Fiserv, Inc. (FISV) Earnings Call Transcript & Summary

Welcome, and thank you all for standing by for the Fiserv conference call. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I will turn the call over to Julie Chariell, Senior Vice President of Investor Relations at Fiserv.

Good morning, and thank you, Ivy, and thank you all for joining us today on short notice. I'm here with Frank Bisignano, Chairman and Chief Executive Officer of Fiserv; and Bob Hau, Chief Financial Officer. We just issued a press release confirming that Frank was nominated by President-elect Donald J. Trump as the Commissioner of the Social Security Administration. His appointment is subject to confirmation by the U.S. Senate, and Frank will continue in his current positions with the company until confirmation occurs. The Fiserv Board of Directors has an established long-term succession plan, which it will follow to select a successor. Now I'd like to turn the call over to Frank for his remarks, and then we'll open it up to a few questions. Frank?

Thanks, guys, for being here. Thanks for the short notice. And sorry for -- if you're not completely caught up. So I thought I'd take a few minutes and talk through this a little bit with you all. And maybe I need to start with a whole bunch of things that you don't know about me. I'm the son of an orphan for a government uniform, retired from Treasury in 45 years, had one of the most coveted awards, the Albert Gallatin Award. But he wasn't a Treasury department employee as you would have thought of. It was back in the day when DEA and Customs was in Treasury. That dad who is an orphan was one of 15, and I had a lot of holidays in the basement in a house in Brooklyn, when there are a whole bunch of uncles arguing about one item. What was the best branch of the service? And so I grew up and always knew that I was from a very patriotic household. My grandfather, who lived with us and came from Italy, left his family behind. And that's why I say, I grew up in a multigenerational immigrant household, came to America and joined the Army to fight in World War I to become a citizen, and then go back and get his family and bring them here. And I've done a lot with the military. And every time I've had the opportunity with a general and they thank me for what I do, whether it's military employment or the veterans from Military Institute, I said, I have one regret, I haven't served this country. And they would say to me, no, you are, you are. But of course, I knew they were being kind. And I've never had an aspiration to be in government. I never -- I wasn't really looking to be in government. And people talk to me about things all the time, and I don't really ever think about it. I love my job. I love the company. I love what we're doing here, and I'll talk to you about some of that. I had a planned trip to Brazil that I'm just coming off and got home yesterday. We launched Clover in Brazil. We saw President Lula. We saw every big bank. Everybody loves Clover. We had an unbelievable time. And I was faced with, did I want to run an independent agency to go solve which is a bipartisan American problem? Social security. And my wife and I talked about it. And I think it's much like 9/11. If you ever go back and really -- and many have no reason to want to do this, study me, you'll read in Jamie Dimon's book that he tried to hire me to go to Bank One, and then Sandy Weill decided that he didn't want me to leave. And he kind of made it impossible in a very kind loving way. And that was before 9/11. And then when I was on the streets in New York on 9/11, I felt like, gosh, I would feel horrible if I was in Chicago right now. And the Social Security Administrative Office Commissioner is not really a glamor job. It's not a job that you can probably ever name one of those commissioners. And what was said to me is I've talked to a lot of very, very, very senior people who watched me and my career, so you could guess who they are. And they said, if somebody could fix social security, this guy could do it. So I feel like I'm doing what's right for the country. I'm not going anywhere, a lot of highway between here and the confirmation. We have a succession plan. We have lots of thoughts around it. We've always had it. I've worked on it from my first day. I thought it was one of my most important choice, and we have lots of options of how to do it. But that's not for this conversation. What's for this conversation is I've talked to every one of you about the construction of this company. It's an unparalleled asset. And that is what the strength of the growth has been and will be. I'll be around here. Who knows what happens on the journey, but we're behaving inside the company as I hope you want us to. I'm the Chairman and CEO. I'm running it. I'll be working over the holidays. I was here on Black Friday. I was in Brazil. I have nothing to do in the social security revamp until I'm confirmed, and that's going to be months from now, not weeks from now. So I think it's important you know that. I'm excited for the future here. I feel great about what we've done, but the strength of it and our talent is deep and long. And that's 2 and 3 levels deep in my direct reports. So I just put it out there that it's -- even going on this call, all these things are somewhat emotional for me because I love this company. I love what I do. I think I do it okay. I hope you feel I do it okay. But I will make sure that the place works better when I'm gone. And it's the construction of the company, not -- it's a whole team. We met this morning. We're all in. And I think we'll just continue to get great results for you. And I'm going to go work for each and every one of you. And social security has 68 million Americans. Doesn't matter who they are. It doesn't matter what party they are. It doesn't matter what color or creed. It was formed in 1935, and it was broken out in '94 as an independent agency. It's never had an operator in charge, and I think it's okay to call myself an operator. And it's forecasted to not be able to do what it does by between '33 and '35. And I hope you guys root for me to do that in the way that I did in other turnarounds. It pays out $1 trillion and change and people think, well, you're used to moving money and you know how to eliminate fraud and you know how to make things better. So I'll take my skill and apply it to the American people. And I like the idea that it's an independent agency. The job is not in Washington, D.C. I'm happy to see any of you for lunch, if I get to that job. We got to see if I can get to that job. And if I don't, I'm happy doing this job. And that's why I'm going to work my a** off the whole way through. And so otherwise, we'll go have a sandwich when I'm in that job, and you guys could give me advice on what being -- and I'll tell you what being a civil servant is like. I don't know if I covered everything I was supposed to. I'm talking from the heart, but we got a great company. The construction of the company is the key. Nobody has Clover. Nobody is out there in Brazil. I mean we're -- I mean, like the [ area of Lula ] was like over the top on it. And all we had, all that business, small businesses who -- actually, [ Ali's ] running Clover, they're in a beautiful session. We have a great construction to this company. And I want you to -- I've said that always. Every meeting, I say it to you all. So I'm saying it in this meeting, too. That's the secret sauce to this company, unparalleled asset. Happy to open up for questions or comments or recommendations on -- by the way, you'll be the first public forum to hear this. I have no objective to cut the benefit of any American. We're going to fix it by doing other things.

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

Frank, first of all, congrats. I can't imagine anyone being in a role to do this better than you, so congrats on it. I guess, maybe just to start off, a couple of quick questions. Number one is, if you could just give us a sense of what the actual actions and moving parts are in terms of the way the company will handle progression in terms of leadership now. Just what's the thought process around it? When should we hear more color on that? And then I guess the second piece, a couple of others would just be whether or not your positions have to be divested. I don't know if you can comment on that or not. But from a stock standpoint, I know there's obviously some tax-free opportunities for anyone that moves to government. So what are the thought process around whether you want to, have to? And then lastly, just in terms of the position that you can put at the company in to make sure, just give us a couple of steps you'll take to ensure that everything is running as smoothly as possible over the next couple of years.

If you look at every year, I brought in new talent at the senior level while developing fabulous talent at the next level. I mean we have these co-heads of SMB that I think are future people to run the company after the next person. I want to remind you, I just want to come back to this issue. I mean, I'm going to behave like I'm doing this job until I'm not. I suppose I don't think we're going to announce a successor, unless I'm confirmed by the Senate. I just want you to know that because I want to run the company. The Board wants me to run the company, and I hope you want me to run the company. And if it's the day I'm going to Senate, we'll probably be prepared to talk about what we're doing. But that's not for lack of knowing what we're going to do, if you understand me. I don't think we should be working on that in the public arena here. But the Board and I always had a plan, a strong plan, if I got hit by a car tomorrow. Not an emergency plan, but a strong plan. And then secondarily, we're going to spend some time refreshing thoughts on all the talent. And without this, I'm always -- have 2 and 3 moves deep on my playbook to be prepared for anything. And you've watched us slot people in and out, and you watch how business continue to move. So I think you should really expect that of us. And one of the reasons I wanted to have the call because I really wanted to have this call, I know that there could be risk in having this call, but I don't really think so. I wanted to have the call so you could hear my voice. I don't -- I haven't worked on -- I own the stock. I'm owning the stock. I'm not thinking of divesting the stock. I mean it's too early to even think about that. I'm thinking about driving shareholder value. You see how much stock I've sold over 13, 11 years. I had 4% sold one time over 11 years, so I'm not thinking about that, and I've never heard -- I love getting paid in stock. I love this company. And we're deep -- I mean, me and the Board spent time this morning. I wanted you guys to hear me. I wasn't planning on giving you a succession plan. But you should know, we have one if I got hit by a car. I'm not saying it was going to be the one if I'm not hit by a car. And I think that's the best type of succession plan to have, to be honest with you.

Next, we'll go to the line of Jason Kupferberg from Bank of America.

Frank, I'll add my congratulations as well. Pretty exciting. I know you mentioned you weren't necessarily looking to join government. Can you just talk a little bit more about how the opportunity came about and how those conversations proceeded? And then maybe just one for Bob, I'll ask upfront. I know you were speaking publicly yesterday at a conference. It sounded like you were pretty upbeat about the business, but just wanted to confirm you remain comfortable with your guidance for this quarter as well as the medium-term outlook.

Yes. I mean, like I think people actually know what I do and who I am, right? So it's not kind of hard to find me. Lots of people named that know me a long time. So my phone -- I mean, it's not hard for people to want me to go do things for them, generally, what they think their big problem is. I really like the opportunity for the country because it is an independent agency. And it serves the American public, so my clients are your families. So I wasn't -- I had a great freaking gig here, man. I got a great Board. I got a great management team. I have fabulous clients. I got one client at 9, I got a client at 10, and one at 12, 3 CEOs. And I'm going to be growing revenue the rest of the day. I don't know. If you check my bio, I probably didn't come out from under a rock for somebody to find me to do this job. And when you think about it pays out $1.3 trillion, $1.5 trillion and one of the main mandates is to figure out how to balance it, people go, First Data wasn't supposed to end up what it did. We got social security. I'm probably not on a -- if you want somebody to fix that, you probably go through the list pretty fast. And if you call around to established people who know me, they'll probably say, best guy for the job. I mean that's like -- I've had 7,000 notes like that. I mean people saying congratulations -- I said this to my wife, this one. I said, like I'm sure everybody said -- I never sent a congratulatory note to somebody to say, you're the best guy for the job. And like the job needs to be done. Like it's not glamorous, and maybe that's why I want it. Fixing the mortgage business during the crisis, settling $25 billion with the government in mortgage settlement wasn't sexy. Take him for his data. Even the corner office diagonal from Jamie wasn't sexy. All these other jobs are sexy. I want to do something that you guys will love, so I mean it wasn't a long process at all. It was a process that me and my wife had to digest. And I think the fact it's not in Washington, I think the fact it's not down the hall, the fact I think it's not a political job, I think it's a job serving everybody in America. So that's -- I mean, I hope you can respect that.

And Jason, to your other question, absolutely. As you pointed out, I was at a conference yesterday. We talked about October, November activity with the company. We're in very good shape and expect to deliver on our 2024 commitments as well as our medium-term commitments we laid out in our November 2023 Investor Day.

I mean, I'm excited to do the next earnings call. So I keep talking about that because almost, that will be my last earnings call. But I'll be glad to hang out with you guys then.

Next, we'll go to the line of Ramsey El-Assal from Barclays.

Frank, a bittersweet congratulations from me as well.

Me too. believe me.

Do you have any further thoughts on timing? Is this the type of thing where it just kicks to Congress and who knows how long it is? Or do you -- is there any time line or plans that you can kind of point to in terms of when that might kind of come up? And I guess, just secondarily, I'll just ask them both at once here. You kind of mentioned a strong succession plan. That sounds to me like an internal candidate is the most likely successor. There's not an opportunity here to open it up to an external search. I'm just wondering if that's...

I'd tell you what, I mean the amount of people asking me if I want them to do this job is like an unbelievable item. So it's definitely something we have to pay attention to. I mean my -- with very, very, very highly -- I mean sometimes, I think you guys forget that like I know around Fiserv, but like I've been around a really long time and a lot of people know me and a lot of people love this company we built. So like we have a very strong succession plan, but that doesn't mean we're going to have blinders on either. And I mean I was a little stunned at the notes I got this morning. Bob's been like stunned now for like 9 hours or 13 hours or 18 hours. I don't have to know. You know what I mean.

Right. And then any thoughts on timing for you, Frank?

In timing, let's put timing in months. Months, you know what I mean? I mean, I keep saying like I'm going to be on the earnings call, right? You know that's February. I mean this probably isn't the first job that gets the confirmation process, you know what I mean? So most people aren't thinking about this job. I'm sure you were never thinking about this job. I tell you another guy who was never thinking about this job, me. So I'm going to be here for a while, and my staff is happy about that. I'm happy about it. We're going to work together, but it won't be years. Or maybe like I'm not -- I'm going to say this, Bob is going to kill me. Why I'm so guarded is things happen in the world all the time. I'm maniacally focused on running this joint and being ready if I'm going to go do that job because the country wants me to. But things change, too. So we can't -- like we got to behave like we're in the here and now. But it's months, not weeks on that. If that -- if the inauguration is on the 20th, then it's not going to be on the 21st or probably the 15th in the next month even or maybe into the next month for some time. And that's why I'm staying focused on -- like I'm telling clients, first, we got a great team. These clients I'm talking to today were on my calendar. They're going to want to know what it means, and I'm going to tell them like you, I'm here to serve them and until I'm not. And of course, we've got a great team that serves them that they're familiar with. Sorry for not having the answer. I don't have a date, but it's not -- and by the way, I'm working on Black Friday, I was in Brazil, and I'm going to be working over the holidays. It's a busy time of the year, holiday spending. We love holiday spending.

And our final question comes from Dave Koning from Baird.

Congrats, Frank. I feel a lot better about my kids getting their social security someday, so thank you for this.

I do too. I think the world for you always.

Thank you for that. And I guess just a couple of numbers questions. Just a follow-up from Jason's question. So you feel good about medium-term guidance. The $11.60 number for 2026, is that still the target? And then secondly, is there any government work that could be at risk, I guess, either of going away? Or maybe on a positive side, with you being in government, does anything change some of your government education type business or anything like that?

I think this is so -- the government is a really big joint. They're down to their last, I don't know, [ 2.3 billion ] employees. So I'm glad I'm only working on a small little portion of fixing it. I don't think there's -- I mean, we're going to make sure that there are no conflicts. And if there's opportunity, I mean, the conflict would be if we -- we're doing something for social security. But remember, it's an independent agency, and we don't really do anything from...

Yes. And the $11.60 EPS number?

But I mean in the real world, if this all happened, Fiserv would have a pretty good friend to help them, you know what I mean, all the right way. But the government is a tricky place and you got a lot of hurdles. And I think it's -- I play it as -- I hadn't thought about this in this way. It's net positive. It's net positive. Don't -- now you're rooting for me to go or what?

And Dave, to your second question, yes, Frank talked about the construct of the company. We laid out, we think, a pretty clear path towards achieving our '24, '25 and '26 objectives and some financial commitments. And our current outlook remains expecting to deliver on those financials that we laid out back in November of '23.

Okay. Thanks, everyone, for your time. We appreciate the questions, and I will be available along with the rest of the team today for any follow-ups. Thanks, and have a great day.

Thanks, everyone.

Yes. Thank you.

Thank you all for participating in today's conference. You may disconnect your line, and enjoy the rest of your day.