Q4 2025 Earnings Call Transcript

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 we have made across each of the 5 strategic areas of the plan. Operating with a client-first mindset, building the preeminent small business operating platform through Clover, creating differentiated, innovative platforms in finance and commerce, delivering operational excellence and efficiency enabled by AI and finally, employing disciplined capital allocation for the long term. Under our client-first pillar, we made targeted investments to better align around client needs, especially in our Financial Solutions business. Over time, we expect this shift to enhance client satisfaction and ultimately drive sustainable growth in average revenue per customer, which has been a hallmark of Fiserv.

The actions we took this quarter included broadly increasing client-facing resources, revamping and improving our approach to working with consultants, including closing the Smith transaction. Delivering against the first phase of product development-related commitments we made at our Fiserv Form client event. Leveraging innovation, including AI trained on our DNA core to streamline product upgrades and implementations and accelerating our investment to modernize our technology platforms, including additional multisite resiliency measures across most of our consumer-facing payment platforms. We remain on track to complete this effort by mid-2026. We are encouraged by the early positive client response to these efforts and will be steadfast in our focus on delivering great service and value-added solutions to our clients.

And to this point, corporate sales were up solidly in Q4 versus last year and the prior quarter, with positive contributions from both the Merchant and Financial Solutions segments. Some of the more meaningful wins included new and expansion Commerce Hub agreements with a leading medical device company, a large specialty retail company and AT&T, among others. An expansion of our relationship with California-based Mechanics Bancorp now with over $22 billion in assets, which selected Fiserv's core and added our XD digital platform following their merger with HomeStreet Bank. On Optis, we signed a multiyear extension with our client Atlanticus, a leading issuer, which includes converting the accounts they recently added with their Mercury acquisition to Fiserv.

A new core deal with Republic Bank & Trust Company, a Kentucky-based $7 billion bank moving to DNA, enabling the bank to give their clients faster access to deposited funds through real-time continuous processing and enabling real-time account alerts and an expansion of our credit card relationship with Robinhood to add debit processing. Turning to our second pillar, Q4 saw continued momentum toward establishing Clover as the preeminent small business operating platform. In vertical markets, we remain on track to launch our PracticePay health care initiative and our professional services offering this quarter.

In restaurant, we continue to see market share gains as we consolidate a number of strong assets to expand our offering under the Clover Hospitality brand, and achieve economies of scale. As part of this, we are rolling out new capabilities, including multi-location support, AI-generated menus, streamlined delivery enrollment checklist dining and new diner engagement tools. Horizontally, we are seeing strong early success in our workforce management partnership with Homebase, and we continued our build-out with ADP, a partnership that is already producing strong sales collaboration and that has significant potential over time.

In December, we integrated CashFlow Central, our transformative AR/AP product directly into ADP's RUN platform, allowing small businesses to manage their cash flow more effectively. And finally, on the horizontal front. Clover Capital grew 30% in 2025 in North America as we continue to see significant upside with this high-value client offering, where we only have mid-single-digit penetration of our eligible client base today. Internationally, our launch in Brazil continues to be highly successful with results tracking ahead of plan and reflecting the importance of partnering with market-leading financial institutions like Caixa, Canada grew strongly in 2025 and should further accelerate as we ramp up our new strategic relationship with TD.

And we introduced our flagship partnership with SMCC to offer Clover to SMBs in Japan starting later this year. This is a focused market for us given its size and low card penetration. Additionally, we are excited about the special support visas providing in this partnership. We grew and further diversified Clover distribution channels across the board in Q4, including adding 47 banks to the Clover referral ecosystem, refreshing our merchant relationship with Truist, which will now support businesses of all sizes across the bank's large footprint including 1,900 branches, expanding our industry-leading ISO and agent platforms; continuing to add direct salespeople in North America, where we have over 600 today; launching a new digital tool for our bank partners, which integrates Clover merchant onboarding into the bank's digital banking experience; introducing AI prospecting tools to assist with the identification and conversion of high-value merchants.

And finally, building on the takeaways from prior pilots we began targeting select non-Clover SMB merchants in the U.S. with a Clover offering. While these efforts have been narrow in scope and it's still early, we have seen some promising results with benefits for our clients and higher revenue yield for us. Our efforts here will remain deliberate, ensuring we prioritize the right experience and fit for the client. To finish on Clover, we are driving a number of merchant experience improvements, including digital feature enrollment and setup, AI-driven end-to-end merchant life cycle orchestration, a range of automated and high-touch service capabilities and simplification to pricing and billing statements.

Next, on the innovation front, we have prioritized appropriately resourcing and completing a focused set of deliverables that are driven by strong demand from our customers. In the quarter, we made significant progress on these strategic priorities. Commerce Hub is progressing well towards a fully integrated cloud-native global omnichannel gateway, supporting a best-in-class enterprise value proposition. In Q4, we launched this capability across the Americas and are ramping a leading video streaming service provider client.

The platform continues to scale in North America, processing over $200 billion in 2025, a greater than 200% increase year-over-year. In Financial Solutions, we continued to invest in modernizing our core banking and card issuer processing platforms. In banking, we are building cloud-based real-time secure, API-enabled and more open capabilities, a modernization effort that began in 2022. At our Client Forum in September, we made it clear that there will be no forced upgrades or conversions as part of this effort, reflecting feedback we receive from our customers. With respect to our newest course, we went live with our first clients on CoreAdvance and Finxact continues to perform exceptionally well and gained broad recognition for innovation.

The Finxact platform surpassed 30 million total accounts and positions, representing over 80% growth in 2025 and is becoming the ledger of choice for fintechs and digital banks. In card issuer processing, we continue to modernize Optis and build out Vision Next, our next-gen card issuing platform. On Optis, we signed a multiyear extension with PNC and a new mandate with Fidem Financial, a fast-growing credit card asset manager that has acquired over $15 billion in assets. Fiserv will power Fidem's new co-branded credit card programs.

We are now live with 5 FI clients on CashFlow Central with over 100,000 of their SMBs using our transformative all-in-one AR/AP payments platform and seeing real value. With over 155 FI signed since launch and a pipeline of over 400 prospects, we are excited about CashFlow Central's long-term potential. We advanced our efforts in stablecoin through the exploration of pilots with Huntington and several other banks, including use cases in cross-border payments, digital escrow and interbank money movement. With the closing of the StoneCastle acquisition, we introduced stablecoin custody capabilities, allowing us to recycle reserves back to financial institutions, a unique capability in the space.

We're also excited about StoneCastle's ability to introduce next-gen cash management capabilities to our merchants, including Clover clients. Lastly on innovation, we continue to develop agentic commerce capabilities for our merchants and are particularly excited about our unique position with Clover to bring turnkey agentic capabilities to small businesses. We see agentic fundamentally changing the payments landscape and are working with Google, Mastercard and Visa to bring agentic to mainstream commerce. Additionally, we're exploring arrangements to enable agentic commerce across the landscape of conversational AI platforms.

Fourth, we are in full swing with Project Elevate, which is a highly structured enterprise-wide evaluation of all of our activities. We are encouraged by the potential here, given we have identified ample room to simplify the business, and execute faster and more efficiently, and we are attacking these opportunities with urgency. This includes a comprehensive review of how we can further deploy AI across Fiserv. We look forward to providing a more fulsome update on Elevate at our Investor Day.

Rounding out our One Fiserv plan is our commitment to highly disciplined capital allocation. As we mentioned on our last call, we continue to evaluate businesses and assets to ensure that they are consistent with our go-forward strategy. This exercise is critical in focusing our time and resources on our most important assets and activities. In summary, we made good progress in Q4. We are focused and confident in our strategy and ability to execute.

No other company has the assets, breadth and scale to connect all parts of the financial ecosystem. Our unique position at the center of Commerce and Finance, 2 massive TAMs strengthens the market position of both our merchant and financial solutions businesses and creates opportunities in areas like embedded finance, stablecoins, networks and merchant liquidity optimization, all expanding the boundaries of how our market is defined today. New technologies, especially AI, further accelerate our ability to capitalize on and scale these opportunities. We have scheduled an Investor Day for May 14 and look forward to sharing additional details on our strategy and financial outlook and introducing you to the leadership team responsible for executing on our plan.

I'll finish by thanking our employees for their hard work and dedication and our clients for the continued trust they place in us. I will now pass it off to Paul to go into more detail on Q4 and 2026.

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 CCV.

Clover revenue grew 12% in Q4, 2 percentage points higher than our guidance. There was a 6-point growth headwind to Q4 Clover revenue from the fee eliminations we called out on our last call. Clover volume grew 6% on a reported basis and 9% excluding the previously discussed gateway conversion. Clover volume growth was below our expectations for the quarter, driven largely by softness we experienced in the month of November in the U.S., particularly in the restaurant and retail sectors where we have a large presence.

This softness in the U.S. was consistent with broader industry trends and Clover volumes reaccelerated on a combined basis in December and January to approximately 11% ex the gateway conversion. Value-added services contributed 27% of Clover revenue in Q4, up 5 points from a year ago, driven by anticipation, software attach and Clover Capital. Clover revenue finished the year at $3.3 billion, up 23%, while non-Clover small business revenue ex Argentina was flat in Q4 and up 3% for the year. Consistent with our preliminary view in October and assuming stable macroeconomic conditions, we expect Clover GPV growth of 10% to 15% in 2026 ex the gateway conversion.

The lower end represents the core growth rate, while the higher end assumes more significant conversion of non-Clover merchants. Based on these volume expectations, the impact of Clover fee eliminations and more moderate growth from Argentina, we expect Clover revenue to grow in the low double digits for 2026. On a structural basis, our medium-term revenue growth rate target for Clover remains in the 15% to 20% range. Moving on to enterprise. Our business grew 1% on an organic basis in Q4, while declining 2% on an adjusted basis.

Excluding the revenue from network fee timing associated with a large PayFac client that went live in Q3 2024, adjusted revenue for enterprise would have been 6% higher in the quarter and more in line with the 6% transaction growth. Transaction growth slowed sequentially from Q3 due to lapping the ramp of the large PayFac client mentioned earlier. And finally, in processing, organic revenue declined 1%, while adjusted revenue grew 1%, driven by FX tailwinds. Fourth quarter adjusted operating income for the Merchant Solutions segment was $816 million, down 17%, with adjusted operating margin of 32.1%.

For the full year, Merchant Solutions' adjusted operating income was down 2% to $3.5 billion with adjusted operating margin of 34.5%. Now I will cover Financial Solutions starting on Slide 9. For the quarter, both organic and adjusted revenue in Financial Solutions declined by 2%. In Digital Payments, organic and adjusted revenue declined by 1%. We saw good volume growth in debit processing and network volumes consistent with the growth levels from last quarter.

Zelle transactions grew 15% in the quarter as we continue to see a slowing of the growth curve for Zelle as the product matures. Also, we started to ramp revenue from CashFlow Central in the quarter. Finally, ATM Managed Services was an approximate 1 point headwind to revenue growth in digital payments. In Issuing, revenue declined 1% on both an organic and adjusted basis, as global active accounts on file grew in the low single digits.

Finally, in banking, revenue decreased 4% on an organic basis and was down 3% on an adjusted basis as we continue to be impacted by certain actions taken over the last several years. While an improvement sequentially, we are still facing comparative headwinds, and we'll continue to face these throughout the first half of next year, after which we expect a return to stability. As Mike mentioned earlier, this is a significant area of investment and focus for us. Fourth quarter adjusted operating income for the Financial Solutions segment declined 20% to $997 million and adjusted operating margin was 42.2% versus 51.7% in the prior year.

The most significant impact on margins in Q4 was related to incremental vendor spend and headcount investments to improve client experience. For the year, adjusted operating income for the segment was down 2% to $4.4 billion with adjusted operating margin of 45.3%. At the corporate level, our adjusted effective tax rate was 19.3% for the quarter and 18.6% for the year. From a leverage standpoint, we finished the year with a debt-to-adjusted-EBITDA ratio of 3x, in line with our expectations.

We continue to target long-term leverage at 2.5 to 3x. Turning to Slide 10. We also repurchased 3 million shares during the quarter for approximately $200 million and paid down over $1 billion in debt after funding the acquisitions of StoneCastle and a portfolio of TD merchant contracts. With respect to Project Elevate in Q4, we incurred $73 million of expenses related to this program, and we will continue to have related onetime costs in 2026. Now with Slide 11, I'll move on to 2026 guidance, which is in line with the preliminary view we gave on our last call. First, on revenue.

We are continuing to provide guidance regarding our organic revenue growth for 2026, and we plan to supplement this with additional information about our assumptions to help investors and analysts arrive at adjusted revenue. Also, to provide further insight, we are giving growth expectations for the Merchant and Financial Solutions segments. We expect 2026 organic revenue growth in the range of 1% to 3% with Merchant Solutions revenue growth in the mid-single digits and Financial Solutions flat to slightly down. Reflecting higher nonrecurring revenue a year ago, we expect adjusted revenue growth in both quarters of the first half of 2026 to decline to the low single digits, with Q2 representing the trough in terms of the rate of decline.

In our Financial Solutions business, we expect a more pronounced grow-over trend in the first half, resulting in a decline at the high end of mid-single digits. As we get to the second half of the year, we expect our adjusted revenue growth to be more tightly correlated to underlying drivers such as volume, transaction and account growth. We expect offsetting FX and M&A impacts for 2026 driving our expectation for adjusted revenue growth that is also in the range of 1% to 3%. As a reminder, Q1 is the last quarter of impact from the CCV acquisition and thus, we expect an approximate 1 point difference between organic and adjusted revenue in this period.

We expect Argentina will have a modest positive impact to organic revenue growth in 2026, while having a slightly larger negative impact to adjusted revenue growth. As compared to prior years, based on our current expectations, this is a much more modest contribution from Argentina. We expect our effective tax rate to be in the range of approximately 19% to 19.5% for the full year and weighted average share count to be approximately 530 million. Putting it all together, we expect adjusted EPS of $8 to $8.30. Similar to our expectations around revenue, we expect a different level of operating margins in the first and second halves of the year.

In the first half, we expect adjusted operating margin of 31% to 32%, with Q1 representing the low point just below 30%. In the second half of the year, we expect adjusted operating margin of 35% to 36% with Q4 representing the high point in the year. For the year, this translates into approximately 34% adjusted operating margin. To complete our strategic investments, we expect capital expenditures to remain approximately flat with 2025 levels and end the year with a leverage ratio of approximately 3x.

We expect free cash flow conversion of approximately 90% of adjusted net income for the year, in line with historical levels. As always, Q1 will be our trough for free cash flow conversion. Finally, to the extent we generate any excess cash from business and asset optimization activities, we intend to deploy this additional cash to share repurchase. And with that, I will turn the call back to the operator to start the Q&A session.

[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.

Tien-Tsin Huang: 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 really 100% in our control, and we're investing directly against them. These aren't things we can't solve. These are things that we need to do and are the right things for our clients to do.

Specifically on core client attrition in 2025, it was above where we wanted to be, but stable with where it was in 2024 and 2023. We didn't see any change on that front. In the very near term and how we went into the planning for next year, we are realistic about the impact of past decisions and how fast we can bend the curve, and that's all included in our plan. But we look -- our goal is to serve all our great clients appropriately and compete strongly every day in the market. And on top of the cores to the second part of your question, we feel really good about the portfolio solutions we're adding, and we continue to listen to what banks and credit unions are focused on, which includes generating core deposits, which the StoneCastle capability helped us with how do you address the emerging value or threat of stablecoin and feel great about what we've done there, launching our own stablecoin on behalf of the banks FIUSD.

And then creating what we think is the first closed-loop stablecoin deposit network by acquiring the custody capabilities through StoneCastle this year. And we think out more and more around AI in a box and other types of solutions around that CashFlow Central goes directly to the desire to build small businesses. So we feel great about the portfolio of solutions around it. If we have to add small capabilities, you've seen us do it with stuff like StoneCastle.

But we're anxious to get our day-to-day service commitment levels and our clients back to one of that pillar of great client service and then focus on this great portfolio of value-added capabilities we have.

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.