Fiserv’s Shares Fall as Clover Growth Slows and Merchant Payments Processing Revenues Dip

Shares of Fiserv plummeted in intraday trading Thursday (April 24) in the wake of its first-quarter earnings report, which showed slowing growth in its Clover point-of-sale operations and a decline in payments processing activity in its Merchant Solutions segment as consumers pared their spending.

An earnings presentation revealed that Clover revenues were up 27%, which indicated a slowdown from 29% gains in the fourth quarter of last year. The annualized GPV, at $296 billion, slipped to 8% gains, down from 14% in the previous quarter, as measured year over year.

In the payments processing unit of the Merchant Solutions business, adjusted revenues were down by 9% year on year to $276 million.

Shares were down 13% in early trading Thursday.

Looking for Accelerating Growth

During a Thursday conference call with analysts, Fiserv President and Incoming CEO Mike Lyons said the company “had anticipated slower revenue growth to start the year and [remains] confident that growth will accelerate as the year progresses and we execute on existing contracts and key initiatives.”

The acquisition of Payfare, finalized in March, was a catalyst to grow Fiserv’s embedded finance offerings, and a deal to acquire CCV is underpinning Clover’s expansion, he said.

A deal announced this week to acquire Money Money in Brazil will “enhance our capital offering to merchants based on risk scoring capability and integration with the receivables registry infrastructure regulated by the central bank,” Lyons said during the call.

Within the Financial Solutions segment, which showed organic revenue growth of 6%, banking is seeing continued investment by Fiserv in core modernization, per the presentation.

Fiserv Chief Financial Officer Bob Hau said during the call that the results in the payments-related business came as “we saw declines in discretionary categories in Q1, including travel and hotels as well as restaurants. By contrast, 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.”

Canadian Slowdown

Within Clover, softer volume growth was partly the result of “a slowdown in spending in Canada particularly on travel,” he said during the call. “Canada is currently the largest international market for Clover.”

However, looking ahead, “banks in particular added Clover hardware as part of a strategic focus to address the SMB acquiring market,” he said. “Such sales bode well for our processing and BaaS revenue going forward.”

“Banking organic and adjusted revenue each grew 1% in the quarter,” Hau added during the call. “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.”

Merchant Solutions organic revenue is expected to grow between 12% and 15% for the year, tied to Clover expansion efforts. Financial Solutions organic revenue is expected to grow between 6% and 8%.

“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,” Hau said during the call. “Additionally, we have a number of newer products and markets that are on track to contribute.”

In response to analyst questions on Clover, Hau said, “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.”

Asked on the call about the competitive dynamics of the Global Payments-FIS deal announced this month and how that might impact the merchant landscape, outgoing CEO Frank Bisignano said, “You have Clover on the front end, and now you watch it rolling out globally. So, we then have this partnership model that’s unparalleled… but equally as important [we have] over 1,000 bank partners, and we consider that something we could continue to grow. We’re at the intersection here of merchants and FIs.”

Payfare is going to end up being a “home run” for the company, Bisignano said during the call.

“We have a debit network,” he added. “We have an issuing business that’s unparalleled. I love our international franchise. Yes, 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.”