The second quarter is expected to be the trough, with a more normalized growth picture in the back half of the year due to tailwinds from strategic actions and contracted revenue from client wins.

Q:What is the competitive dynamic in Financial Solutions, specifically in Issuing and Banking?

A:Michael Lyons noted that competition remains strong but unchanged. Fiserv is focused on improving service, product delivery, and speed to market. The Finxact platform is highlighted as a competitive advantage in the modern core space.

Q:What is the organic growth of the non-Clover SMB business and its components?

A:Paul Todd stated that the non-Clover SMB business experienced a low single-digit decline in Q1 but is expected to show slight growth for the year. Growth drivers include ISV expansion and international growth, particularly in Brazil. The goal is to transition non-Clover SMB business to Clover where appropriate.

Q:How does Clover plan to address the competitive environment and product roadmap?

A:Michael Lyons emphasized Clover's strong position as a small business operating system with significant investment in horizontal and vertical features. Distribution channels include direct sales, banking partners, ISOs, and ISVs. Market share is still low in many verticals, indicating room for growth.

Q:What are the senior hires in Merchant Solutions and opportunities for streamlining headcount using AI?

A:Michael Lyons mentioned that Fiserv has brought in talented senior hires to complement the existing team. Project Elevate is focused on improving productivity and efficiency, with AI playing a significant role in areas like call centers and app development.

Q:What is the expected growth trajectory for the Acceptance segment, including Clover and non-Clover SMB?

A:Paul Todd explained that Clover is expected to accelerate from 6% reported growth to low double-digit growth for the year, driven by pricing tailwinds and volume growth. Non-Clover SMB is expected to improve from a low single-digit decline to slight growth, supported by ISV and international expansion.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the exact growth rates or financial metrics for certain initiatives, such as the precise impact of AI on productivity or the exact market share of Clover in various verticals. Additionally, some responses deferred detailed explanations to the upcoming Investor Day.

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Earnings Word Cloud

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Fiserv, Inc. (FISV) Q1 2026 Earnings Call Transcript

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