Fiserv Inc (FISV) — Q1 2026 Earnings Call Transcript

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 in this call, along with the reconciliation of those measures to the nearest applicable GAAP measures. Unless otherwise noted, 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'll turn the call over to Mike.

Thank you, Walter, and good morning, everyone. As we began the year, we were firmly in execution mode, and our first quarter results were in line with the expectations we shared with you in February. Our teams continued to be laser-focused on executing against the One Fiserv action plan, and while there is still significant work to do, we are taking the right actions, with the right sense of urgency and feel really good about the progress to date. We are confident in our strategy and the unprecedented pace of change in banking and payments is creating an extraordinary opportunity for us. Our clients and prospects want a trusted partner to deliver sophisticated technology and value-added solutions. We are uniquely positioned to do exactly that. To drive these efforts, we continue to add outstanding talent across the organization, including new heads of operations for both Merchant Solutions and Financial Solutions, new Chief Revenue Officers for Clover and Enterprise Merchant and a new Head of Product for Financial Solutions. With respect to business performance, I'll start with Merchant Solutions, where we saw solid growth in Clover GPV supported by good execution against our strategic initiatives and a stable macro. Clover VAS revenue represented 27% of Clover revenue in Q1, growing 18% from a year ago, driven by software and Clover Capital. We also saw steady growth in enterprise transactions. While anticipation lending volumes in Argentina remain strong, lower inflation and interest rates in Argentina were a revenue headwind to Merchant in Q1. I would note that this revenue softness was largely offset by lower interest expense below the line. Our preliminary April merchant volume growth, including Clover GPV, remained solid around Q1 levels. Going forward in Merchant, we're watching the impact of various environmental factors, including higher gas prices from the conflict in the Middle East, which, if sustained, can impact the mix of consumer spending. We saw some of this dynamic in the most recent Fiserv Small Business Index data. In Q1, we signed 27 new banks as Merchant Referral Partners. We also announced our largest agent bank partnership in our history with Western Alliance Bank, which has more than $90 billion in assets and expands our reach with merchants across the Western U.S. We also hit important milestones in the quarter, going live with CommerceHub omnichannel capability across a number of our largest petro customers. We also went live on CommerceHub with built rewards in neighborhood hospitality and via Americas in cross-border remittance. Our broadening global releases and customer go-lives are driving CommerceHub transaction growth, which was up nearly 200% in Q1. Other key enterprise merchant wins in Q1 included a retail energy provider, Blue Shield of California, a leading tax compliance platform and a large telecom provider who added on fraud capabilities. In Financial Solutions, we saw solid underlying business volume growth, particularly in Finxact and our Payments businesses, excluding BillPay. New business sales showed continued momentum. We hit important product delivery milestones, and we saw an improvement in key client service metrics. While core bank account and revenue attrition remain above our long-term trend, we've seen early signs that our client service initiatives have been well received. We're also getting positive client feedback on our decision to continue supporting all of our cores, and we are signing and renewing customers across all core. Also contributing to an enhanced client experience is the value we are delivering from our recent acquisitions of StoneCastle and Smith Consulting, where both our strategic and financial results are in line with our business cases. Key new business wins in Financial Solutions included OceanFirst Bank, which is a $14.5 billion Northeast regional bank that is growing rapidly through its announced acquisition of Flushing Bank. It extended its premier core and surrounds agreement with us, adding Digital Payments and committing to deploy CoreAdvance. Nicolet National Bank, a $16 billion Wisconsin-based bank, is adopting our Premier Core with its Midwest One acquisition. Truliant Federal Credit Union, a $5 billion-plus North Carolina-based institution chose to move to our debit processing platform. We expanded our long-standing digital money movement relationship with PNC Bank to include CashFlow Central AR/AP Services for their small businesses. And we had embedded Finance wins with a large payroll provider and a large retailer to bring new capabilities to their payroll members and customers. In these wins, we will leverage new integrated capabilities across Fiserv, including Finxact for ledger, PayFair for banking applications and program management and VisionNext as a cardholder platform. Finxact was named Best SaaS for FinTech at the 2026 FinTech Awards, recognizing the combination of its market-leading innovation and scaled customer deployments. Finxact continued to grow strongly in Q1 with accounts and positions up over 70% as clients find value and its ability to provide financial infrastructure to enable any asset class in any domain at scale under a common platform and business model. So our execution is improving across both businesses, but as expected, that progress is not yet visible in our reported financial results as we are still lapping a higher mix of nonrecurring revenue, fueling the lingering impacts from prior client service challenges and absorbing the incremental expense from investments that will drive long-term client-focused growth, all necessary and important elements of our transition year in 2026. We look forward to the second half of the year and 2027 when we expect our operating performance will be more fully visible in our financial results. I'll now provide an update on our execution against the One Fiserv Action Plan. Of course, we will cover all aspects of the plan in greater detail at the May 14 Investor Day. Under our client-first pillar, we continue to make targeted investments to raise the bar for client coverage, relationship management, service delivery and product resilience. The number of client-facing personnel we have is up significantly, meeting a key demand from clients, and importantly, we are seeing better day-to-day execution. Our time to resolve client inquiries is down 27% year-over-year. While we still have significant work to do, high-impact client incidents are down nearly 60% year-over-year, and we launched important AI initiatives to enhance the performance of our primary client portal and call centers in Financial Solutions. Turning to Clover, our second pillar, we continue to make progress towards establishing it as the preeminent small business operating platform. We launched two new verticals in March with PracticePay in the health care space and our Professional Services offering. We are seeing promising early results with annualized GPV per health care outlet running at double-digit levels above our existing Clover health care merchants, and a 20% plus increase in new Professional Services outlets that attached our paid SaaS offering in the month. Internationally, our momentum continued with Brazil Clover outlets up over 30% sequentially, and we had another strong Clover quarter in Canada, where we remain on track to enable TD Merchant Solutions to provide Clover's product offering, processing and servicing to its clients in the second half of the year. After launching in Q4, we continued to expand our Digital Merchant Activation capability, and now have 22 of our top bank partners signed. We will also add this capability to our clover.com online Merchant Referral Partners. Through integration with StoneCastle, we remain on track to launch Clover Savings, our merchant cash management program before the end of Q2. Through a number of important partnerships, we continue to build agentic capabilities for our Clover merchants and we'll showcase some of these at Investor Day. And finally, we are excited to share that Clover is slated to support 30 World Cup games this summer in the U.S. and Mexico. Next, on the innovation front, we continue to hit critical milestones on key strategic products including Experience Digital, CashFlow Central, VisionNext, Optis and CommerceHub, as I mentioned earlier. In our Enterprise Merchant business, we delivered a new developer portal supporting agentic commerce. Our teams have further ramped up their usage of AI tooling in the software development process with early results showing a significant reduction across key steps in new feature development and delivery time with mainframe modernization. And finally, we are on track to launch our previously announced stablecoin pilot this summer to facilitate interbank money movement. Fourth, we are in full swing with Project Elevate. With AI at the center of this program, we are very encouraged by the early results. The teams have identified hundreds of opportunities to drive revenue uplift, reduce expenses, increase simplicity and improve productivity, and we're moving with urgency to operationalize them. Paul will outline our financial targets for Elevate at Investor Day. Beyond Elevate, we took several important actions in Q1 to drive efficiency, including closing two subscale offices, exiting underperforming Merchant businesses in India, reducing management layers, and implementing more aggressive performance management. And just last week, we completed the migration of all customer activities from a significant data center as we continue our modernization activity. Last, but certainly not least on One Fiserv is our commitment to highly disciplined capital allocation. We continue to sharpen our focus on the businesses and assets that best align to our go-forward strategy, including evaluating potential dispositions. I'll conclude by saying we look forward to seeing you at Investor Day where among other topics, we will further highlight our strategic priorities, describe how our businesses are converging further to unlock more synergies and share how we're using AI to transform systems of record into systems of collaboration, create new TAMs and increase efficiency. Together, these actions will support the mid-single-digit adjusted revenue and double-digit EPS growth that we've discussed since last fall. This will position Fiserv to return to its roots and create significant shareholder value as a constant compounder. I want to thank our employees for their hard work and dedication and our clients for their continued trust. With that, I'll turn it over to Paul to cover the details of Q1 and our guidance.

Thank you, Mike, and good morning, everyone. I will cover details on total company and segment performance in the first quarter and reiterate our guidance for 2026. Beginning on Slide 6, total company Q1 adjusted revenue was $4.68 billion, a decrease of 2.4% compared to the prior year period and was in line with our guidance as we lapped higher nonrecurring revenue from a year ago. Q1 adjusted operating income was $1.4 billion, resulting in adjusted operating margin of 29.7% also in line with the just below 30% view I provided on our last call. Total company organic revenue was down 3.6% in Q1 and with a differential in organic-to-adjusted revenue of just over 1%, in line with the approximately 1% delta we communicated in February. First quarter adjusted earnings per share was $1.79. Our Q1 results reflect an adjusted effective tax rate of 11% driven by the release of a tax valuation allowance in the first quarter. Relative to our expected annual adjusted tax rate of between 19% and 19.5%, this lower tax rate resulted in a $0.17 positive impact to adjusted earnings per share in Q1. This 11% rate in Q1 is strictly a timing-related impact. Our full year adjusted tax rate guidance of 19% to 19.5% remains unchanged, and we expect higher quarterly effective tax rates through the balance of the year as an offset. Free cash flow for the quarter was $259 million and in line with our expectations we noted in February, and reflects typical seasonality where Q1 is our lowest free cash flow quarter of the year. Now I will turn to the performance by segment for Q1. Starting on Slide 7 for Merchant Solutions. Merchant Solutions organic revenue declined 1% for the quarter, while adjusted revenue was flat, which is largely in line with our expectations as we fully anniversary the CCV transaction. As Mike mentioned, lower inflation and interest rates in Argentina did have a negative impact on adjusted revenue in our Merchant business. Small Business revenue declined 1% on an organic basis in Q1 and grew 1% on an adjusted basis. Small Business volume grew 7% in the quarter. Clover revenue grew 6% in Q1. However, excluding higher nonrecurring revenue from the first quarter of 2025, Clover revenue growth would have been in the mid-teens. Clover revenue from Payment Processing grew 10%, more in line with volume trends. As we noted in February, we expect similar trends for Clover in Q2 with this period representing the peak in nonrecurring impacts and also expect that Clover processing revenue will grow in line with Clover GPV. Clover volume grew over 9% on a reported basis and was in line with our expectations as we saw stable growth, both in the U.S. and in key international markets. Clover volume, excluding the previously discussed gateway conversion, grew 12%. As the previously discussed gateway conversion continues to run off, the delta between Clover reported and ex-Gateway growth will converge. We continue to expect Clover revenue growth in the low double-digits for 2026 and GPV growth of 10% to 15% excluding the Gateway conversion. The lower end represents the core growth rate, while the higher end assumes more significant conversion of non-Clover merchants. Value-added Services revenue contributed 27% of Clover revenue in Q1, growing 18% from a year ago, driven by software attach and lending, including Clover Capital. Moving on to Enterprise. Our revenue grew 3% on an organic basis in Q1 and grew 2% on an adjusted basis. Enterprise transactions grew 8%, and finally, in Processing, organic revenue declined 14%, while adjusted revenue declined 9%. First quarter adjusted operating income for Merchant Solutions segment was $626 million, down 23% with adjusted operating margin of 26.4%. Now I will cover Financial Solutions starting on Slide 8. For the quarter, organic revenue declined by 6% in Financial Solutions, while adjusted revenue declined by 5% relative to our expectations of adjusted revenue decline at the high end of mid-single digits that I mentioned on our last call. In Digital Payments, both organic and adjusted revenue declined by 5%. Our underlying account and volume growth in Financial Solutions was in line with what we expected and our recent history. This included low single-digit growth in debit processing and low double-digit debit network volume growth. Zelle transactions grew 18% in the quarter in line with recent trends we have seen while we saw BillPay transactions down high single digits. Also, we saw a further ramp in CashFlow Central revenue in the quarter. In Issuing, revenue declined by 6% on an organic basis and 5% on an adjusted basis. While global accounts on file grew in the low single digits, revenue comparables were impacted by nonrecurring revenue in Q1 last year, a trend we expect to be more pronounced in Q2. Finally, in Banking, revenue decreased 6% on an organic basis and was down 4% on an adjusted basis as we continue to be impacted by certain actions taken over the last several years as well as higher nonrecurring revenue in the year-ago period as well as attrition that remains above our long-term target. We saw core counts declined 2% year-over-year while overall accounts and positions, including Finxact, grew 6%. First quarter adjusted operating income for the Financial Solutions segment declined 24% to $877 million and adjusted operating margin was 38.1% versus 47.5% in the prior year period. From a leverage standpoint, we finished the quarter with a debt to adjusted EBITDA ratio below 3.2x measured on a gross basis. We expect to finish the year at approximately 3x. Turning to Slide 9. We repurchased 3.3 million shares during the quarter for approximately $200 million. As we noted in February, we are focused on managing our leverage ratio and remain committed to returning capital to shareholders. Now with Slide 10, I'll move on to our 2026 guidance. First, on revenue, we continue to 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. Consistent with February, we expect adjusted revenue growth in the range of 1% to 3%. All of this continues to assume a stable macro environment. As we told you in February, we expect the second quarter to be the trough in terms of our year-on-year revenue decline and we expect our Financial Solutions business to decline at the high end of mid-single digits in Q2. We expect our weighted average share count to be approximately 530 million resulting in adjusted EPS of $8 to $8.30, consistent with our prior guidance. We continue to expect adjusted operating margin of approximately 34% for the year. In line with our commentary in February, we expect first half adjusted operating margin of approximately 31% to 32%. In the second half of the year, we continue to expect adjusted operating margin of 35% to 36%, with Q4 representing the high point in the year. We continue to expect capital expenditures to remain approximately flat with 2025 levels. We continue to expect free cash flow conversion of approximately 90% of adjusted net income for the year, in line with historical levels and our February guidance. And with that, I will turn the call back to the operator to start the Q&A session.

I wanted to ask just on maybe visibility on the Banking side and retention given some of the bank conversions that you're doing. Just any surprise there? I know the trough comments were made, but I'd love to hear a little bit more detail on attrition and retention, that kind of thing.

I think broadly on Banking, we continue to be, obviously, very proud of the leading market share position we have in the business and all the support across almost 3,000 banks and credit unions on the core side. As we've said and we said again today, core attrition has been above where we want it to be and getting that back to normal is a significant focus for us. That attrition, as you know, is the result of actions taken over the last several years and especially around the client service front. And we're confident we have the right fixes and the way we're addressing it is the right thing to do. And while there's significant work to do as I said today, we feel like we're bending that curve in a positive way. Contributing to that is we've significantly increased our client coverage efforts, which was an ask that came directly from the clients. From that has come better service, and we're seeing that show up in both our surveys and anecdotal evidence. And then we've really leveraged a number of different forms of AI to help in call centers, enhancing our client portal experience, accelerating our tech modernization and reducing the books of work we have. Obviously, the decision to support all of our cores was an important one for our clients and has removed a significant amount of perceived pressure for them to switch and obviously, pressure on us. The StoneCastle acquisition has been a great value-add, supporting our depository clients and one of their biggest needs, which is continued deposit growth. Our approach to embracing the consultant community and even acquiring Smith Consulting to really drive value-added services to our depository partners is another piece. Finally, we've taken an advanced approach using AI to measure what we call a Client Health Index across all their experiences with us in terms of pace of change, resolution inquiries, client touch and the like, and it's given us a much better view and perspective of where these clients stand, which allows us to play much more on the offensive side in engaging them. So it's a complete package of behavioral changes, technology changes, service changes, alignment changes and enhancements. We talked about continued enhancement in the quality of our leadership team, bringing in new executives to complement existing leaders. I wish it was more visible in the results, but when you go through the underlying KPIs that we have, we feel really good about the progress we're making and our ability to get core revenue-related attrition back down to more normal levels. Ideally we'd like to have none, but of course, you've got M&A and the like. We've had some over history, but getting it back to those historical levels, we feel like we're doing all the right stuff and are on the path to do it; it just takes time and work.

I wanted to ask just on SME back book. If you talk about the performance there ex Clover. And then I know there's a swing factor in terms of the conversion of non-Clover merchants. If you did any testing there? It'd be interesting to just understand how that testing is performed and how that might influence just the go-forward emphasis on converting those non-Clover merchants to Clover?

Yes, Andrew, thanks for the question. And yes, first of all, I wouldn't call out anything unique as it relates to the back book conversion in the first quarter. And certainly, for the year, we don't have any different expectations around what that back book conversion looks like. We've commented for some time now, we're being very mindful about how we approach any of the non-Clover to Clover transition to make sure that we're doing it in a very mindful customer-centric way. And we've had some good tests around that, around the receptivity of those moves when there's a good product fit. But there is a peaking incremental impact. We've talked about it and the overall Clover GPV guide for the year, the low side of the guide assumes very minimal back-book conversion. And the higher side assumes a more meaningful back-book conversion. But right now, everything is on plan as it relates to how we're looking at that. We're going to talk a lot about this at Investor Day; Takis is going to be going through just the overall Clover strategy, the overall merchant strategy, and you'll see all the pieces kind of fit together related to this topic at Investor Day. But right now, nothing has changed. Mike, do you have anything to add?

I'd just add that we've said in the past that our ability and willingness to pursue conversions of Fiserv customers from one platform onto Clover depends on us doing certain actions, and we're proud this quarter to launch two new verticals in health care and professional services. Each time we build unique capabilities to address a certain vertical, that allows us a greater opportunity to go in and address the back-book with compelling offers. We don't want to just go in and try to move that to Clover without a strong rationale and mutual benefit for the customer. And as Paul said, our efforts to date have been very modest. Takis will talk you through that study, learn and test approach, and then when we have the right capabilities and the right understanding of it, we could pick up the pace of it.

Guys, great progress here. Quick question on AI. I think your competitor made an announcement yesterday on AI with regards to bank processing. Can you maybe, Mike, elaborate on some of the initiatives and how you add value with AI to your banking plans?

Thanks for the question. As we keep progressing with AI across our businesses, we get more and more excited about what AI is allowing us to do, and we've seen incredible results to date, recognizing it's still early in the development of it. But we're really intensely focused on four areas: taking our systems of record into systems of greater value and systems of collaboration, generating new revenue sources and TAMs, enhancing client service and increasing our own productivity and efficiency across the company. With respect specifically to leveraging AI on the revenue side and for the benefit of our clients, agentic capabilities are clearly the next important phase on both the Merchant side and the Banking side, and we have a number of extremely exciting developments going on there, including new agentic commerce capabilities, which we've been talking about in Merchant and rolling out through important partnerships. Takis will go through that in detail next week, but we see a great opportunity, especially with the Clover customer base and enabling them to access an agentic world without building all the back-end systems needed. On the Banking side at Investor Day, Divya will introduce a new governed AI operating layer that will allow financial institutions to access and fully capture the power and benefit of agents across many functions, including front, middle and back office, and using any LLM. We're already live with pilot agents with two financial institutions around this today and have a number of others lined up with different use cases—loan originations, compliance, call centers. So not to steal too much thunder for next week, but Divya will formally introduce the product and you'll be able to see demos of it. Whether it's internally or externally, Merchant or Financial, we're seeing great opportunities both to drive value for ourselves and help our clients access agentic capabilities.

I just had a couple of quick ones on Clover. I guess the first one just on the nonrecurring revenue that you called out, Paul, from last year. Was that mostly hardware revenue or something else? And then more broadly, Mike, on Clover Capital, you've highlighted in prior calls how the penetration is still relatively low in your installed base. So maybe if you could just talk a little bit about what has constrained adoption so far? And as you look to scale that business, how should we think about the long-term penetration potential and sort of the mix between on-balance sheet, off-balance-sheet to support that growth?

Yes. So Vasu, maybe I'll take two parts of those, and then Mike, if you want to add anything. As it relates to the nonrecurring revenue on the Clover side, yes, hardware is a big piece of that. There are some other things from a nonrecurring standpoint in that comparative. We highlighted that up; that's why the Clover revenue grows in the mid-teens while reported growth was 6%. But if you take the comparative dynamics of the nonrecurring not repeating in the first quarter of this year, that puts you to the mid-teens—roughly 15%—and hardware is the biggest or one of the biggest pieces there. On the Clover Capital side, we will talk more about this at Investor Day and just our strategy around how we're going to be approaching the marketplace both from a balance sheet standpoint as well as an overall growth standpoint. You're right, we are under-penetrated relative to the opportunity set and we're going to lay out a broader strategy around how we're going to be approaching the marketplace. We did see good Clover Capital growth in the quarter, and I'm very pleased with the underlying volume growth that we saw. We don't see any change in that growth trajectory as we look at the forecast for the remaining part of the year, but we'll give you more color at Investor Day. Mike, anything else?

You highlighted perfectly that the opportunity is significant in front of us. We're a couple of quarters into enhancing our core capabilities and going after that, and it's a domestic and international opportunity.

I wanted to ask on Financial Solutions. Can you just give us a sense on the nonrecurring revenue headwinds where relevant across the subsegments. And I'm thinking particularly in Issuing and Banking. And then the relative potential size of those headwinds in 2Q? Just so we could unpack the recurring performance within overall performance.

So specifically, in the issuing area, the biggest single driver I'd point out is the output solutions business, where we had some significantly sized output solutions work that is not recurring this year and was more concentrated in the first half. Specifically in the second quarter, you'll see that team's growth rate on the Issuing business in the first half of last year provide a meaningful comparative headwind on the Issuing side. There are other nonrecurring items across the digital channel as well as in Banking, but as it relates to sizing, we gave you when we talked about the high mid-single digit expectation and the second quarter being the trough, relative sizing of what we expect the impact to be. I would say we are pleased with the fundamental growth across the Financial Solutions segment in each of the underlying businesses: Digital, Issuing and Banking. So we're seeing consistent underlying volume growth in the first quarter and the second quarter and really for the back half of the year. It's just these comparative dynamics that we have in the first half and more acutely in the second quarter that we're needing to grow through, and then we expect to be in a much more normalized growth picture in the back half of the year. We do have some natural tailwinds in the back half of the year as it relates to growth. We have a comparative tailwind in the back half on Financial Solutions due to some of the strategic things we did in the Digital space in the third quarter of last year. So that's a natural tailwind. And then we have some contracted revenue from some of the client wins that we've talked about that also will be additive in the back half of the year.

It's hard to go through every single recurring revenue item. Broadly, we think, and we'll talk at Investor Day, that we're a mid-single-digit growth company with Financial Solutions being a low single-digit growth company, probably operating flattish today on a clean basis and Merchant being mid- to high-single-digit. Our plan is to make the progress visible in the financial results. But to Paul's point, you look at the underlying volumes, they track closely to what we're talking about from a high level and maintaining and growing that volume step—the revenue will come behind it and start to match.

Mike, if I could just follow up on the comment you made. I think you've been pretty clear in sort of telegraphing what you think the right growth rate is for the business and the message you expect to deliver at the Investor Day coming up. I'm wondering, to the comment that maybe the underlying growth in Financial Solutions is more or less flat right now, and obviously, the investments that you're making that are weighing on margins right now. As you look out into next year, you've talked about seeing the benefits of some of the improved execution coming through the numbers. Is it your expectation that the company can actually get to that level of performance exiting the year and into 2027? Or are there lingering performance and attrition issues in Financial Solutions or investments you want to make on the margin front that could delay that?

I'd say go back to the One Fiserv comments: we are confident we're taking the right actions. We have to execute against those and complete them. The team has rallied around those. We're laser-focused on them. We know the fundamentals we have to get in the right place to be a mid-single-digit grower, and the efforts we need to get there are fully funded and fully resourced. We've brought in great talent to complement existing talent. I feel good about the execution plan. We have to go do it. As you exit 2026, you'll start to see comparables shift and become more favorable into Q4, and 2027 is the first full year where you can see clear visible growth. We'll give you more at Investor Day the underlying volume drivers that support our belief. We've got two great TAMs in Merchant and Banking, both in strong positions and investment modes. Whether it's an enterprise merchant or an FI, there's a lot to work on. The environmental support is there, the fundamental volumes are there, and we must put ourselves in a position where execution resilience and service are much crisper than they've been. That's the path we're on, and I'm confident we're taking the right actions to get to where we need to be to position the business to deliver growth. We have to execute.

This is Melissa Chen on for Jason. I wanted to ask about the launch of Clover PracticePay, it sounds like the initial reception there has been good. But can you talk a little bit about how big the addressable market is in health care POS and who you're mainly competing with in that space?

We were thrilled to launch PracticePay this quarter. We're very optimistic about our growth in that area; it's a massive TAM. This was the number one area requested by our bank partners, which is a major distribution channel for us, and we heard it loudly from our ISO partners as well. We're focused on local doctor practices where our penetration is low. Our growth rate in that segment has been below industry benchmarks historically, so this is a key component that will allow us to go after some of the back-book conversion. We have a great partner in developing this with Rectangle. We launched this month, so it's still early, but we're very pleased with the progress and remain focused on execution.

I was wondering at a high level, if you could share your perspective on the competitive dynamic of Financial Solutions, specifically in Issuing and Banking because it does seem like landscape is changing somewhat, investors are potentially anxious about it.

I made a lot of comments on core banking earlier specifically. Obviously, we've got great competitors across Banking, Digital and Issuing. Competition fuels growth for the industry and we're focused on ensuring our fundamentals—service, product delivery, value-added solutions and speed to market—are at the highest level so we can compete effectively. A lot of the questions we hear relate to the modern core space and changes in the competitive dynamics. We're thrilled with Finxact, which is on the way to being the largest with the most accounts being served on a modern core platform—cloud agnostic, asset-agnostic, a truly modern digital ledger. Divya and Takis will address the embedded finance space at Investor Day. No major changes in the competitive landscape as we see it; competitors are innovating and competing as always. Our focus is to ensure our underlying fundamentals allow us to compete and maintain leadership positions across our FI businesses.

I was hoping we could spend a few minutes on non-Clover SMB. So it's roughly 20% of total company revenue, roughly 40% of the Merchant segment. I know there's a lot of moving parts there in terms of some of the Argentina changes, some of the Clover migration. But I was hoping you could talk about the organic growth on an adjusted basis for that business this past quarter, but also over the past few and then what is implied in the guidance? And maybe a little bit bigger picture. I understand this might be more of an Investor Day topic. But to the extent that you could decompose some of the portions that are U.S. that are international, how large the ISV partner business might be in there, etc. Any additional color would be appreciated.

Yes, Tim. We'll go over this in good detail at Investor Day so you'll get more clarity around the componentry. We'll provide additional disclosure of Clover components as well as non-Clover, and you'll also understand strategic items around the non-Clover side, particularly ISV and some international expansion. As it relates to organic growth, we do have comparative dynamics—Argentina creates noise. As I said on our last call, we're expecting our non-Clover SMB business to have slight growth this year. We were down low single digits in the first quarter. So organically, we were down in the low single digits for the first quarter and would expect similar performance in the second quarter if everything holds. For the back half, incremental ISV growth is coming in and some international growth, particularly in Brazil, ramps. Generally speaking, non-Clover SMB is not a growth business for us, but relative to the overall picture, we're managing it in a more systemic way than in the past. We're being mindful about how we approach moving that business to Clover over time in the right way. The end goal is to move as much of that business to Clover where the product and features fit those merchants. Takis and team will cover that in more detail at Investor Day.

All great topics for next week and all in our materials to be addressed.

I appreciate all the commentary and apologies if I missed something because I've been bouncing between calls. But I would like to ask quickly, when you talk about moving volumes and taking advantage of Clover's strength, how are you thinking about the moving targets and competitive environment, especially as we see more companies looking to add incremental functionality for omnichannel, etc.? How do you think about that and its implications versus product roadmap?

We'll do a deep dive on Clover next week, but high level: we think we've got the best small business operating system in the business. We're continuing to invest heavily across horizontal features and vertical features; we launched PracticePay and Professional Services this quarter with good early results. Takis and his team are digging deep on the experience piece of Clover—we have room for improvement there. We also have the best distribution channel by a significant margin combining direct sales, 1,000-plus banking partners, and a growing ISV ecosystem. The opportunity is significant: our market share in many verticals is still single digits, so there's a lot of room to grow. Competition will always be strong, but we think we've got a great platform and we're focused on investing, focusing and driving Clover growth domestically and internationally.

You called out some senior hires on Merchant Solutions. So I was hoping you could comment more broadly on the org chart in terms of whether you have all the pieces in place to execute on the plan? And also if there's more opportunities to streamline head count by way of AI?

We mentioned in the prepared comments that we've been thrilled by the interest from talented senior people outside of Fiserv wanting to join, and we've added a number of highly talented leaders on both the Merchant and Financial Solutions sides who add to an already strong team. We feel very good about where we are in terms of critical hires remaining to have the go-forward team; there are very few left. We'll have demos at Investor Day where you'll meet many of these leaders and see some of the products they're working on. We love the team and the combination of external talent we've brought in along with the deep institutional knowledge at Fiserv. On AI and efficiencies: Project Elevate is our focused effort with AI at the center. We're deep into sourcing and vetting ideas. There are no sacred cows; everything's on the table. A couple of hundred people are very focused, almost fully dedicated, and we're seeing great opportunities coming out of that. If you look at our headcount over the last four or five years, we're down double digits in headcount and we've already taken significant gains leveraging early automation. From here, we continue to see significant opportunities to become more productive and efficient through AI—in operations, call center services, application development and so on. Modern AI solutions show significant opportunity to improve customer experience while increasing efficiency for us. We're leaning in hard on AI.

In the Acceptance segment, it seems like you're implying high single-digit growth in the back half. And it seems like the first half is probably close to mid-single digits. I'm just wondering: source of acceleration? You answered Tim's question about non-Clover SMB and there will be some contribution there, but will Clover accelerate from the normalized mid-teens? And will Enterprise accelerate to the high single digits? Maybe how will those things happen?

Yes, Dave. We do expect that Clover on a reported basis will accelerate from the 6% reported in Q1 because we're expecting low double-digit revenue growth for Clover for the year. If you do the math, you'll see acceleration. Two favorable dynamics in the back half for Clover are: one, in Q4 we had some pricing rollbacks that provide a nice tailwind in the fourth quarter from a comparative standpoint that fuels additional reported growth; and two, in Q4 we had some weakness, particularly in November on the volume side, so we actually have a volume-positive compare as well. From a fundamental standpoint, right now we're in a mid-teens growth rate for Clover and expect to deliver low double-digit Clover revenue growth for the year. On the non-Clover side, we were down low single digits overall in Q1. Given some of the ISV growth and international expansion, we expect that to improve and be a small positive contributor for the overall year. Nothing has changed in our volume assumptions. We're pleased with the volume growth in Q1. The shaping of the year remains intact, which supports the expected Clover and non-Clover growth rates.

Thanks, everyone, for joining today. We look forward to seeing you next week at the IR Day.