Welcome back to Evercore ISI 8th Annual Payments and FinTech Innovators Forum. I'm David Togut. I track the payments and financial technology stocks at Evercore ISI. Delighted to host Frank Bisignano, Chairman and CEO of Fiserv. Frank, thanks so much for being with us here today. We greatly appreciate it. My pleasure. My pleasure. Since Clover and Carat are Fiserv's two highest growth payment solutions, let's start there. With both products, you pursued an operating system approach, adding new software applications to help drive growth. With Clover serving SMBs, what new software applications do you expect to add in the next 12 months? What major new software applications do you expect to add to Carat in the enterprise space? Yeah, first of all, want to thanks for having me once again. I think when you think about these, want to they're both operating systems. The beauty of both of these operating systems is they allow us to continue to bring value-added services to our client base. If you think about Clover, we like talking about, want to what we're doing with ARPU, how our software penetration continues to grow. want to I think it's also about the digitization and the automation for our clients to be able to help them grow. want to when you think about us bringing digital storefronts to them, want to. One great example would be what we do with BentoBox on restaurants. I think also, want to when we think about a 23 roadmap, we're very excited in both cases as we're going to continue to scale existing services and add new services. I think about the SaaS stack, think about all the things in there. want to we have great partnerships, and then we have our own products, want to. I think when you think about Clover Capital, we have great trajectory on that, and we'll continue there. W ant to we love the disbursement business and the ability to disburse payments at a greater rate to the total client base, and we see that both in Clover and Carat. Obviously, fraud and data management solutions sit in both. All of those are designed to help our client make more money, right? I want to go back to, want to these are not about anything other than helping small, medium, and large enterprises manage their business better, us delivering integrated solutions across the stack and being able to capture more of their wallet, and in some cases, just purely expanding the TAM, bringing new services to them that they don't have. About things like disbursement in that area and Clover Capital in that area too. Great. As you verticalize Clover for restaurants and retail, what are the most important investments you intend to make? want to what is your timeline to generate substantial additional growth from these two verticals? Well, I mean, I think, want to this is, this is been our pursuit from day one on both of those. want to I think, want to how do we grow them out in a way that helps our clients grow? want to obviously, we have a big bent on omnichannel commerce, right? That's really our mind is dedicated to that. How do we continue to help our clients meet their clients where they want to be met? That would be a theme across the company, in all honesty. It's not limited to this, but it's what we're talking about now. want to how do we deeply integrate Clover and Bento? want to we take our Nextable solution, want to and create frictionless commerce for our clients. How do we continue to bring integration into retail so we help the omnichannel experience and allow our clients to meet their clients where they want to be met? Want to we continue to look at the roadmap in order to add other features to support the gig economy too, for our retailers and our restaurants and our disbursements products and the products that go along with that. I think, want to you'll continue to see us lean in in these. We have a great foundation. We hold ourselves very accountable to ARPU and driving LTV. want to you've heard us report on that. We'll continue to do that. want to I think our solutions are targeted at helping these businesses grow. What inning are you in terms of verticalizing Clover for restaurants and retail? Well, want to it's all according to how many innings you think the game is. want to there's been 24 inning games in baseball. I think we're further along in restaurant. The reason why I answered that 24 inning point is this is a constant journey, right? I mean Clover's been a constant journey. Carat's been a constant journey. Verticalization's been a constant journey. want to we're never satisfied. We always feel like there's so much more to do. Obviously we're distributing BentoBox, we're distributing Clover Capital, we're distributing disbursements, and we're growing ARPU. want to I can't imagine a time where we'll ever say we're in the 8th inning. We'd probably be in the 8th inning if we thought the game was going to 24 like that did one night at Chase Field. Understood. Just shifting to distribution. Last year, you added 174 ISVs. For this year, what are your plans to expand the ISV channel, direct sales and bank merchant, which itself was one of the biggest revenue drivers in the Fiserv First Data acquisition? Yeah, I mean, we love all of those. want to obviously direct sales and direct acquisition we've built out over time and is continuing to have great traction. want to we do think that our partnerships with bank are very special, and we do see a lot more opportunity there. Obviously, that was a merger item that I really believed in, and I always thought we had a very great bank merchant relationship. That's so expanded within this company. The fabulous and privileged position we have with our core allows us to be able to do things. I do believe that if you're back to the innings, we're in early innings on bringing all that capability we have to our bank partners. I think, want to we started the ISV business by buying properties like CardConnect and BluePay, and then built it out and integrated those, so they became our channel. We love the ISV business. We believe we can distribute Clover into the ISV business. We like software-led payments. We think it's growing very well, and we think, want to our assets play very well to be able to help it along. Thank you for that. Shifting to Carat, how far along are you in building out Commerce Hub, a single orchestration layer? How does that increase Carat's growth opportunities? Well, want to these journeys are journeys, right? want to I keep telling David, like, we're always in the early innings, but we're always winning business because our clients continue to help us evolve our products, right? want to large institutional clients that we have continue to think about how Commerce Hub can be more capable for them than its current version. Not to say that they didn't buy Commerce Hub for the Commerce Hub capability. The fact is we have Fortune 100 companies, want to boarding on to that solution, and they continue to want to evolve the solution for more capability. want to we have an unbelievably robust e-com offering. Carat is super strong, and we will continue to invest in. Want to I think if, want to if we were to forecast out, want to my point of view is in the next 2-3 years, want to Carat will be the dominant winner. We have to continue our investment roadmap. We have to continue what we're doing. want to but our e-com and omnichannel offerings, I think, are very, very strong, and we're going to continue to bring the surrounds around it, want to to help that enterprise solution set. I will say, want to we're proud of all the things we do, but I feel like we have so much more opportunity and so many more things to do. We do think about each year we come into as a very pivotal year to help us continue to grow the businesses and take share. You're rolling out a new Clover gateway, which enables easier access to your full range of value-added services and expands the opportunity for Clover to compete for card-not-present or e-commerce business. When will the new Clover gateway be fully rolled out, and how soon should we expect an impact on new business signings? We've been on this journey for a while. For clarity, we had a gateway. We have a gateway, but this is the most modern, capable capability and a much better, tighter integration. That gateway actually existed before Clover. You can imagine why we invested heavily in bringing this new capability. I think about, want to everything from our virtual terminal to our fraud capabilities to how we do online ordering, invoicing, payment links, want to our wallet integration, all of that will in fact get enhanced on this journey. Many of those capabilities exist today, and I believe even in the advanced fraud area. want to I think it's going to help our businesses manage their business better, which I always say our purpose is to help our clients grow their business. We're a purpose-driven company in business to help our clients grow it. It allows them a better single source of truth of all their transaction volume. want to you're going to see that ramp through the course of the year. As we migrate clients to it. Want to it's just another example of us investing in our business where we already had capability, but to take that capability to the next level. Got it. Thank you for that. We do have an incoming question for you. That's why I'm-. Are you ready for a question? I'm ready. Uh. Let's hope I get it. Frank, one year ago at David's conference, you reminded us of the industrial logic of large mergers, the scale benefits. There's clearly a property for sale with FIS Worldpay. Does this make sense either offensively or defensively? Geez, want to let me just think about that for a second. Look it, we put these two companies together. When I sit back and think about what we have here today and want to how we've been progressing it, I think we've made good progress. I think the merit of what we've done was really, being first. I think that was an advantage. I think we have the best client set in the industry. want to I actually believe, and it's more than I believe, want to it's fundamentally 100% accurate, that we serve every American household. Now, people may not realize that, but if you take out bill pay capability, you take out merchant capability, you take out client base from Walmart to McDonald's to Dunkin' Donuts to, want to Sonic. Want to if you think about we touch Americans every day. Think about our debit network. Think about our retail private label business. I could go on. How many DDA accounts we have and how many, on the above. I think, the industrial logic was very strong. I like to believe having the best client set. I think we do have tremendous products that give us a strategic advantage. I think from Clover to our debit network to Optis to Carat. Our geographical reach, I think, is fabulous. want to a few billion dollars outside the U.S. growing double digits, and having a lot of runway. want to I'd say relative to the property we have, I think we did a good job integrating the company. I think we're back from the pandemic. I would say the pandemic is, want to I think, probably statistically in 2019, this might have been the sixth largest merger done. want to do the sixth largest merger and then, want to within, want to less than a year you have a pandemic, probably is not conducive to getting done everything you can. I feel like we have the opportunity for unbelievable operational excellence by the co-location of our staffs, by the investment we've made in technology and people. I do think our management team is highly motivated to take this whole platform to the next level. That's kinda where we are. I think that's probably the most important part of our journey. want to everybody else's journey is their own journey. Understood. That's very clear. Shifting to payments and networks. In the Q4, you signed large card issuer services contracts with Desjardins and Target RedCard. How material will these two contracts be to 2023 revenue growth? Related to that, what are the major advancements incorporated into Optis, your new card issuer services platform? I back up a second, and I frequently think about when we had Investor Day virtually in December of 2020, at one of those highlight moments of the pandemic. We talked about $120 million of wins that we were going to onboard. We talked about in the terms of 3 top 25 issuers. At that moment, we were thinking it was kind of like, the way I like to phrase it, want to they're 100-year floods. I've come to recognize, like many things, want to a 100-year flood doesn't happen every 100 years. It happens at a much higher interval. When we talked about that $120, we were so darn proud of it and thought it was an incredible number. want to as we onboard these and other wins we've had, we've actually exceeded the 120 number. I do think that leads to, want to the question about Optis. want to Optis has become a, want to a much digitized modular platform that has been enabled in a manner that allows clients to have the best of everything from loyalty to fraud capabilities. It may have been at one point, non-Optis. It was something else, and the investment we made in that somewhat parallels the way you should think about Carat. The taking a bunch of capabilities to the next level in a fully integrated fashion to serve our clients in a manner that we think is state-of-the-art for them. We will always be investing in modernizing our infrastructure. want to I love to remind people, want to people talk about cloud and all of this. Carat was built in a cloud in, want to 2014. We don't necessarily talk about the advances of our infrastructure because we think that's a mandatory requirement, and we don't talk about it as necessarily the strategic advantage. The strategic advantage is the functionality we build around it to allow our clients to run their business better so they can grow. I think it's exciting. want to I think the work done by that team has been significant and, want to they've been market share gainers. Got it. Also, in payments and networks, you announced a large e-commerce client win for debit routing in the Q4. Do you see other large merchants planning to sign up with the STAR Network, effective July 1st, once dual unaffiliated debit networks are required to route every online debit transaction per the Federal Reserve? Yeah, I actually don't believe, honestly, 1 and the other are correlated. want to I think people think they're correlated, but they're not. It wouldn't be the first piece of debit routing business we've done through our career as a matter of fact, STAR Network has a very good capability and is desired, recognizing it is more than STAR. STAR X cel is the number three network in debit and has held that position for a while when it was much smaller at a point in time. I think it has tremendous capability and tremendous bandwidth and helps us grow. I do think that we've yet to see what actually will happen under that regulatory change. Of course, we're working hard on thinking through it. Nowhere in the wins we've had in debit is it driven by that change. It's driven by our pure capability. I would hope that that change is accretive to us. I'd say we don't have anything in our guidance around it. Understood. Within payments and networks, what do you see as the growth outlook for electronic bill presentment and payment? What's the path forward for this business? Yeah, look at, I think one of the things to think about this company is its breadth to size, its capability, whether it's the NOW Network, whether it's Zelle, whether it's our biller capability, whether it's our bill pay capability, whether we can spread our bill pay capability in a wider range. The reason why we sit with a payment segment is our objective is to provide every possible option to our financial institutions and to consumers, right? I think it's very important that, want to as FedNow comes in, we will be a major player and a major leader in that. We've been a leader in Zelle. We've had the best bill pay product in the industry, and we think there's, want to at one point in time, that was going in a direction that we didn't love, and I think we've changed that direction. I want you to think about, want to the largest form of P2P and P2C and C2P. What we want to do is ensure that we give our client base and their client base every possible capability. We believe, want to that we will continue, want to to have payments and payment presentment as a strategic asset inside the company. Thanks for that. We do have another question coming in for you, Frank. This is your first real year to get your hands dirty with improving operational efficiency after having to focus on the First Data integration, COVID, work from home, etc. How excited are you about this opportunity, i.e., improving operational efficiency, and how much low-hanging fruit do you see that you can address in 2023? Yeah. want to I've never thought about low-hanging fruit. It's just not my terminology. I think about it this way. want to this is actually my first year running the company, not in a pandemic. Which means this is my first year running a company with people sitting next to me side by side every day, driving operational excellence. Operational excellence really has a series of items underneath it. How do we elevate our game with our client? I'm committed to be the best in the client's office. I think we have a track record over a long period of time if you check this management team's track record. Obviously, a pandemic is not conducive to driving culture or efficiency. I think we've done a great job in getting as much done as humanly possible during a pandemic. If you ask me how excited I am, I'm on fire on the topic. It's in every meeting I'm in. We are going to be intellectually honest with analytical rigor in every corner we turn. We're going to analyze everything we do and figure out how to do it better. We come from an engineering bent, and we have a manufacturing mindset while driving high performance. I think we could develop our systems faster. I think we could deliver better product for our client. I think we could actually eliminate a lot of things within the company that are redos. want to I plan on, want to us taking this to a place that most people actually don't think are as possible, but inside this company, we know will get done. want to? I could go on forever. You can ask me about anything on that topic. By the way, we have spent the past three years building systems that allow us to drive this operational excellence and management information to allow it, from how we interact with our clients, to how we build our systems, to bringing artificial intelligence into the client experience, to, want to continuing to build out, want to RPA in manners. We now can deploy it. We've moved people into facilities with thousands of people who are all at home or disparate. I think it gives us an unbelievable strategic advantage. We were the people who were crazy enough and dumb enough to take new facilities when it was going to be a 100% remote world. We just had a different strategy. I think that strategy is probably coming our way. Well, on this topic, are you going to start setting targets like Fiserv did pre-First Data, which was $250 million over five years routinely beat? Should we start to expect targets from Fiserv on, want to multi-year cost takeout? How will we see this manifest? How will we be able to track it? I think you should track it through what we tell you in guidance, right, Rowley? Right? I mean, like, I didn't want to we're talking about how we improve in every element of the company, right? want to like, I kinda want to go like this and do what you want with what I'm going to say, and I may get booed at in stadium, but that's okay. We took a 3% and 4% grower and a 5% or 6% grower and came out and told you we would grow 7%-9%. I understand everybody wondered why the hell did we say that. Just because we knew we could do better than that, and it saw us produce 11%. We came out and talked to you in the beginning of the year about second half synergies and what we're going to get, want to when your scoreboard lit up at the end of the year, it showed the outcome we talked about, right? We believe in margin expansion. We believe in more high quality margin expansion, right? High quality margin expansion means, in fact, that we're driving quality and productivity. Anybody can take expenses out. That's not really hard. Grow the top line, get the next dollar of revenue at a higher quality, expand your margin and in fact, drop more to the bottom line. I think you should hold me accountable and my team accountable with that. want to I think that's the metric that I would drive us off of. Understood. Well, you've set a target of 125 basis points for this year for adjusted operating margin expansion. Yeah. That is above the long-term target. Yeah. I think actually, if you go to the tail of the tape, which I like doing, I'd say we laid out a stuff, a bunch of things in 2020. I do believe, we didn't hit the free cash flow conversion rate. I put that all on me, and I said this the other day, this, somebody... want to what people probably thought was 7 to 9 was never happening. What we didn't realize is we had never traveled at that altitude before and what it would take to get 7 to 9 and that 100 or greater in 7 to 9, I've been struggling to find companies that actually do that. I would take that, but I think if you look at the scoreboard, revenues outperformed, margin, EPS, all while we probably had a longer pandemic than we thought, higher inflation we didn't count on, and a bunch of puts and takes. want to hold us accountable to what we tell you we're going to do. You should expect us to get top line benefit out of the way we're going to drive operational excellence because it's going to be the, felt in the client's office, not just on margin. Very clear. We have another question coming in for you. Can you talk about capital allocation now at 2.8 times leverage? You announced the big buyback authorization increase. Recently we're in the debt markets. How are you thinking about buying back stock today versus potential deals as it seems the M&A pipeline is heating up in the industry? Yeah, I mean, want to I don't know that, want to this word big is, I guess as a absolute, it's big. I think if you look, we had announced $60 million, want to and now we've come back with $75 million. I think we've been a very good acquirer of properties. want to we haven't done anything huge in scale, but, want to I think Finxact, BentoBox, Merchant One, Ondot, all tremendously valuable to our long-term growth story. We will always be looking at opportunity. I think we're very good at integrating companies, integrating them. That means getting the economic benefit and the long-term benefit of the value of putting the two together. You could get economic benefit but not have integrated the property, so it runs in a manner that's long-term efficient. You look at what we did with Ondot. We were an investor. We bought it. It was a card control and digital card capability, and we moved it into mobility, and we made it way beyond what it could ever been. want to we're about to pierce 1,000 banks and really usage up 4x for those banks. The banks won, their clients won, our shareholders won. That's my favorite, right? want to I'd say that you should expect us to be trafficking all the time. I would not read anything into our authorization for repurchasing of shares. I would not think anything about that other than it was our job to go get authorization. want to there's nothing time-bound on that number. want to we feel great about our balance sheet, we feel great about our firepower, and we feel great about our businesses, and we think if we were to buy something, we know how to integrate it very well. That's very clear. As we're coming up on time, I'd like to close on the Fintech segment. One of your primary competitors continues to highlight elongation of sales cycles in their bank technology business, albeit in the large bank space, this being FIS. What factors continue to drive demand and revenue strength in your own Fintech segment? Yeah, I mean, want to like I like to say, I really can't. I work at this company. I go see bank CEOs. want to it's not every day I talk to them, want to weekly all the time. There's tremendous demand for our product. The opportunity is very large. I don't know about a slowdown. I'm not saying that there's not somewhere, it's just not in our pipeline. We've added to our sales force. want to we will continue to do that. We feel we're forward-leaning. Our surrounds are off the charts good. I think the combination of, want to our deposit systems, our loan systems, our surrounds, our client base, our ability to continue to go up the stack on clients too. Want to I think there was a point in time where we were viewed as handling a smaller client base, but you could see, want to even in mergers at times where, we have a bigger bank and a smaller bank, it didn't really matter where they were. We believe we can compete. We have good old Finxact, right? want to that hasn't yet, want to turned into Clover. Like Ondot has done what it's done, like BentoBox continues to do it. It's done like our other acquisitions over time, including DNA, which has turned out to be a great landing platform. I think, want to Finxact's world-class, and it'll be good for our clients and for our prospects. Frank, thanks so much for your time and insights. Greatly appreciate, want to the wide-ranging discussion. Have a great day up ahead. Thanks. See you baseball season. Bye.