Welcome to Fiserv's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I will turn the call over to Walter Pritchard, Senior Vice President and Head of Investor Relations at Fiserv.

Thank you, and good morning. With me on the call today are Mike Lyons, our Chief Executive Officer; and Paul Todd, our Chief Financial Officer. Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of fiserv.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call along with the reconciliation of those measures to the nearest applicable GAAP measures. Unless otherwise stated, performance references are year-over-year comparisons. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results and strategic initiatives. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. You should refer to our earnings release for a discussion of these risk factors. And now I will turn the call over to Mike.

Thank you, Walter, and welcome aboard. Good morning, everyone, and thank you for joining us. This quarter marked a decisive and positive step for building the foundation to consistently deliver on the pillars that have long distinguished Fiserv. These include exceptional client service, world-class execution, value-added technology and cutting-edge innovation. While there remains significant work ahead of us, we are clear on our strategy, laser-focused on our priorities, and are optimistic about our multi-quarter path towards delivering strong, sustainable operating performance and ultimately realizing Fiserv's full potential. While Paul will review our financial performance in detail, I would note that our Q4 results demonstrated stable broad-based business activity trends, and there were no major surprises relative to the outlook that we provided in October and that our 2026 guidance is in line with the preliminary view from Q3. As we told you in October, our headline results are below our go-forward expectations, and they will remain that way for the first half of 2026 as we invest in the franchise and lap a higher mix of nonrecurring revenue. Importantly, we continue to add senior talent, complementing the high-quality team that was in place when I came aboard. In addition to Paul, Walter and Dhivya, we have added leaders in technology, Clover and merchant product and sales, among other areas. Overall, I'm encouraged by the team's energy and pleased that our overall employee retention is up with retention of our top talent reaching a multiyear high in 2025. With the team in place and focused, we were firmly in execution mode in Q4, taking decisive actions across the One Fiserv plan. One Fiserv is at the foundation of our strategy and firmly integrated into our 2026 plan. With this in mind, I want to provide a brief update on the progress…

Thank you, Mike, and good morning, everyone. I will cover details on total company and segment performance in the fourth quarter and full year and then review our guidance for 2026. Beginning on Slide 6, total company Q4 adjusted revenue of $4.9 billion was flat and adjusted operating income was $1.7 billion, resulting in adjusted operating margin of 34.9%. This results in full year total company adjusted revenue of $19.8 billion, up 4%, with adjusted operating income of $7.4 billion, resulting in an adjusted operating margin of 37.4%, a decrease of 200 basis points, right in line with our guidance. Total company organic revenue was roughly flat, down approximately 40 basis points in Q4, resulting in annual organic revenue growth of 3.8% in the upper half of the 3.5% to 4% guidance range we gave on our last call. Turning to Slide 7. Merchant Solutions grew 6% organically for the year, while Financial Solutions grew 2%. Fourth quarter adjusted earnings per share was $1.99, resulting in annual adjusted earnings per share of $8.64, above our guidance range of $8.50 to $8.60. Free cash flow for the quarter was $1.6 billion and $4.44 billion for the year, ahead of our guidance of $4.25 billion, representing approximately 93% conversion. Now I will turn to the performance by segment for Q4, starting on Slide 8 on Merchant Solutions. Merchant Solutions organic revenue growth was 1% for the quarter, while adjusted revenue grew 2%. Small Business revenue grew 2% on an organic basis in Q4 and 3% on an adjusted basis with the impact of the CCV acquisition slightly greater than the FX headwind. In addition, the Clover fee eliminations we discussed last quarter were a 2-point headwind to small business growth in Q4. Small business volume grew 7% in the quarter, inclusive of…

[Operator Instructions] Our first question comes from Darrin Peller from Wolfe Research.

Mike, can you just touch on whether you believe the review you've taken in the business has really accomplished everything you need and you fully see what you needed to see that you feel confident on the numbers going forward?

Yes. Thank you for the question. And we feel great as went through in the prepared comments, we feel great about the progress we're making and the pace that we're moving at. And relative to the conclusions that we outlined from the analysis we did in Q3, there's nothing new, and that's fully reflected in hitting up what we thought we'd do for Q4 and introducing guidance for '26 in line with the preliminary view we provided back in October. So as I said, it's a multi-quarter path. I feel great about the progress. We're fully aware of what we need to do to position our business as this constant compounder goal that we have. And 100% of our focus is on executing against the pillars we put forth in the One Fiserv plan, and I went through it. And as you saw and Paul talked about in his comments, we just have to -- there's a difficult compare in the first half of the year as we pivoted the strategy in the third quarter to focus on more recurring revenue. So overall, we feel good. The quarter was about execution, and that's where we go from here.

Timothy Chiodo from UBS.

I want to touch on digital payments, so that subsegment within the Financial Solutions segment. That is the largest bucket there. I believe it's about $4 billion or so in annual revenues. And correct me if I'm wrong, but I think STAR and Accel, the debit networks make up about maybe 1/4 of that, so say, $1 billion or so of that $4 billion of revenue within digital payments. Last quarter, you called out some pricing actions within that subsegment, and I believe some of them related to the debit networks as well and maybe some other portions of that subsegment. Maybe you could just add some more detail on those price changes and maybe an update or a response to what you saw in the market, whether it brought on additional volume, it protected volume that might have been lost? And anything else you can provide around really STAR and Accel as the focus. I know you mentioned that things are pretty consistent, but anything else you could add would be appreciated.

Sure, Tim. Thanks for the question. And yes, we did make comments on the last quarter call in regard to that. I wouldn't add anything new to that. There wasn't any new development in Q4 related to any of those actions. I would say we're very pleased not only with the sequential improvement in digital payments, but also what we saw on the volume side, particularly on the network side. We did see growth on the network volumes. And in that overall digital space, we also saw good transactions in our debit processing area as well. And I think that's what was the underpinning of the performance there. Just like with all the segments, we do have comparative headwinds that will continue in digital payments for the first half of next year, but there wouldn't be anything else I would add on the network side.

I would just add, strategically, we continue to be very pleased with both STAR and Accel and the value we add on both sides of our business, classic synergy play between FS and MS sides of the business, and we continue to try to look for all ways that we can fully leverage those networks.

We'll go to the line of Tien-Tsin Huang from JPMorgan.

It seems like you got some good line of sight into the business, which is great. I want to better understand the expenses required to execute on Fiserv, specifically how much is structural versus onetime like consulting or IT staff augmentation, that kind of thing. It looks like you're going to exit the year at 36% margin. How clean is that 36%?

Yes. So Tien-Tsin, thanks. I would speak to the overall margin first and the expense. We don't see any material kind of expense ramp-up. As we kind of said on our last call, we have largely baked in the expenses related to One Fiserv and particularly around the infrastructure and some of the resiliency investments and such. So just as an operating margin standpoint, there is an increase year-over-year on expenses from an operating standpoint, but it's in line with exactly what we were expecting when we gave the guide and hence, the margin guide is in line. As it relates to the transformation Project Elevate expenses, particularly, we did call out the size of those. There was start-up-related expenses, particularly around professional services in there. We did have some infrastructure expenses as well. And that is about the right kind of cadence of what we expect quarterly expenses related to Project Elevate to be. They will increase some as we move forward and broaden the project as we focus now on process efficiencies and other efficiencies that we expect to get out of the business. And those will then be more kind of technological-related expenses as opposed to more professional services related.

We'll go to Dave Koning from Baird.

And I guess my question is on the SMB portion of the Acceptance segment. You mentioned the Clover part will probably grow revenue low double digits. But I'm also wondering what do you expect from the non-Clover part of SMB that's been declining, maybe flattish ex Argentina. But then as a corollary to it, Argentina, the merchant cash advances look like they were down dramatically, like there's a lot less. So is that creating a little bit of a headwind in that non-Clover part? So I guess kind of multiple layer question just on how SMB is going to do in '26.

Yes. So overall, we did comment on the Clover part of SMB. We do expect slight growth in the non-Clover SMB for next year. Just we kind of talked about that as being kind of flat to maybe just a little bit of growth on the non-Clover SMB. You're right, Dave, as it relates to Argentina in general, it's now really not a growth factor at all relative to the go-forward expectations in 2026. And so we do -- we had an impact in 2025 that we called out that if you took out Argentina, we actually did grow the non-Clover piece. But as you look forward in 2026, we expect roughly a flat to a slightly growth non-Clover SMB picture that's embedded in our guidance.

We'll go to the line of Andrew Jeffrey from William Blair.

Mike, I'd like to dig in a little bit on your outlook for Clover yield. The medium-term revenue guidance in Clover obviously implies some nice share gains relative to at least the U.S. market. And yield growth, obviously, given the fee changes has slowed quite a bit. But can you talk about the areas where you think you have the ability to add sort of durable value with value-added services and what the yield progression in that business looks like over time? Just trying to get a little more clarity on the outlook for accelerating Clover revenue growth.

So the -- I'd just start at the highest level as we were very pleased with the underlying trends we saw in Clover in Q4. We talked about some of the macro factors. And then more importantly, with the progress we made against the Clover business priorities that we highlighted as part of the One Fiserv action plan and pillar 2. And those are critical to reaching this goal of creating, I think, a little bit to where you're going is what we believe will be the preeminent small business operating platform. That's obviously our goal, not just be a payments box, but help small businesses run their full operations from there, and that goes to the partnerships on the horizontal side with Homebase, with ADP, with CashFlow Central, obviously, embedded into ADP, Clover Capital and then really to get after and drive higher yield for the overall SMB book, not just focusing on Clover, our entire SMB book is to continue to build out our vertical expertise and we mentioned in the opening comments that we'll launch this quarter on the health care side and the professional services side. And the more custom solutions and value-added solutions we can embed inside the platform of Clover, obviously, yield will grow with that. And we're optimistic on that over the long term. There's hard work being done to create a value proposition to the $4 billion or so of revenue we have sitting in non-Clover SMB. But more specifically in the guidance stuff, I'll let Paul comment on yield.

Yes. So Andrew, I think it would be fair to say we're very pleased with yield maintenance for 2025 overall, and we don't expect any change really on the yield side in 2026. And you can kind of see that based on our volume growth being in line with our revenue growth on a kind of overall kind of high level. And I think as it relates to go forward, like Mike commented, as we look at like vertical expansions, you would see 15% to 20% kind of growth on the revenue side in the longer term against that 10% to 15% growth, which speaks to a higher yield on a go-forward basis as we penetrate more in Clover Capital, as we do more on the software side. As Mike said, as we do more on the platform side, you'd see kind of that yield maintenance or even slight yield improvement on a go-forward basis so that's consistent with our strategy. And certainly, we'll give more color on that at our upcoming IR Day.

We'll go to the line of Andrew Schmidt from KeyBanc Capital Markets.

Just a quick 2-parter on the banking segment. Mike, I hear your comments on the sort of the core client retention. Maybe just a little bit more color on what you're seeing there. It sounds like you've been very proactive in being high touch with clients. And then just beyond the core, can you talk about how you view the portfolio today? Do you need additional capabilities, thinking digital, et cetera? Or do you feel good about where you're at from a capability perspective?

Thanks for the question. First, on the core part, as I said in the opening comments, we're going down the path of core modernization. We're -- first of all, we're proud of our leading market share position broadly in core banking, and we support a lot of banks and credit unions across the country on our various platforms, and we're proud of that. We began that core modernization process in 2022, building cloud-based real-time secure API and really more open capabilities from our perspective. That plan remains in place and is a good thing for everyone. As we rolled out back at our Client Forum in September and talked about on the last call, based on some feedback we got from clients, we were explicitly clear that there are no forced conversions as part of this modernization. So if a client wants to make a change, it's totally on their time line. All that said, as a result of some actions taken over the last couple of years, including the prior core conversion approach, we have lost some market share, especially you see it on the smaller credit union side of our business and have been disappointed, obviously, in the results that have come through in the banking segment from those actions. Our view is given the pivot we made at Forum on the conversion approach as well as a series of other client commitments we made at Forum and a whole series of investments that I talked about earlier, both on the technology side and on the people side, day-to-day people side, we think we're on the right path to having banking return to positive growth, which we've talked about in the low single digits. And I think most importantly, what we feel good about is the fixes are…

We'll go to the line of Jason Kupferberg from Wells Fargo.

I wanted to come back to Clover for a second. If you can talk about what drove some of the improvement in December, January, you said to 11%. And then the midpoint of your guide for '26 would suggest maybe a little bit more acceleration of this December, January levels so what drove the improvement in December, January? And then what are the drivers of some of the potential further improvement as you go through 2026. And if you can just remind us also when you think we lap the gateway conversion, that would be really helpful. Yes.

Yes. A couple of parts there. First, I'd start is December and January went back to where we thought we'd be for the quarter. We had said 11% in Q3, came in under that, obviously. We cited November as being macro weakness. We saw that in other people participate in our industry. And part of our vertical build is to drive yield higher to the prior point, but it's also to reduce some of our concentration in the restaurant and retail areas, especially restaurants, and that had a weaker November. So macro anomaly in the month and then we saw volumes reaccelerate back to where we thought they'd be for the quarter. So we feel good about that. I think just longer term, if you exclude the gateway conversion over the last couple of years, we've been -- we bounce around quarter-to-quarter from the high single digits to the low double digits. The 4 quarters of '25 were between 9% and 11%, and that's sort of where we see the core growth rate of the business sometimes independent of macro factors. So I think that's a good view to lead -- a good area to lead around that. Just to be careful on the gateway conversion, remember, that -- there's not a technical lapping of the gateway conversion. You stop converting over a gateway and then there's continuous runoff over time. So it's not a traditional anniversarying thing that will -- as long as there are gateway converted clients on the system, if one of those runs off, it will impact growth going forward. But obviously, the magnitude of that will go down and we have it going it was 3 points for most of -- 3-point differential for most of this year, and it will go down in '26 and going forward. So hopefully, that's helpful. Anything to add, Paul?

Yes. The only thing I would add is, Jason, we feel good about where we sit. When we saw what December did, when we see what January did as it relates to that overall guide that we gave. And the things that we talked about in the prepared remarks around business development, expansion some of the verticals expansion. Those are all just kind of tailwinds that help us get very confident about the overall guide of GPV. And as Mike said earlier, the overall macro, we're assuming kind of a normalized macro and we also commented in the prepared remarks that the lower side of that guide is reflective of less kind of non-Clover transition and the higher side reflects kind of more on non-Clover transition.

We'll go to the line of Dan Dolev from Mizuho.

Lots of good things, improvements across the board, great job here. Mike, it's been a few months now. I mean, is anything that surprised you most? Any new surprises here? Anything you're seeing that hasn't been appreciated that you would like to highlight, that would be great.

Yes. As as I mentioned earlier, with respect to new developments or surprises with the negative connotation from what we said in the third quarter, there are none, and our focus is all on execution. I think all the things -- the surprises on the positive side are the capability and potential for this company to not only deliver on the pillars that we've delivered on historically to serve 2 massive TAMs who are eager and have a high appetite for advice and advanced technology from us. That just continues to grow. And so we're anxious to get these investments made and be able to focus on exciting things similar to what I talked about in the banking core place. Our cores are great. They meet a lot of different needs of a lot of different institutions. We want to make sure the service is great on that. So then we can talk to the banks about how do you grow small business customers, how do you deal with modern forms of payments? How do you bring -- how can we, as an execution and orchestration layer on behalf of them, bring AI into their businesses. And the same thing on the merchant side, where agentic capabilities, our ability to democratize that for small businesses across the country and allow them to participate in a similar way is right in front of us. So lots of positive surprises. It the things that people have known about Fiserv for a long time, but as modern technology accelerates our ability to capitalize on those just gets greater and greater.

We'll go to the line of Will Nance from Goldman Sachs.

I just had a little more here on the enterprise side, you've been calling out the PayFac grow-over issues for a bit now. Just remind us again when those lap and if there's any way of quantifying the magnitude on both revenue and transactions, that would be helpful as well.

Yes. So Will, we did -- in the prepared remarks, I made a couple of comments, particularly around enterprise. As I talked about, this will be the last quarter that we talk about enterprise transition of this PayFac client, and we had about 6 points of differential that existed in the fourth quarter related to this. If you kind of add that to the revenue side, the minus 2% goes to kind of more of a plus 4%. If you look at the transactions of 6%, which is kind of a clean number on the transaction side, that 4% revenue growth is very in line with the 6%. And then that kind of 4% or kind of mid-single-digit growth is consistent with what we've had in the third quarter and also consistent with roughly what we expect as we look forward to next year. And that mid-single-digit transaction growth would also be the right way to think about the business on a go-forward basis without the PayFac noise in that line.

Got it. Okay. So converging in the first quarter. Appreciate it.

We'll go to Bryan Keane from Citi.

Just a follow-up on that, Paul. How do we think about the mid-single-digit growth for the -- organic growth for the year in merchants? You just went through enterprise small business, though, with Clover, it looks like it will be about the same growth rate we saw in the fourth quarter. So going from 1% organic growth in the fourth quarter to mid-single digits we get a lift from enterprise, but do we also get any lift from SMB and processing?

Yes, Bryan. So I gave some comments on that in my prepared remarks around the overall mid-single-digit growth expectations we have for merchant next year. I would say, I think your comment related to Clover specifically is accurate when we gave the overall Clover growth -- revenue growth guidance of the low double digits. And so I think that kind of holds. And if you try to add back kind of the headwinds that we had in the fourth quarter, you get back to that mid-single-digit growth rate for merchant in the fourth quarter. So if you looked at it from a third quarter and a fourth quarter, how Merchant has performed overall, that gives you line of sight into roughly how we will perform in that range roughly for next year. I would just highlight that we do have the comparative dynamics in the first half of the year in Merchant like we do in Financial Solutions. It's not as dramatic. And so we obviously called out the more dramatic FX headwinds, comparative headwinds in the first half. But I think the third quarter, fourth quarter adjusted run rate, if you want to call it that, gives confidence of what the overall Merchant Solutions looks like for next year.

Next, we'll go to the line of James Faucette from Morgan Stanley.

I wanted to follow up on some of the fee changes that you've made and any color you can give there in terms of merchant response. I'm sure they're happy about it, but things that you can measure like changes in churn or retention? And how long do you think you'll see some of those impacts for?

Thanks for the question. The changes we talked about last quarter with respect to the specific Clover fees, they were implemented, and we received positive feedback from our partners. I don't know if you can directly attribute it to in-quarter or any specific in-quarter movements. We just thought it was the right thing to do on behalf of our customers, partners and the business, and that's the way we'll continue to run the business.

Next, we'll go to James Friedman from Susquehanna.

A more general question on the Financial Solutions segment. Obviously, posted negative organic growth in the quarter. I'm just wondering what from your perspective needs to change for that segment to reaccelerate and grow. What indicators are you looking at? And what should investors watch in terms of the opportunity overall for Financial Solutions?

Yes. Overall, again, we think we have a great platform. We talked about some of the investments in and around the client service and specifically around the core customer service platform that we have to make. We're making those. We're closely monitoring the progress of those. Obviously, there's easy KPIs for those in terms of client satisfaction and the like and average revenue per client. So we continue to watch those. I would say broadly, the impact of comparable periods and you have to continue to monitor that. If we look at the underlying volume growth across almost all aspects of the financial services business, it remains in trend areas that it's been in for a long time, and we feel good about. It's not just purely translating to period-on-period revenue growth as you go over the comparables from a prior period. So one of the most important things we watch and Paul mentioned in his comments is what are those underlying volume growth rates. And again, we feel good about those we told you in the banking space that we're not happy with where we are in performance last quarter. We remain there, but we know what we have to do to fix it, and we're addressing it.

Yes. And the only thing I would add on to that, Jamie, would be that we do expect to see in the back half of next year growth in all 3 of these areas of Financial Solutions based on those volume underpinnings that Mike just mentioned. These are very volume-driven businesses. We like the volumes as they're growing across those businesses. For 2026, we have these comparative -- nonrecurring kind of comparative headwinds. And so we will see expected growth across the board in the back half of the year. And we've talked about Financial Solutions being a low single-digit kind of growth business, and that's what we expect on a go-forward basis after we get past this year.

We'll go to Kenneth Suchoski from Autonomous Research.

Just one on the non-Clover SMB part. I think you mentioned you're assuming slight growth in that business in 2026. We estimated it was down slightly in 2025 and maybe a little bit more of a decline in the second half. So maybe just talk about the drivers of the acceleration and how you get to that slight growth in that business in '26?

Yes. And I would start off by saying you're right in that rough estimation of slightly down overall and as we said, up ex Argentina. I would say we've got a very strategic approach as it relates, and I think Mike made some comments on this earlier around testing the non-Clover merchants as they move over to Clover and just a greater attention on just this book in general and how we go about that book. We are very focused on growing the Clover business, but we are also very focused on the transition of non-Clover merchants and the retention of non-Clover merchants as well. So I'd say all of the things that we're doing across the board are collaborative in nature. They're more Clover focused, but we're also focused on this side of the business as well.

For the next question, we'll go to the line of Harshita Rawat from Bernstein.

Just two quick ones. On the Clover 10% to 15% volume growth for the year, Paul, what drives the pace of back book conversion that could land you at the high end of the range in volumes? And then Mike, I just want to follow up on your conversation with your banking customers, you -- there's been some satisfaction with the service and product levels that you talked about and also addressed at the Forum. You talked about the elevated churn. My question is, as you go on and change the organizational mindset and make these investments, what are you hearing currently from your customers?

Yes. On the 10% to 15% GPV, as I said earlier, the business on a core basis excluding any non-Clover to Clover transitions has been growing in high single digits, low double digits. That's the formation of 10%. You should think of that as the organic growth rate, assuming economic conditions stay in relatively constant form, over time, and we also mentioned that we're taking a very deliberate and thoughtful approach to any back book conversion, making sure that there's a right value proposition for the merchant because today, it's -- again, it's all Fiserv revenue, and we want to make sure if we do anything, it's very thoughtful and with a clear value proposition. That would have to be working in a very significant way, more than we contemplate in the near term to get to the high end of the range. And if we have some success in that, again, we're being very deliberate and very thoughtful as we do it, making sure we have the right vertical capabilities, the right paths to add value to those clients. So anything we do and we're successful there would bring it above that core line of growth. On the banking side, I think it's reflective of what I said for the first quarter of a multi-quarter effort. We are out doing the right things, making the right investments and the anecdotal feedback we're getting from clients is they like what they see, but they want to see it sustained and delivering on the commitments we made and that's 100% what we're focused on.

Final question.

Thank you all for joining us today, and we look forward to seeing you at the various conferences and different meetings over the course of the quarter.

Thank you all for participating in the Fiserv Fourth Quarter 2025 Earnings Conference Call. That concludes today's call. Please disconnect at this time, and have a great rest of your day.