Fiserv, Inc. (NYSE:FI) Q1 2025 Earnings Conference Call April 24, 2025 8:00 AM ET

Company Participants

Julie Chariell - SVP, Investor Relations
Frank Bisignano - Chairman, President & CEO
Mike Lyons - President & CEO
Bob Hau - CFO

Conference Call Participants

Darrin Peller - Wolfe Research
Tien-Tsin Huang - JPMorgan
Ramsey El-Assal - Barclays
Timothy Chiodo - UBS
Jason Kupferberg - Bank of America
Bryan Keane - Deutsche Bank
Will Nance - Goldman Sachs
Jamie Friedman - Susquehanna
Dan Dolev - Mizuho Securities
Andrew Jeffrey - William Blair
James Faucette - Morgan Stanley

Operator

Welcome to the Fiserv, Inc. First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode until the Q&A session. As a reminder, today's call is being recorded.

At this time, I would like to turn the call over to Julie Chariell, Senior Vice President of Investor Relations at Fiserv, Inc..

Julie Chariell

Thank you, and good morning. Joining me on the call today are Frank Bisignano, our Chairman and Chief Executive Officer, Mike Lyons, our President and incoming CEO, and Bob Hau, 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 a reconciliation of those measures to the nearest applicable GAAP measure. 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, for the last time, I'll turn the call over to Frank.

Frank Bisignano

Thank you, Julie. And thank you all for joining us today. It was a particularly active first quarter, but I think you've come to expect that from Fiserv, Inc. First, we were steadfast on execution, and that worked out well as we exceeded consensus EPS, expanded a leading client franchise and partner relationships, and advanced our new product and market initiatives while making several strategic acquisitions.

We also completed our CEO transition. Mike has exceeded all of my expectations, and as a company, we have not missed a beat. While the economic landscape remains dynamic, we are focused on executing, driving our growth initiatives, and hitting the commitments we set forth in February.

As for me, I'll continue to do all I can to extend Fiserv, Inc.'s industry-leading position, pending the outcome of the full Senate vote on my nomination as Social Security Commissioner. You've often heard me talk about the deep bench we have here at Fiserv, Inc., and last month, Mike and I took steps to further advance the organization with the elevation of Takis Georgikopoulos, our new Chief Operating Officer. Takis was named as the Senior Advisor back in June after a successful career at JPMorgan, most recently as Global Head of Payments.

The COO role is a natural next step for Takis, who is an accomplished leader and talented operator with deep expertise in technology and payments around the world. He took the baton from Guy Chiarillo, who became vice chairman and continues to report directly to Mike. In this role, Guy is focused on developing best-in-class products, deepening client and partner relationships, and guiding our technology strategy.

He is also spearheading our efforts to leverage artificial intelligence and data, both within Fiserv, Inc. and for our clients. The balance of the management committee remains in place. Lastly, I'd like to wrap up with some reflections.

I am extremely proud of what we have built at Fiserv, Inc. The company's ability to extend its leadership position is clear. It comes from scale and profitability, a strong balance sheet, global footprint, marquee clients, broad distribution through a network of partners, vast resources to invest and innovate, and a business model that's durable enough to weather shifts in the economy. These attributes have led us to outperform on both operating and valuation post-merger and can extend our track record of thirty-nine consecutive years of double-digit adjusted EPS growth.

The alignment of our ecosystems for merchants and financial institutions is driving our growth now and into the future. As commerce and banking are increasingly interconnected, we are positioned to help clients on both sides to meet their growth aspirations. It is a construct unparalleled in the market today, ripe with opportunity and clearly hard to replicate.

And with that, I'll turn the call over to Mike.

Mike Lyons

Thank you, Frank, for your tireless efforts in guiding Fiserv, Inc. and me personally through this transition. It is truly an honor and a privilege to lead the company going forward, and I feel fortunate to do so alongside Guy, Bob, Takis, and the rest of our established and proven management team. Over the last ninety days, I've had the opportunity to meet many of our talented employees and partners and over 1,000 of our clients.

These interactions have only further validated my view that Fiserv, Inc. has an absolutely outstanding franchise with many attractive growth opportunities, some of which we are actively pursuing and some that have yet to be tapped and would bring incremental TAM. In nearly all of my client discussions, the focus was on what more Fiserv, Inc. could do for them. It's clear that we are valued, trusted, and that clients recognize our scale, stability, and technical prowess.

These attributes are even more important in the current environment of macro uncertainty and industry disruption. So for Fiserv, Inc., commerce and banking activity carry on, and our clients continue to engage with us to explore ways to modernize and digitize, grow their market share, and better serve their customers. Turning to first-quarter results, Fiserv, Inc. is off to a strong start for the year with total company organic revenue up 7%, adjusted earnings per share up 14%, and our adjusted operating margin up 200 basis points.

As you know, we had anticipated slower revenue growth to start the year and remain confident that growth will accelerate as the year progresses and we execute on existing contracts and key initiatives. Confidence in our positioning and prospects has us leaning into opportunities presented in this dynamic environment. And in the last sixty days, we announced four strategic acquisitions outside the United States and a new U.S. operating hub.

In March, we acquired Payfair, a Canadian provider of program management solutions that enhances our growing embedded finance capability and adds two major gig economy companies as clients. Shortly thereafter, we closed the acquisition of CCV Group, a prominent player in omni-channel payment solutions that meaningfully expands our footprint in The Netherlands, Germany, and Belgium. CCV will help us accelerate the deployment of Clover across Europe.

Earlier this month, we acquired Pinch Payments, a payment facilitator serving merchants in Australia and New Zealand. And finally, earlier this week, we announced the planned acquisition of MoneyMoney in Brazil to enhance our capital offering to merchants based on risk scoring capability and integration with the receivables registry infrastructure regulated by the Central Bank. This past Monday, we were excited to announce the opening of a new FinTech hub in Overland Park, Kansas.

This new location will house 2,000 associates, part of our proven strategy to bring people together in major offices to drive innovation, collaboration, and efficiency. Let's shift to our performance at the segment level. Merchant Solutions posted 8% organic revenue growth with a 10 basis point rise in adjusted operating margin to 34.2%.

Bob will discuss the details, so I'd like to highlight our progress in the quarter on three key near-term initiatives. First is driving Clover growth through new products, new markets, new partners, and new geographies. Second is signing more financial institutions as merchant referral partners, and the third is adding new and existing enterprise merchant clients to our Commerce Hub platform and driving vast penetration.

Let's dig into these starting with Clover. Over the last few months, we've made major advances in our international strategy, introducing Clover in four new countries: Mexico, Brazil, Australia, and Singapore, and entering Belgium through the CCV deal. This brings the total number of Clover countries to 13.

We are particularly excited about the Brazil opportunity given our size, scale, and momentum in the country and multiple distribution channels, including direct sales, ISVs through our Software Express unit, and our leading financial institutions partners. We spent Q1 training and preparing these partners, and they've hit the ground selling in April, and we expect results will ramp through the year. In Asia Pac, we launched Clover in Australia on the last day of the quarter with a full cloud-based SaaS platform, including hardware, processing, and value-added solutions.

Our deep relationships in Australia mean we are well-positioned to scale Clover through partners, as well as direct distribution. Shortly after the launch in Australia, we kicked off a Clover pilot in Singapore. Also in Q1, a leading provider of buy now pay later services, Klarna, signed an agreement to enable its payment options on Clover devices in the U.S., with initial plans to enable over 100,000 merchant locations.

Clover Sport continues to win stadiums and arenas with nearly 350 of them in total and growing. Denver Broncos, as well as six NCAA venues, selected Clover Sport in Q1 to streamline payment operations throughout these high-traffic locations. In May, we will be introducing Clover Hospitality, a new point of sale system designed to meet the needs of upper-market restaurants, broadening our TAM.

Our advanced technology across hardware, software, and payments will create a unique high-end restaurant solution. Clover Hospitality will debut at the National Restaurant Association Conference, and we are thrilled to have Sean Feeney's highly regarded Brooklyn-based, Lilia, as our first client. Our new partnership with ADP is progressing well.

Teams from each company are deeply engaged and working collaboratively. Up through Maria and I, who regularly discuss ongoing development. We are seeing strong initial receptivity from small businesses who are increasingly looking for integrated solutions like ours.

We are already piloting a two-way referral program and expect leads to multiply as we complete our technical integration throughout the year. Our level of optimism for this partnership has only grown as we apply our best-of-breed brands and distribution to drive compelling value for small businesses. Turning to our second major initiative, we added 33 new financial institutions as merchant partners in the U.S. in Q1.

This marks an acceleration from last year when we added just over 100 in total. Our pipeline is strong, and we expect to meaningfully outpace that number in 2025, driven by financial institutions' desire to win in the small business space by using Clover and our broader SMB suite. Along those lines, we extended our joint venture agreement with PNC in Q1, which also included a Clover hardware order.

On April 1, we transitioned our joint venture with Wells Fargo to a processing agreement, and we look forward to supporting their SMB growth strategy. We also enhanced our merchant referral agreement as well as our card issuer processing relationship with ICBA Payments, a subsidiary of the Independent Community Bankers of America, whose clients and members together represent $4 trillion in assets. Overall, we now have merchant referral partnerships with 40 top 100 financial institutions, with several other large opportunities in the pipeline.

Our merchant FI partnerships also extend beyond the U.S. In Q1, we won the merchant acquiring business in Austria for UniCredit Bank, one of the top-performing banks in Europe, as they look to bring Clover to their small business clients. And finally, we added several new enterprise merchants to Commerce Hub in Q1 and expanded BaaS with others. We signed Fanatics Sportsbook, one of the largest and fastest-growing online sportsbooks, which will use a range of services from e-commerce acquiring and value-added solutions, including our authorization optimization tools and digital payouts.

Additionally, Sezzle, a leader in buy now pay later services, selected Commerce Hub and has embraced a full suite of Fiserv, Inc. products for their BNPL payments, including global merchant acquiring and debit routing via our STAR and XL networks. Texas Roadhouse, an American steakhouse chain with over 700 locations in 49 states, expanded BaaS by choosing Fiserv, Inc.'s gift solutions and shopper data insights for enhanced customer engagement and operational analytics. Yum.

Brands, a long-standing marquee client that renewed its contract during the quarter, expanded VAS by signing on for fraud, network tokens, and our authorization optimization tool. Client authorization metrics using the new optimization tool have been encouraging, and we will soon be utilizing our position as the number one merchant acquirer and number one card issuer processor to make it even better. By virtue of these top positions, we have a greater volume and variety of data than other providers.

We are combining this wealth of data with our AI order to continually monitor, interpret, and suggest improvements to increase authorization rates for our clients. During a pilot with one of the magnificent seven tech companies, our off-off tool was able to improve the recovery rate on declines by 30% before the enhanced data solution, which will be available later this year. Now let's move to the Financial Solutions segment, which posted organic revenue growth of 6% and a very strong adjusted operating margin of 47.5%, up 340 basis points.

Before Bob covers some of the key drivers here, I want to highlight progress in our three key strategies: gaining leadership in issuing and banking, driving adoption of Cash Flow Central and XD, and advancing cross Fiserv, Inc. solutions. Starting with the issuing business, we converted the Target Circle Card portfolio in Q1, adding one of the largest retailers in the United States to our Optus platform and further cementing our strong lead in the retail issuing space. In EMEA, Banquist Banking Group, a leading specialist bank and a key client for many years, was the first to sign on for our next-generation cloud-native processing platform, Vision Next, under a new twelve-year credit card processing agreement.

This kicked off what we believe will be a new growth phase for our international issuing business. In the U.S., we renewed a number of important relationships, including a leading brand-focused issuer, Bread Financial, a servicer and credit card issuer, CardWorks, and a fintech lender, Abom. These early renewals and multi-year extensions are a testament to the strength of our relationships, offerings, and product roadmap, and the direct result of our prior and planned investments.

With over 1.7% billion accounts on file, we are now nearly twice as large as our closest competitor. In banking, we continue to invest in core modernization. In Q1, we introduced Core Advance, our latest investment in providing modern core technology to the community banking market.

With cloud-based solutions, Core Advance offers real-time processing, including payments, transactions, and decisioning, allowing community banks to serve their customers with technology typically available only to the largest banks. For larger financial institutions, DNA remains an attractive upgrade path, and we continue to build and expand Fintech as well as Signature Next outside the U.S. In Q1, we signed Republic Bank, a $7 billion asset institution, onto DNA, while Northwest Bank, an existing $14 billion asset client, will add many new accounts pending its acquisition of $2 billion Pennwoods Bancorp. Moving to a key growth product for us in the coming years, Cash Flow Central. We are excited to announce that our first client went live just last week, Washington Federal, a $28 billion asset bank.

This is a critical milestone for Cash Flow Central as we look to activate the 53 other financial institutions that have already signed up and accelerate the pace of new wins. In Q1, we secured 15 new mandates for Cash Flow Essential, including one for BECU, a $30 billion asset credit union, and one for a large commercial bank with $50 billion in assets. With respect to advancing cross Fiserv, Inc. solutions, we see ongoing opportunities in three main areas.

First is our STAR and Excel debit networks, where we provide optimal routing for merchants. We've invested here to become the third-largest provider, and we are excited about our opportunity to expand with synergies across our card issuing and merchant businesses. For example, this quarter, Domino's, a merchant gift card client, signed on for routing over STAR and Excel.

Second is our SMB integrated suite, which combines multiple products for financial institutions to offer their merchant customers. The solutions use online banking platforms like XD, our digital banking asset, as the integration and access point for other SMB products, including Clover and Cash Flow Central. In Q1, Teachers Federal Credit Union, a nearly $10 billion institution, purchased the broadest SMB suite yet, including Cash Flow Essential, XD, and Dell for Business, after becoming a Clover referral partner in Q4.

Our third key cross Fiserv, Inc. initiative is embedded finance. Our marquee win here was DoorDash, and our subsequent acquisition of PayFair added a white-label mobile app, a cloud-native orchestration platform, and robust program management. These assets have helped us produce an active and high-quality pipeline.

Our embedded finance capabilities allow us to enable banking, lending, and payment services in any commerce experience. We achieved this by combining our merchant acquiring and card issuing capabilities with bank-grade general ledger processing through Fintech. No other single company offers all of this under one roof, with the scale and resources to manage traditional and emerging payment modalities globally.

In Q1, we signed a strategic partnership with Threadbank, a leading provider of embedded and digital banking services nationwide. Threadbank chose Finxact's cloud-based core platform to scale its embedded banking offerings for a broad range of customers, demonstrating Fintech's ability to support not only banking but also payments and data at scale. As Bob will detail, we are maintaining our expectations for 2025 with accelerated growth in the back half of the year.

With that, I'll turn it over to Bob to take you through the financials.

Bob Hau

Thank you, Mike, and good morning, everyone. If you're following along on our slides, I'll cover the detail on total company and segment performance in the first quarter, starting with our financial metrics and trends on Slide four. Our first-quarter results were in line with our expectations.

As I said during last quarter's call, we anticipated a slower start to the year and are pleased with the progress toward our plan for faster growth in the second half. Total company organic revenue growth was 7%, with good growth in each of our segments. Adjusted revenue growth was five, including the impact of currency translation, which had a significantly smaller impact compared to Q1 of last year and was in line with historically average levels of just under 2%.

Free cash flow of $371 million reflects expected Q1 seasonality, mostly related to timing of working capital and green tax credits. On a trailing twelve months basis, free cash flow was $5.2% billion, and for 2025, we continue to expect approximately $5.5% billion of free cash flow. Revenue growth this year looks dramatically different from 2024 due to the effects of interest and inflation on our business in Argentina.

The contribution from excess inflation, interest rates, and the interim Dollar Treester program to our organic revenue growth is zero this quarter, compared to 10 of the 20 percentage points of organic growth in the year-ago quarter. Total company adjusted operating margin was 37.8%, an increase of 200 basis points versus the prior year, and an adjusted operating income growth of 11%. Adjusted earnings per share for the quarter was $2.4%, up 14%.

Turning to performance by segment, starting on Slide five. Organic and adjusted revenue growth for the Merchant Solutions segment was 8% and 5%, respectively, for the first quarter. This is in line with our expectation and reflects three timing-related factors.

First, the impact of leap year, which contributed an extra day last Q1. Second, timing of the Easter holiday moving from Q1 last year to Q2 this year. And third, a difficult year-over-year comparison against the large term fee that we discussed in Q1 2024.

The sum total of these three items impacted our merchant organic revenue growth by roughly three percentage points. Turning to the three business lines of the Merchant Solutions segment. Small business, organic and adjusted revenue growth in the quarter was 10% and 7%, respectively, on payment volume growth of 3%.

A slightly slower pace of volume growth reflects the leap year contribution last year and the toughest compare quarter. By sector, we saw declines in discretionary categories in Q1, including travel and hotels, as well as restaurants. By contrast, volume growth at grocery, services, and QSR establishments held up relatively well.

Through the quarter, we saw a stable January, slightly lighter February in part driven by weather, with a rebound in March. For April, small business payment volume is tracking in line with March levels. For Clover, revenue grew 27% in the first quarter on annualized payment volume growth of 8%.

The softer volume growth largely reflects three factors. First, leap year and Easter, as I just mentioned. Second, a difficult comparison against the gateway conversion that brought new merchants to Clover in Q1 2024.

And third, a slowdown in spending in Canada, particularly on travel. Canada is currently the largest international market for Clover. Excluding these specific factors, Clover volume grew at a healthy double-digit pace.

Clover revenue growth was a solid 27% against the highest growth quarter last year. There are several reasons for the spread between revenue and volume growth, including a two-point gain sequentially in the penetration rate of Clover value-added services to 24%. Roughly one-third of the spread came from strong Clover hardware sales.

As Mike mentioned, banks in particular added Clover hardware as part of a strategic focus to address the SMB acquiring market. Such sales bode well for our processing and VAS revenue going forward. Another nearly one-third came from growth in anticipation of Clover Capital, as we added more Clover merchants in Argentina late last year, their anticipation revenue is now ramping in Clover BaaS.

And we continue to see overall strength in other Clover BaaS as well. Enterprise organic and adjusted revenue growth in the quarter was 12% and 8%, respectively, driven by transactions growth of 13%. Enterprise organic revenue growth was mostly driven by new clients and vast penetration, which continues to ramp in part helped by new offerings such as data as a service and our new authorization optimization tool.

Finally, processing organic revenue growth in the quarter declined by 7%. Excluding the impact on revenue growth from a termination fee received in the first quarter of last year, processing organic revenue growth would have been up 4%. Adjusted operating income in the Merchant Solutions segment increased 5% for the quarter.

Merchant adjusted operating margin expanded 10 basis points to 34.2% compared to a particularly strong result in Q1 2024. Over the past two years, Merchant adjusted operating margin increased 450 basis points. Turning to Slide six.

On the Financial Solutions segment, both organic and adjusted revenue grew 6% in the quarter, in line with our 2025 and medium-term outlook of 6% to 8%. Growth was led by strength in digital payments and issuing. Looking at business lines, digital payments organic and adjusted revenue each grew by 8% in the quarter, with growth in Zelle transactions of 22% and initial revenue from the sale of data.

You've heard us talk about the vastness of our data in the past. Now, as clients have started to experience the power of that data, we are seeing new revenue streams. This long-term initiative is just beginning to bear fruit after years of investment in data science capabilities and governance.

We expect revenue to grow meaningfully over time, though the near term won't be a steady upward track. For Zelle, we continue to expand our leading role as an enabler, and our client base has grown to represent two-thirds of financial institutions on the Zelle network, including six of the top 10 credit unions and seven of the top 18 non-owner banks. In issuing, organic and adjusted revenue grew 8% and 7%, respectively.

The strong performance at Issuing was driven by high growth in the international business and continued momentum in North America. Our vertical growth focus continues with positive contributions from healthcare and loan accounts. Verizon will begin to contribute to revenue in the second half of the year, and embedded finance-related revenue should contribute to growth in this business line as well as in the banking business line.

Banking organic and adjusted revenue each grew 1% in the quarter. Fintech revenue was a positive contributor, with more revenue under contract to contribute later this year. We expect accelerated growth from experienced digital clients, as we now have a more automated migration solution in place that will significantly reduce the implementation time.

This is expected to help turn recent sales into revenue faster and help close new sales as the year progresses. Functionality within XD continues to advance. In Q1, we integrated Cash Flow Central and Clover behind XD as the front door and began offering digital merchant acquiring to automate a merchant's onboarding to Clover through XD.

Adjusted operating income for the Financial Solutions segment was up 14% for the quarter, with an adjusted operating margin of 47.5%, a 340 basis point improvement. The increase in adjusted operating margin resulted from a higher mix of discrete data and license sales and improved operational efficiency. Now let me wrap up our Q1 discussion with some remaining details on the financials.

The adjusted effective tax rate was 17.9%. The first quarter is historically our lowest tax rate of the year, and this was largely in line with Q1 2024. We continue to expect our full-year adjusted tax rate to be approximately 19.5%.

Total debt outstanding was $28.3% billion on March 31. Our debt to adjusted EBITDA ratio increased to 2.9% times in the first quarter on timing of free cash flow and share repurchase volume. This remains in line with our targeted leverage range of 2.5% to 3 times leverage.

During the quarter, we repurchased nearly 10 million shares for $2.2% billion, bringing our total cash return to shareholders for the past twelve months to $6.2% billion. Average shares outstanding declined 5% since Q1 of last year as a result. We had 68 million shares remaining authorized for repurchase at the end of the quarter, and our robust share repurchase activity demonstrates both confidence in the outlook for our business and our commitment to returning value to shareholders.

Turning to Slide eight. We are maintaining our full-year 2025 guidance of organic revenue growth of 10% to 12% and adjusted earnings per share in a range of $10.1% to $10.3%, representing 15% to 17% adjusted EPS growth. The forecast impact from foreign currency exchange remains 1.5% for 2025.

This outlook contemplates an environment where tariffs remain at current levels and consumer spending remains stable. The cost impact of tariffs at current levels is expected to be minimal relative to the size of the cost base of the company and thus manageable within our guidance range. As Mike mentioned, we continue to expect revenue growth to be weighted toward the second half of the year, with some anticipated revenue already under contract and being implemented.

Additionally, we have a number of newer products and markets that are on track to contribute. Our adjusted operating margin expansion outlook of at least 125 basis points is also unchanged and is ahead of our medium-term target of at least 100 basis points annually. From a segment perspective, we continue to see Merchant Solutions organic revenue growth of 12% to 15% in 2025, driven in large part by Clover and its international expansion efforts, new product development, and increase in VAS penetration, as well as Commerce Hub, with its expanding demand and VAS capability.

We remain on track to achieve our targets of $3.5% billion in revenue for Clover and 25% BaaS penetration by year-end. In Financial Solutions, we continue to anticipate organic revenue growth of 6% to 8%, with a healthy pipeline of implementations to drive revenue from Cash Flow Central, XD, Fintech, issuing, and real-time payment products in the back half. Overall, the guidance range does account for some variability, and as you have seen from us over many years, we manage well through economic cycles and have a strong capacity to invest in our people and products.

Because we can support our clients at a time when others may be struggling, we are leaning in. With that, operator, let's open the line for questions.

Operator

Thank you. We would now like to open the phone lines for questions. As a reminder for today's call, please limit yourself to one question to ensure ample time to answer as many questions as possible.

If you would like to ask a question, you may use star one on your phone. If you need to withdraw your question at any time, you may press star two. For our first question, we'll go to the line of Darrin Peller from Wolfe Research.

Please go ahead.

Darrin Peller

Hey, guys. Thanks. Maybe we could just start off on the trajectory of the merchant business.

Obviously, the Clover growth was very strong at the 27% we're seeing. And so when we build that in, if you could just remind us some of the trends we're seeing and maybe a little bit more quantification of what we'd expect volume growth to look like for Clover as the year progresses. And then more importantly, as we build out in Brazil and Australia and we add these VaaS, what kind of revenue growth do you see in terms of a bridge between volume and revenue growth for Clover.

Finally, just overall merchant trajectory as the year progresses would be great from a sequential standpoint.

Bob Hau

Yes, Darrin. Good morning and thanks for the question. Overall, we feel good about the 27% revenue growth for the Clover business.

BaaS moving up to 24%. As we continue our march and we reaffirmed our commitment to delivering the $3.5% billion for the full year and 25% BaaS for the full year of this year. And Q1 results were right in line with our path towards doing that.

We certainly continue to expect growth in the latter part of the year, both in terms of further VAS penetration reaching that 25% as well as overall volume growth. We mentioned in the prepared remarks this morning that Q1 was really impacted by a couple of key things. Obviously, leap year gave us an extra point of growth last year.

Easter was in March. It's actually very late April this year. And so we see some acceleration of volume and therefore the revenue growth.

Adding to that things like Clover Hospitality going out, the continued acceleration of our international regions, both in Latin America and in Asia Pacific. New countries going live during the first quarter and early second quarter. And then we'll also see some benefit from CCV, the new acquisition.

Continued distribution channel expansion in Europe, and actually essentially adding a new country with Belgium having a good distribution channel through CCV and being able to sell Clover through that distribution channel. So there's a number of good things ahead of us that give us confidence in the ability to deliver that $3.5% billion of revenue, and that includes performance in Q1.

Mike Lyons

Yes. Think probably continue to in terms of distribution and merchant, financial institution partnerships, we continue to see good growth on that front. And then we continue to enhance, talked about it and will throughout the year, continue to enhance the merchant experience, whether that be with the partnership with ADP, the rollout of Cash Flow Central and the integration of that into Clover over time, leveraging AI into Clover's in the merchant opportunities for new leads, get loyalty.

Lots of different things around merchant experience.

Operator

Next, we'll go to the line of Tien-Tsin Huang from JPMorgan. Please go ahead.

Tien-Tsin Huang

Thanks. Thank you so much. I had to ask a parting question for Frank because I'd love to hear your thoughts on the Global Payments FIS asset swap and how they're unbundling merchant and choosing depth there over breadth, and that's clearly in contrast to what Fiserv, Inc. has done and what you guys have built.

So does that change your thinking on that bet in the strategic sort of view on the sum of the parts for Fiserv, Inc..

Frank Bisignano

I think you know, let's talk about what Fiserv, Inc. is for a second. You have Clover on the front end and now you watch it rolling out globally. So, you know, we then have this partnership model that's unparalleled.

You heard us talk about where we're saying top 100 banks, but equally as important as over a thousand bank partners, and we can that something we could continue to grow. With the intersection here of merchants and FIs and, you know, even though we get paid there, that's end of me a home run for us. You don't see any of that right now in the numbers but you'll see it in the future.

I mean, I think there's the best talented management team in the industry. I think it puts together the company I never thought there were three deals that were actually the same. Everybody laughed and then we have a debit network.

We have an issuing business that's unparalleled. You know, I love our international franchise. Yeah.

We leverage the ability to cross-sell through the best distribution network. I feel that market opportunity has opened up across the board. And that would include in the debit space with deals that were done.

I mean, I think Mike will have his own point of view out ninety days. But, and I'm I know he's you know, happy to talk about it. But if you think about our issuer strength, that 1.7% billion accounts on file, that's 2x the largest competitor.

And we got Fintech coming up. You're gonna continue to watch that win. Our hand in my opinion, is unparalleled.

And it we the reason we did the first date of you know, Fiserv, Inc. deal was because that was the deal to do. Right. They weren't comparable.

Now debit networks were not the same size. The issuing business was not the same size. Our ability to understand how to sell at the bank or across both companies.

I mean, I could go on for the whole call. I won't But I love the hands. I love the company.

Mike Lyons

I would just add, I meant to the earlier comment that said met with over a thousand clients in the last ninety days and all of those conversations are about how to do more with them. And a lot of those conversations are at the intersection of commerce and banking. And whether it be transactions in the market, noise around tariffs, noise around the equity raising markets or M&A markets.

Whatever it may be, size, scale, resilience, continued investment, consistency of strategy. These are all resonating with our clients. And you could feel that come through the quarter as people may look at a certain function that they've relied on a smaller FinTech without access to capital to provide and then turn to us.

On the trust front, again, it goes back to size scale and just continuous consistency of strategy that Frank laid over the last several years since that deal. So we see it as a huge advantage for us and like we do every day, are out in the market trying to win share by adding value to our clients. If we get greater ability from disruption in these deals, then that's great.

Operator

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

Ramsey El-Assal

Hi, thanks for taking my question this morning. On Clover volumes, Bob mentioned some Canada headwinds. I'm just curious, were those headwinds do you interpret those headwinds as being kind of idiosyncratic to Canada.

Are they sort of ring-fenced in Canada. Is there a risk that we see similar dynamics emerge either here in the U.S. or in other international markets. Think you called out travel, for example.

Bob Hau

Yes, Ramsey, where we really saw it was in the travel aspect. And for would say, based on the data we have, it does feel like it is Canadian specific. It's certainly discretionary spending and we saw that come down. We did talk generally in our prepared remarks that broadly across our merchant base, we did see discretionary, I.E. travel, hotels, and restaurant come down.

But given the mix of our overall business, having the nondiscretionary growth in groceries and services and QSR holding up, gives us a nice overall balance. We saw that in the first quarter. We saw that in the last many years.

And we expect that will continue to bode well for us in any economic outcome.

Operator

Next, we'll go to the line of Tim Chiodo from UBS. Please go ahead.

Tim Chiodo

Great. Thank you for taking the question. Bob, I think you did a great job outlining some of the delta between the Clover volume growth and the revenue growth.

You touched on hardware, Clover Capital, and anticipation. I want to dig into some of the other areas. So I think the laundry list is pricing and mix, some of the SaaS packages, there's rapid deposit, but then there's one that you've mentioned on a few of the past earnings calls around the increasing direct mix.

And I was wondering if you could talk a little bit about how you expect direct mix to play a role in reaching that eventual $4.5% billion revenue number for 2026 for Clover.

Mike Lyons

Yes. Tim, I would say overall, we've got a very broad, deep set of distribution channels. And direct channel, which, quite honestly, is our newest overall channel.

We'll continue to add salespeople, which we refer to as business consultants or VCs, and growing that channel out. We're also seeing great growth in our FI merchant partnerships. So I wouldn't necessarily call any one channel out in particular.

We see good opportunities in all of those and the direct channel mix is benefiting overall revenue and margin as we grow that because it's the newest and fastest expanding channel.

Operator

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

Jason Kupferberg

Good morning, guys. Thanks. I wanted to come back to the Merchant segment for a minute.

So I know we were at 8% organic in the quarter. You said that was in line with plan. You had three points, I believe, of headwind related to some of those calendar factors.

The term fee comp, so if we adjust for that, I guess we're at 11%. We're still a little below the full-year range. So just help us kind of reconcile from that into, let's say, the middle of the full-year range in a stable macro scenario.

I know you've got some Clover geographies and products ramping, but also wanted to get a sense there in terms of how much of this is coming from the new acquisitions, if you could give us a sense of 2025 revenue contribution from those. Thank you.

Mike Lyons

Yeah. Jason, I would say, first, broadly, it would not be from a contribution of the acquisitions. Those are certainly, will benefit us.

Those are brand new into the company. You see very, very, very little impact in Q1. Those will accelerate.

It's really a late 2025, 2026, 2027 opportunity for those. We'll continue to see good fast penetration growth. The expansion internationally is certainly a big element for us.

Brazil, Mexico, Australia, Singapore, there is an element of CCV giving us international growth. The new product, Clover Hospitality, that rolls out, what, in a couple of weeks now, for high-end restaurants. And generally, broad capabilities and continued growth in a variety of vast capabilities.

In new software both in terms of restaurant as well as service and retail that we continue to build out. Give us good opportunities to deliver the $3.5% billion this year and $4.5% billion next year.

Operator

Next, we'll go to the line of Brian Keane from Deutsche Bank. Please go ahead.

Brian Keane

Hi, guys. Thanks for taking the question. I wanted to ask about the 33 signings in the FI in the financial institution side.

I guess what's happening in the market that's driving that number higher for you guys to be landing that many financial institutions. Because I guess I would have thought that most FIs would have already decided who they're partnering with. So I just want to understand the market dynamics that's driving that.

Thanks.

Mike Lyons

I think with respect to all like anything we do and when we approach it, we want to be a great partner and help our clients achieve their objectives. And serving the small business bases of the banks is a very profitable and rich area for the banks, especially in deposits and cash flow transactions. So with our ability products to help them do that highlighted by Clover, and the merchants' appreciation for Clover.

We are seeing an increasing interest from banks across the country. The pipeline is huge here for additional banks to come into the fold. And again, we're simply helping our clients achieve their objectives by bringing them great products and services.

And you go to this is the classic place to go to for Cash Flow Central, which is I spent most of my life in banking, it's hard to get a scalable AP, an effective AP AR product into a small business integrated in with their acquiring solutions, and that's exactly what Cash Flow Essential is. Making great progress on it. We talked about Washington Federal the first to go live.

Continue to build out great functionality with our partners at Meleo and think we have a solution that can help banks achieve their objectives. And that's what our goal is to be. The greatest partner that we can be in the FI emerging markets.

And this really at the center of it. So we're very optimistic about the growth we can put on here and what that will do over distribution.

Operator

Next, we'll go to the line of Will Nance from Goldman Sachs. Please go ahead.

Will Nance

Hey, thanks for taking the question. Mike, one for you. There have been a lot of data points on the macro environment about a lot of large enterprises going pencils down on large CapEx investments.

But I know banks tend to beat to their own drum. I was wondering if you could maybe put your PNC hat back on for a second and talk a little bit about how the macro environment we entered, you know, a month ago, it may impact the way banks think about technology and deployments. And maybe what I'm getting at at a higher level is how would you expect implementation pipelines in a business like Fiserv, Inc. to perform in a weaker macro environment versus maybe a typical enterprise software company.

Thanks.

Mike Lyons

Yes. I think I mentioned it in the earlier comments at least in the conversations we've had throughout the quarter, it's a question about doing more. And those just aren't banks.

Probably an even split between merchants and banks. What we generally provide is mid-mission critical systems and capabilities that help them generate revenues. Facilitate sales at our merchants and serve clients, and grow clients at the bank.

So have not seen anything of that nature so far this quarter. In fact, I made the point that with a little disruption in the market, we've seen a flight to quality, if you will, in terms of people coming to us around size, scale, stability, consistency of model. Some institutions have over-relied on a multiple of fintech solutions patching together different things, whereas we can bring an end-to-end solution, significant balance sheet, great capabilities, and consistency.

So, so far, we've seen the opposite. The question is about doing more.

Operator

Next, we'll go to the line of Jamie Friedman from Susquehanna. Please go ahead.

Jamie Friedman

Bob, I wanted to ask about merchant as well. My math is that small business and enterprise organic grew 10.3% combined ex-processing. And I realize you had messaged last quarter in prior transcripts the challenges in processing.

But if you could revisit where we are in the processing journey because it sounds like you're expecting that to improve. But if you could talk through why it is and what the logic is, I think that would be helpful to understand the trajectory. Thank you.

Bob Hau

Sure, Ed. First off, the processing line certainly was impacted by a periodic revenue item that we had. You recall Q1 of last year, we disclosed we had a large periodic revenue item that accelerated Q1's growth.

So we're now growing over that. If you take the organic revenue growth and adjust for that periodic item in Q1 of last year, it actually grew about 4% for the quarter. And we generally believe that the processing line will be roughly flat, slightly positive over an extended period of time.

What we've seen over the last several quarters, and we expect to see going forward. And we see great opportunities to grow the overall merchant segment. Processing is an element of that.

It's obviously the smallest of the three business lines. And our overall growth as we grow the Merchant Solutions business, processing is a small part of that.

Operator

Next, we'll go to the line of Dan Dolev from Mizuho. Please go ahead.

Dan Dolev

Hey, guys. Great results. And congrats again, Frank and Mike.

So really quick on I know you called out Dollar Tree's impact in tandem with interest rates and excess inflation. But can you maybe quantify just specifically the Dollar Tree's impact.

Bob Hau

Yes, Dan. From a first-quarter standpoint, Argentina broadly, and that's really all three elements: inflation, interest, and Dollar Turista, was zero impact to the growth in Q1 of this year. Q1 of last year overall Argentina was about 22 points of growth in the merchant segment.

And Dollar Turista was seven points of that. But now that Argentina inflation interest has returned to more normal levels. And while we did see some Dollar Turista revenue in the first quarter, it actually was down a bit from Q1 of last year.

And we expect that program to likely go away this quarter as you may have seen Argentina reached an agreement with the IMF for a large loan. Their currency peg is expanded or lightened. And we anticipate Dollar Turista to go away this year.

Excuse me, this quarter.

Operator

Next, we'll go to the line of Andrew Jeffrey from William Blair. Please go ahead.

Andrew Jeffrey

Hi. Appreciate taking the question. Mike and maybe for Frank too.

Recognizing that Fiserv, Inc.'s offerings for banks have improved and expanded dramatically over the last few years, can you just comment on sort of the nature of that distribution channel compared to the historical JVs. Maybe just qualitatively, have the partnerships improved along with product. Is it people in the bank partnerships.

Because I know that's an area that had sort of been a little choppy historically, but it sounds like now it's really turning into important growth drivers. So I'm wondering if you could sort of compare and contrast today with five or seven years ago perhaps.

Frank Bisignano

Yes, I could definitely compare and contrast from five seven years ago. You know, I think that was a much different COVID. You know.

So you gotta go back to, you know, why we love this franchise and, like, I like to say, the construction of the company. Right. So with any of these bank parts, many of them were providing account processing, the core base system.

We got their bill pay. That allows us then ultimately to have CF then deliver Clover. I think we've done a great thing to 's been unbelievable in building this SMB bundle.

And then that's why you see people like ADP coming in. You'll see more of those. And so I think the bottom line is we had these great JVs with great bank partners but we've now taken it through the premise of the deal.

You know, I always said the synergy went way on way beyond you know, the reported we're still getting the benefit of bank partnership. And if you go anywhere from a First Citizens to other banks across the country. Our ability is just bring them more is very, very strong.

And I think you're going to continue to see it. So it's a completely different model. It's the model of the company. It's the construction of the company.

You know, it's seven years ago, I was I was debating what you guys whether Clover would be the heavyweight champ. And, you know, that that's probably been a good battle, and we loved it. Now you got a much bigger platform.

So I you know, and Mike can talk about the opportunities we have around expanding TAM. It's a you know, we built this we executed, we got through the consolidation. But we're still optimizing the construction of the company and adding adding more capability.

Mike Lyons

I would say that the success or lack thereof of these partnerships is not dependent on the structure as much as it depends on our ability to help the bank partners serve their clients with their needs. So that means quality of product into it. What the small businesses are saying, they increasingly want a bundled solution.

So that's how we're thinking about the Clover SaaS dashboard and platform. That's how you think about ADP. That's how you think about Cash Flow Central.

Bring coordinated simple to turn on. Value-added capabilities to small businesses and to distribute them through our great banking partners. But it's less the structure.

More the content and our ability to help our banking partners deliver.

Operator

And for our final question, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.

James Faucette

Thank you very much. Appreciate all the color today. I wanted to ask about the evolution of margins.

You at least relative to our estimates, continue to put up very good operating margins. At the same time, we're seeing the increased contribution of growth from international markets, especially as you roll out over to those markets. How should we think about the maturity of profitability in those markets.

And how can that change over time as you continue to grow footprint outside the U.S.. Thanks.

Bob Hau

Yes, James. We've certainly seen tremendous operating margin expansion over the last several years. We guided or provided a medium-term outlook back in our last Investor Day, what November of 2023, that we expected margins to expand 100 basis points.

Obviously, strong growth last year. 70 basis points over the prior year. That was on top of 230 the year before that.

Our guide for this year is at least 125 basis points. So certainly exceeding our outlook there. We continue to see real opportunity to see that continue into 2026 and beyond.

We've talked about the virtuous cycle of growth in this company, where investment brings growth, growth brings very high fall through on a very scaled global business. That allows us to expand operating margins while reinvesting some of that operating income back into the company to provide additional growth. We've seen that for the last many years.

It's been secret sauce to thirty-nine consecutive years of double-digit earnings growth. And we think we've got some meaningful runway. Our international businesses are certainly part of that.

As you enter new markets with new products, those certainly don't immediately add to margin in a way that a scale business can. But given the breadth of the company, seeing Clover grow meaningfully in the U.S. gives you great margin expansion. While you accelerate things like Brazil.

And so the power of the scale of our business, the global breadth of the business allows us to expand margin. While investing both in new products as well as new markets. So we continue to see great opportunity ahead of us.

Mike Lyons

I think that when we talk at those client conversations we've had and wanting to do more with us, the ability to consistently invest in products and services through the franchise is the most important consideration whether they continue to do incremental business with us. So we think that's important. We think especially important amid disruption in the industry, whether it be tariffs or mergers, the like continued investment in high-quality products.

Wins more customers. And then there's still I'm only ninety days in, but there's still plenty of opportunity at the core to continue to increase the efficiency of the company. And we point to the investment in Kansas City.

Fintech Hub this week is a great opportunity to bring our employees together, make them more effective, more efficient. More focused. And there's opportunities like that across the company.

Frank's incredible at getting after a lot of those, but we still have opportunities to be more efficient, at company. So lots of runway ahead for margins. All right.

Thank you everyone to all those on the call today for your interest and a special thanks to the 38,000 associates of Fiserv, Inc. who are driving our success every day. Our IR team is available for any further questions, and we wish you all a great day.

Operator

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