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At this time, I will turn the call over to Peter Poillon, Senior Vice President of Investor Relations at Fiserv.

Thank you, Ivy. Good afternoon, everyone. With me today are Jeff Yabuki, our Chairman and Chief Executive; Frank Bisignano, our President and Chief Operating Officer; and Bob Hau, our Chief Financial Officer.

Our earnings release and supplemental presentation for the quarter and full-year are available on the Investor Relations section of fiserv.com. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results, strategic initiatives, and expected benefits and synergies from our recent acquisition of First Data.

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. Please refer to our materials for today's call for an explanation of non-GAAP financial measures discussed in this call along with a reconciliation of those measures to the nearest applicable GAAP measures. Unless stated otherwise, performance references made throughout this call are year-over-year comparisons and all references to internal revenue growth are on a constant currency basis.



Also note that non-GAAP financial measures, included in our earnings release and supplemental materials, include the fourth quarter of 2018 and full-year 2019 and 2018 results for First Data, which have been prepared by making certain adjustments to the sum of historical First Data and Fiserv GAAP financial information. For additional historical combined financial information, please refer to the Form 8-K which we filed on October 3rd.

As a reminder, we'll host an investor conference on March 25th in New York City. We expect the presentation to run from about 8:30 AM to noon and we'll also host a launch following the program. We look forward to seeing you at this important event.

Thanks, Jeff, and good afternoon. It's wonderful to be here today discussing the creation of new Fiserv through best-in-class integration. We are making great progress serving clients, enhancing our growth profile through revenue synergies and moving the needle on cost actions.

At the same time, as you can see from our strong 2019 results, we remain focused on profitably growing our existing business to deliver shareholder value. We were excited to start the new decade by being named as a Fortune Magazine World's Most Admired Company for the seveth year in a row. This recognition is a testament to the hard work, dedication, and commitment of our associates around the world. I'm personally very proud to be part of this team.

As you know we set initial five-year target of at least $500 million of revenue synergies and $900 million of cost benefits. The punch line remains that we are highly confident in achieving these targets and continue to identify ways in which we can overachieve in terms of both quantum and timing.

We continue to advance a growing list of revenue synergies designed to deliver additional client value and incremental revenue growth. These initiatives represent a solid mix of near- and long-term opportunities, which should enable us to serve clients in a way that will drive enhanced growth and profitability for Fiserv over the next decade.

We continue to see better-than-expected results in our bank merchant program for Fiserv account processing clients. We signed 44 new clients in the fourth quarter, more than tripling the signings in Q3 and signed over 50 for the year. We are seeing a good balance between de novo programs and competitive takeaways which are running about one-third of the signings, higher than anticipated at this stage.

We exited the year with more than 300 institutions in the pipeline and continue to believe we will exceed the $200 million revenue synergy target for this very important initiative. In addition to bank merchant services, there is a large opportunity to cross-sell solutions around the world where one or both of the original firms has an influential relationship. Examples include CheckFree, Dovetail payment hub, DNA, credit card processing, and Output Solutions. We continue to be bullish on the revenue synergy opportunities emerging from network innovation. The combination of STAR and ACCEL as the third largest debit network in the US provides us with significant opportunity to differentiate with issuers and merchants.

Importantly, we are on track to deliver at least $100 million of revenue synergies in 2020 and are well on track to meet or exceed our initial $500 million revenue target. We are also making excellent progress against our cost synergy objective of at least $900 million. Our initial focus is to streamline our cost structure through enhanced efficiency, increased operational rigor, and a significant focus on our $4 billion of annual vendor spend.

We attained $46 million of cost synergies in 2019 and are continuing to grow a level of annualized run rate savings. We expect incremental cost synergies of more than $300 million in 2020 and given the combination of visibility and actions to date also anticipate very strong cost synergy performance in 2021. We are pleased with our performance to date and have increasing confidence in our objective to exceed the original synergy targets over the five-year period. We will provide a full update of both cost and revenue synergy targets at our March investor conference.

Since the time of the transaction announcement, we have gotten questions on how the original Fiserv operational effectiveness program would intersect with the cost synergy program. We see a number of opportunities to operate our business more efficiently, while enhancing our client experience through innovation, such as RPA, cloud, and process reengineering, which we believe will also provide additional economic opportunity beyond the cost synergy program.

An important 2020 priority is to continue working collaboratively with Bank of America on the joint venture dissolution which is slated for June 2020. The discussions are progressing very well, and both parties are focused on ensuring the delivery of great service to our shared clients. We continue to believe that the financial impact of the BAMS separation will be generally accretive to our results over the next few years.

Overall, there is nothing more important than delivering on the promise of new Fiserv. Our unifying purpose across the enterprise is to build an extraordinary company for our clients, associates, and shareholders.

Thank you, Frank, and good afternoon. Let me start off by saying that we feel great about our financial performance and have confidence in our ability to create sustained value for clients and shareholders.

Internal revenue growth was 5%, as expected in the quarter, and 6% for the year. We were pleased to see modest contributions from our revenue synergies, which we believe will accelerate to at least $100 million in 2020. Adjusted operating income increased 7% to $1.2 billion in the quarter and was up 8% to $4.3 billion for the year, which includes an early contribution from synergies.

Adjusted operating margin in the quarter was up 100 basis points to 31.4%. The improvement was driven by a combination of continued revenue growth, the lapping of prior year's tax reinvestment, and the early benefits from synergies, partially offset by the expected lower periodic revenue compared to the fourth quarter of last year. Adjusted operating margin for the full year was up 100 basis points to 29.7%, driven by improved revenue growth, cost efficiencies, and a modest impact from early synergy realization.

Adjusted earnings per share was up a very strong 18% to $1.13 in the quarter and increased 16% to $4 for the year, which also marked our 34th consecutive year of double-digit adjusted EPS growth. These results include a negative impact from foreign currency of $0.02 and $0.11 per share for the quarter and full-year, respectively. As you know, we intend to modify our segment structure in 2020, and we'll report our future results on that basis. We expect to file an 8-K in March that will provide the new segments along with comparable financial information on a quarterly basis for 2018 and 2019.

Now on to the segments. Internal revenue growth in the First Data segment continued to be strong at 6% in the quarter and 7% for the year. This performance included outstanding results in the former GBS segment, delivering 9% growth in the quarter and 10% for the full year. Internal revenue growth in GBS North America was a very solid 6% in both the quarter and year. And as we mentioned in our Q3 call, we don't intend to provide this level of subsegment detail beginning in 2020.

Global merchant acquiring, both at the physical point-of-sale and in digital markets were important contributors to our 2018 growth with strong performance in India, Brazil, and Argentina. Additionally, we saw solid performance in our domestic business, including continuing strength in our digital commerce solutions. Our ISV partners grew by more than 25% for the year translating to almost 25,000 new ISV merchant locations. Importantly, the number of global contracted merchant locations in 2019 expanded by double digits.

We also continued to expand our leadership position in card issuing with worldwide accounts on file up solidly in the mid-single digits for the full year. Segment adjusted operating income increased 6% to $708 million in the quarter and was up 5% to $2.7 billion for the year. Adjusted operating margin in the segment was up 50 basis points to 31.9% in the quarter and 30.7% for the year, driven primarily by strong revenue growth.

The original Fiserv Payments segment delivered the internal revenue growth of 4% in the quarter and 5% for the year impacted, as expected, in the quarter by lower periodic revenue. We saw strong segment growth performance in card services, output solutions, and some early network revenue synergy benefits.

Adjusted operating income for the segment was excellent, growing 12% to $353 million in the quarter and up 11% to $1.3 billion for the year. Adjusted operating margin in the quarter was outstanding, up a very strong 250 basis points to 39% and was up 70 basis points to 36.3% in the year. This increase was generally from growth in high-quality revenue, the reduction of last year's tax-funded investments, and the benefits from productivity and early synergy performance.

Transactional businesses performed well with debit transactions up in the high-single digits for the quarter and year and Mobiliti ASP subscribers increased 11% in the quarter to more than $9 million. P2P transactions, which includes both Popmoney and Zelle, continued their rapid growth, doubling versus Q4 last year and up 18% sequentially. Zelle transactions tripled in 2019, and the number of live clients increased tenfold compared to a year ago. Zelle signings were also very strong for the year, almost doubling to more than 360, which included 112 in the fourth quarter alone.

Internal revenue in the Financial segment for the quarter was flat, as expected, driven by much lower periodic revenue, partially offset by gains in high-quality recurring revenue. For the full year internal revenue growth was up a solid 3%, led by our account and item processing businesses. Adjusted operating income in the Financial segment was flat in the quarter at $207 million and was up 1% to $805 million for the year. Adjusted operating margin was up 40 basis points in the quarter to 34.1% with the benefit of growing recurring revenue and operational effectiveness more than offsetting the impact of lower periodic revenue. Adjusted operating margin for the full year was up 20 basis points to 33%, which is the highest level attained in the last several years. The adjusted corporate operating loss in the quarter was flat to the prior year at $100 million and down 11% to $414 million for the full year, primarily due to a combination of cost synergies and operational efficiency benefits in both original companies.

The adjusted effective tax rate came in slightly better than expected at 22.8% for the quarter and 21.4% for the year, primarily due to higher-than-expected benefits and stock-based compensation. Due to the transaction close, we expect this benefit to be reduced in 2020 and become a bit of a tax rate headwind with the largest impact likely in Q1. Accordingly, we expect our adjusted effective tax rate for 2020 to be in the range of 22% to 23%.

Free cash flow of $984 million in the quarter was driven by a combination of strong operating results and some benefit from settlement timing in our merchant business. Full year free cash flow was up a very strong 16% to $3.3 billion and free cash flow conversion was 118%. We expect to see continued free cash flow benefits from the utilization of the First Data tax NOL in 2020. We repurchased 2.2 million shares for $238 million in the quarter and 4.2 million shares for nearly $400 million in the year. We are pleased to have reentered a more regular cadence on share repurchase, which should carry into 2020. As of December 31st, we had 680 million shares outstanding and 22 million shares remaining authorized for repurchase.

Total debt outstanding, which is about 78% fixed rate, was $21.9 billion and debt-to-adjusted EBITDA was 3.8 times as of December 31st. We repaid nearly $600 million of debt in the quarter, and we remain committed to returning our historic leverage level within 18 to 24 months through a combination of debt repayment and strong EBITDA growth.

In December, we announced an agreement to sell a 60% interest in our Investment Services business to Motive Partners. Along with entering into a joint venture, we expect to receive approximately $510 million of net after-tax proceeds from the sale, which will be primarily redeployed to share repurchase. Overall, the net expected dilution from our four [Phonetic] 2019 divestitures should be about $0.05 in 2020.

We will continue to use our portfolio management discipline to ensure we have the optimum mix of businesses to deliver sustained client and shareholder value in your company. In conjunction with the First Data merger, we recorded a non-cash impairment charge in the GAAP results in the quarter associated with an international core account processing platform. Lastly, using the midpoint of our 2020 adjusted EPS guidance, we will have already achieved, approximately 25% accretion from the First Data transaction. We will remain on track to meet or exceed our commitment of more than 40% accretion over the five-year synergy period.

Thanks, Bob. As we mentioned upfront, market momentum continued in Q4 with a 15% increase in sales for the second quarter in a row and with strong performance across several areas, including bank solutions, card services, merchant solution, and biller. The Q4 results are even more noteworthy considering original Fiserv sales results in the comparable period were at a record level. On a combined basis, sales was up 10% for the year and our pipeline remained strong. We are seeing synergy opportunities grow as the market explorers the benefits of new Fiserv, which we believe will lead to incremental revenue growth in 2020 and beyond.

For original Fiserv, integrated sales was up 41% sequentially and up 5% for the year. During the fourth quarter, we achieved $11 million of operational effectiveness benefits and $47 million of savings in 2019, which completes our five-year $250 million program one year early. As you know, we provided a preliminary view of 2020 performance in Q3 and our actual 2020 outlook is right in line with that preview.

We expect constant currency internal revenue growth of 6% to 8% for the year with growth rate acceleration coming from continuing strength in our global merchant business, the cumulative impact of sales and implementations, and the achievement of in-year revenue synergies. We expect 2020 adjusted earnings-per-share growth of 23% to 27%, or $4.86 to $5.02, after [Phonetic] revised 2019 result of $3.95, which reflects the net divestiture impact Bob mentioned earlier. Our outlook also contains negative FX impact of approximately $0.07 to $0.08 per share, which is incremental to the decline in 2019. We expect adjusted operating margin to expand by at least 250 basis points and that free cash flow conversion will be greater than 112% for the year.

For modeling purposes, we expect our Q1 results to be pressured by the comparison against last year's strongest quarter, which also had a high level of non-recurring and periodic revenue. Additionally, we expect revenue growth and earnings to build sequentially throughout the year as action plans are executed and cost and revenue synergies fold into our results. Overall, we expect the quantum of these benefits and the impact to our P&L to be sustainably higher in the second half of the year, which should also provide a strong jumping-off point as we enter 2021.

2019 was a watershed year for Fiserv. We were again named a World's Most Admired Company, achieved our 34th consecutive year of double-digit earnings-per-share growth, and most importantly acquired First Data in a market-defining transaction that significantly advanced our aspiration of moving money and information in a way that moves the world.

We're excited to enter a new decade of growth and opportunity. We believe we have assembled the strongest client-centric solutions in the industry, the best associate team, and are focused on delivering above-market returns for you, our shareholders. As we close, let me thank our more than 40,000 talented associates around the world who work relentlessly to serve clients and to deliver Fiserv at our best.

Just quick questions on, as we look and kind of enumerate, and, Frank, you talked a little bit about this, as you think about the various categories of revenue synergies, you mentioned network synergies, card issuing, things like that. Would you order the priority of those for us and now that you've kind of been at this for six months or so, and give us a little bit more color on each of those buckets?

Well, bank merchant and the merchant opportunity we would put at the highest level. And you see that performing and how we're signing it up. And when Jeff and I thought about this, we always thought that we would have a strategic advantage with the Clover platform, and that'll create a privileged position in core processing, account processing, and along with our deep bank relationships.

Second, the bringing together of the used two networks is a very, very unique opportunity that takes us -- we were already, in some cases, number three when you put it together, we're a powerful number three. But we have this merchant business is that affords our clients opportunity. So you're watching the client centricity of these opportunities that are good for our shareholders and good for our clients. And then the ability to take the privileged positions both companies had with the long list of assets, Output is a very strong product. We know that we can have CheckFree and our payments of Dovetail, all those are very strong opportunities and the cross-sell.

And as Jeff talked about, the market reaction is every time we're together with the client, we get this very deep feeling of even more we can do for them. And we look forward to Investor Day talk in more deeply about that.

Yeah. Brett, I would say, I think Frank is exactly right. The only other thing I would say is as we continue to have the privilege of spending more time together, we are identifying more and more unique opportunities. We currently have more than 80 different revenue synergy opportunities in play, and that list continues to grow.

And so the beauty of this is not only do we see opportunities to deliver value, as we've talked about, whether it's in the bank merchants and network and Output, kind of, some of the nearer-in opportunities. But the ability to drive continuing value through the wonderful solutions and people that we have in the organization, we're increasingly bullish, and again, we'll spend more time on that in March.

My quick follow-up is the longer -- the bigger picture, longer term idea of owning both the funding account and the merchant point-of-sale. That was I know one of the things on the list that intrigued you about the combination. Again, as you're six months into this, what is your view on that? Has it changed? Has it evolved at all? Gotten more concrete.

And I would say that it continues to evolve. We believe that there is again kind of an even more increased privileged position where you can have access to the transactional account with all of the evolution that's happening in the payment space around real-time money movement. And we continue to see that as a very interesting future opportunity and that would be incremental to the kinds of opportunities that we see today. And so we continue to be very excited about that.

I guess my first question. When we think of 6% to 8% growth, I mean that's very encouraging. And is it both segments, both Fiserv and First Data, accelerating? Like is Fiserv is going to be 5%-ish and First Data 7% to 9%. Is that kind of what we should be thinking of?

Yeah. So, Dave, I would say that, as Bob talked about, we will be moving away from our traditional segment structure and we'll move to new segmentation, and we would expect each of those areas to continue to grow. I would say, if you went back to the old kind of the original structures, we would expect to see our payments -- our payment segment have incremental growth really driven by strength in our digital and mobile capabilities in Zelle, in network, some of those areas. So around card -- sorry, around card processing on balance. So we would expect that to grow.

As we've talked about before, we would expect to see some level of improvement in the traditional financial segment. But as you know, that segment both produces good solid returns and margins on a stand-alone basis, but also does the double duty of being a hub for us to deliver future and integrated value through other solutions, whether it be bank merchant, card, or any of the other capabilities that we have. So a longer answer, but yes, we would expect to see acceleration in each of the different traditional segments on balance.

And just a quick follow-up. Free cash flow incredibly strong, over 112% I think is what you said you're guiding to. And I know that include a little bit of NOL. Is there a way to think of what that is without the NOL maybe on a longer-term basis? Is it still like 105% or something like that?

I would say -- and Bob will certainly add in here, there is no reason to believe that our free cash flow performance will be below what it had been historically.

Yeah, absolutely right way to look at it. And as I mentioned in my prepared remarks, Dave, we've got the NOL benefit repeating, reoccurring in 2020, and have expectation of at least 112% long-standing above 100% for the company going back many, many years. Expect to see that going forward.

Yeah, I would say, Dave, the only other caveat to keep in mind, and it's not an annual caveat, but it's a quarterly caveat in that depending on the days that the quarter's end and everything else, you could have some merchant settlement moving up and down. So you'll have a little bit more of that between quarters. But on an annual basis, we are absolutely committed to running free cash ahead of normal earnings.

I just want to start off, the Q4 results, if you normalize for the periodic revenues you talked about, I guess what would you -- what kind of impact that had on the quarter's internal growth of 5%? And then just thinking about the outlook, the 6% to 8% range. I mean, what would go right for the top end of that? What do you expect to be -- are you just being conservative for the 6% part of? Just a little bit more color would be great.

Sure. So if you think about the -- it's hard to talk about it in terms of the entire business because obviously a fair amount of the periodic revenue comes out of the traditional or the original Fiserv business. But in the original Fiserv business, it's kind of a little bit more than a point of revenue growth. We gave up because of the periodic revenue. And we also have had a drag most of the year in our biller solutions business where we had a large client grow over from the prior year.

And so those kinds of negatives are running through -- certainly running through Q4 and did have an impact. Again, consistent with what we laid out in Q3, but on an absolute basis, that would have been the case. Going into 2020, we feel really good about where we sit. We had 15% sales growth in Q4. We had 15% sales growth in Q3. And one of the great things about that is we were worried what might happen when the market frees up and what we saw is very strong growth. And so that 30% growth in the last six months of the year, we'll start to see some of that roll in. And one of the levers that could move us up on the continuum is faster implementations, faster growth of those clients. As you know, almost all of our clients end up ramping up.

I think the other thing would be, do we see higher levels of performance outside the US than we're planning for today. I think that could move us up on the continuum. And I think the last thing would be faster realization of revenue synergies. And so as Frank talked about, whether it's bank merchant, network, output, those kinds of areas could all conspire to have higher growth, kind of move us up to the top end. But nothing has changed from where we sat at Q3. We think this range is prudent, but our perspective, this is still the same as it was in Q3.

Just one quick follow-up. The 40% growth in Clover, I mean, that continues to be extremely strong. And is that still just the organic trend of follow through from what First Data has already built or are you starting to see some benefit from cross-selling through the Fiserv banks or any other cross-sell on that front.

I would say that there has been exactly no impact on the Clover GPV growth. In fact, each of the quarters for the year Clover grew above 40%, really stellar performance, and annualized run rate in excess of $100 billion. So we feel quite good about that. And while we're excited about the progress that we've made on bank merchant, there's really been no contribution yet. And really, I don't think we'll start to see any movement in contribution until the second half of next year. And even that will take time to ramp, as you've seen it up in Clover. Historically it was the great work that Frank and the team has done. But we do believe that's going to be a meaningful tailwind to growth over the next several years.

As you sit down with your bank and credit union CEOs to discuss 2020 spending priorities, first, what would you characterize as the top spending priorities for your bank and credit union clients? And how does your solution set match up against those.

And then number two, how would you characterize the overall demand environment for 2020 in the core Fiserv financial sector based upon your conversations with the bank and credit union CEO.

I would say that the priorities for financial institutions in the US are continuing as they were. I would say everything digital, whether it is on the consumer side, the small business side, the commercial side, that's really job one, continuing to make the institutions more efficient through straight-through processing, right, digital really requires a straight-through processing. We're seeing a lot of discussion around money movement. Frank made reference to the Dovetail Payments Hub as one of the interesting cross-sell opportunities that we have as a result of the combination. That's really illustrative of modernizing the back office. So we continue to see that as a important priority.

And then third, I would say, it's all about cyber, making sure that banks are doing everything they can to solidify their position around safety and soundness, right, which is instrumental to the banking system. So I would say, those would be the top 3 priorities. We're also seeing some modernization going on behind the scenes around the infrastructure that's required to operate in a digital kind of a -- think about a digital real-time 24/7 world. But that is still secondary to the first three items that we talked about.

So that trend continues. We think we are very well positioned in what we are doing today around digital. We've been talking about it for a while, whether it's around Mobiliti, our Architect solution, it's helping to reenergize the account processing, the core banking space, both in the bank and credit union side. We're making a lot of progress in our security solutions and some of our other solutions that are around safety and soundness. So again, good progress there. And third, payments have been a big deal for us. And so we continue to make progress overall.

I would say that on balance the spend environment, if you would have asked me six months ago given where interest rates were moving, I would have thought that we would see a more muted spend environment. The spend environment has actually held up. I think part of it is we're getting used to a lower spread world, and banks realize they have to continue to spend. You, of course, are seeing discretionary spending being pulled from places that may not be in the top priorities, but on balance, we remain bullish going into 2020 on the spend front with that segment of the base, including the synergy work, bank merchant, and other areas, we are bullish and optimistic going into the year.

I wanted to ask about the competitive takeaways specifically on the merchant services cross-sell into the banks. How can you kind of characterize the sort of secret ingredient to picking off those relationships? Is it Clover? Is it more just focused sales attention? Is it bundling with other services? Like what's giving you the sort of torque in those negotiations in order to sort of pick customers?

So I would say that we have for years talked about the importance of the core processing as a hub to a strategically privileged relationship. And so I would say, at the top of the house is that relationship that we have with clients. However, it's really been complemented beautifully by the technological innovation that Clover brings to the party and offers banks an opportunity to bring Apple-like innovation to their commercial clients, to their small businesses. So from that perspective, those two items have been very important.

Thirdly, because of the privileged position we have, we've been driving deeper integration, integration into digital capability, integration into commercial cash management. And we're working on innovation into our Notifi alerting hub. We're working on innovation that's going to allow banks to have deeper relationships with these small businesses and commercial customers.

So from that perspective, I would say that combination is what's allowed us to get off to such a good start, both as Frank talked about, in the de novo space as well as in the competitive space. So on balance, good. And we're also seeing -- I would have anticipated or I did anticipate that we would see smaller banks take the lead. And while they have, almost 20% of the conversions are institutions that are greater than $1 billion of assets. So from that perspective, we feel good about the place and the reaction from the market.

And then in light of some of the recent divestiture activity, how would you describe the collection of assets that you have now under the combined companies? Is it sort of where you want it to be, or should we expect kind of a steady stream of incremental divestitures as we move forward?

Yeah. Ramsey, we're still in the process of reviewing strategic fit and really making sure that we have the bandwidth to put effort into some of these businesses. So if you take the investment services business which was obviously the large divestiture we announced in the fourth quarter, we think that's a fantastic business. We think with the right leadership and the right capital that that is a wonderful business, which is why we kept 40% of the business. But we believed it needed additional management and the opportunity cost for us was too great given everything we have that Bob and Frank and I have been talking about.

So from that perspective that was important. I would say that while you may see us do some trimming over time, we're not sitting here with a list of big divestitures that are coming. We're really looking and we like our portfolio a lot. I think we talked about it. We think we actually have the best solution set in the industry in terms of growth capability, but really most important around client centricity and the ability to move our clients forward with our solution.

Jeff, you just touched on this, but wanted to ask you on something about what you're seeing right now on the Fiserv side of the platform. And clearly, you seem to have made a number of moves over the past couple of years, which position Fiserv quite well to capture market share. And so I was just wondering if you could frame something for us. Where are you seeing the most significant change in client demand over time? Is it coming to you from smaller financial institutions, is it coming from mid-size FIs? Maybe it's coming from larger FIs. I was just curious if you can help us figure that out because we're just trying to figure out who's capturing share in each of the buckets. Looking at it like that. So would be great if you could give us your thoughts on where you think you're taking share.

I would say that we are taking share on balance in the areas where we have market strength, and I use that descriptor because it's less about is it in the small-end of the base or in the large end of the base, and when I say the base, I mean the market, sorry. And instead, it's in places where we have solution strength that delivers value for clients. So if you are a small commerce merchant or a very large e-commerce merchant, and I think we indicated we signed roughly 80 new e-commerce logos during the year. Some of those are smaller and some of them are very important household names that we're all familiar with and so and so what we're seeing is more consistency around that decision making is being made in the market. So really looking for quality more than any segment will accept something that isn't quality. So from that perspective, whether it be a solution like the CheckFree RXP or Dovetail or our ISV solution or e-commerce solution or Clover you're seeing, you're seeing choices being made based on the quality of the solution.

As it relates to kind of deeper into the segments, I would say I feel right now across the enterprise that we're doing well, gaining share in the places that matter to us strategically and that we're well positioned to continue to do that, especially as we bring things together. Probably the most important trend that we're seeing is if you think about the below the top 60 or 70 banks, you're just continuing to see more move toward outsourcing, right. We have fantastic capabilities as an outsourcer that got even better through our combination with First Data. And so we're seeing more and more capability.

In fact, some of the more interesting opportunities that we have synergistically are in fact bringing things together with solutions that the original Fiserv had that we didn't offer on a hosted or ASP basis.

And then I think you said in your prepared remarks that you're growing by 25% in integrated, if I heard that correctly, which certainly sounds strong. So could you talk to us a little bit more about that, maybe tell us what's driving that and also about the -- maybe a little bit about the go-forward picture for yourselves and integrated. I'm just curious as to whether there's any specific verticals, for example, where you're seeing the strongest momentum and how sustainable you feel that growth is overall.

Sure. So, Jeff, let me quickly give you the data and then I think Frank can add a little bit more color on that. In the ISV and integrated payment space, I think we said, we increased the number of ISV merchants by 25% and transaction growth was -- sorry, revenue growth was up 60%, right. So, a very strong year in that space. We continue to make it a priority, kind of taking on the way First Data that Frank and his team had done. We see lots of opportunity to grow. But let me have Frank give a little bit more color on that.

Yeah. In ISV, it's a very, as Jeff said in the earlier point, it's a very technical product. It is not a vertical attempt here. There is not a look at one single vertical. It's really across -- and it's really the technology solution. So I feel very comfortable that our solution plays in all spaces and we are winning across all spaces from car washes to retailers of different sizes and shapes. So it's not a vertical-specific capability.

I wanted to ask about the Fiserv stand-alone. I know Fiserv started the year guiding to 4.5% to 5% internal revenue growth, but there's been some moving pieces with divestitures and obviously acquisitions came in. So just hoping to get a report card on how Fiserv stand-alone did versus original expectations.

Yeah. Thanks, Bryan. I would say that on balance, it was probably slightly lower than we would have anticipated at the beginning of the year. The comparables are a little bit more difficult because upon the combination, we made some changes that had an impact to some of the revenue recognition and therefore some of the growth. So we had some impact there, but I would say, on balance, slightly less than we would have expected.

I would also say that when we closed in July, we've made a series of decisions around allocating resources to places that we didn't have in our sights originally. And so from our perspective, we thought it was most important to make sure that we were getting the integration right, that we are focused on laying the track for synergies, both on the cost and on the revenue side, and then third, just making sure that we're continuing to invest and have these capabilities ready to drive more growth this year, which we think they will.

Got it, got it. Helpful. And then wanted to ask on the adjusted operating margin expansion of at least 250 basis points. How much of that is from the core companies versus the synergies? Is there a way to break that out?

I will also tell you that embedded in that are investments that we are making that are required to drive revenue synergies that are kind of consuming some of the gains in margin. So that $300 million is not a net number of all of the investments we have to make up. But again, to get to your exact question, a large part of that would be coming from the synergies but we, as a normal entity, would continue to do the things that we would do to drive margin, if you think about our original Fiserv greater than 50 basis points per year.

Right, right. And just to be clear, the $300 million in cost synergies, is that up from previous expectations?

We have never guided in any year. We've said we expected to do $900 million over five years. And so we did $46 million -- I think we did $46 million in the first five months that we were a combined company. We've said in our prepared remarks, we'll do at least $300 million this year, and after 17 months we'll be roughly at least $346 million.

Just wanted to follow up on I think it was Darrin's question earlier, just on the outlook for the 2020 organic. I think last quarter you had said at least 7%. Now we're refining it maybe around the edges a little bit and I guess 6% is in the equation here. Just any particular reason why 6% is part of the guidance? Because it kind of sounds like you're thinking at the high end, the 8%, is a lot more likely than the low-end at 6, but just wanted to understand the nuance there in terms of how the commentary evolved incrementally from last quarter.

I would say, and we've tried to make this point clear in the prepared remarks that nothing has changed from our preliminary view that we gave in Q3. We continue to be confident in the numbers that we provided, we do believe it's prudent to have a range that is that encompasses kind of 2 percentage points and therefore we thought 6% to 8% made sense. The center point is not accidentally 7%. And so we feel good about where we are. And 7% is a very healthy gain over where we ended this year, and we feel like we -- if we execute well, and we believe we will, that we will not only increase our internal revenue growth rate this year. But we will be well positioned jumping off into 2021 given our commentary about how synergies will lay in and stronger performance in the second half of the year.

Okay. No, that's very helpful. Just a quick follow-up. Digital distribution initiatives for Clover, any metrics you might be able to share there in terms of the percent of new activations that are may be coming through digital channels now versus through physical bank branches, how that mix is kind of evolving? I know that was a big focus for First Data heading into the merger?

Yeah, I would say we still are very bullish on digital distribution as an opportunity for us and we actually think that opportunity grew in the combination of Fiserv and First Data because of the fact that we now have not only more digital distribution points through the cash management and retail digital capabilities of the banks and credit unions that we will sign up and the ability to be more targeted on the data that we would use.

So we continue to believe that all makes sense. However, I would say that as we sit here today, the results of digital are quite low, probably immeasurable relative to the successes that we have had in other parts of the business. And so we will continue to grow that, and the results at least for the next couple of years are not contingent on us dramatically increasing digital distribution. We see that to be a journey. We're early in the journey, and we'll continue to work it and knock it down.

Jeff, a lot of good stuff in terms of where you're investing in and where you think the sweet spot is and I just wondered if I could get your perspective on sort of the competitive environment. There are a few things I think that have emerged of late. Temenos launched a new solution for neobank, a SaaS-based solution. We saw the Worldline-Ingenico deal yesterday. We saw BigCommerce tap Barclaycard for payments, also the rest of world developments for the most part, should, may be coming us domestic. I just wonder you kind of kicked off this consolidation trend and now it seems like there are some new entrants. Can you just frame up your strengths and investment priorities against the competitive backdrop?

I'm not sure we can take credit for kicking off this entire trend, but I do think we can take credit...

Well, thank you. But I do think we can take credit for understanding between Frank and me and the rest of our team that the world was changing and that we felt like getting on the train early would be good for us, good for our clients, and obviously good for our shareholders. And so, the things that are happening right now are generally consistent with what we would have expected in terms of the overall transformation.

When we think about this transformation that's going on, we see some things happening around the fringes, we see people coming together to create more -- in some cases, more capacity to invest, in some cases more unique partnerships, all of that recognizing the change that's going on. And it's part of why we earmarked $500 million in incremental innovation to make sure that not only could we generate a significant amount of free cash flow so that we could allocate that to acquisitions and other inorganic uses of capital, but that we would be very focused on investing, while we are restructuring and reshaping the company for the future.

So we actually take a fair amount of comfort in the things that are going on in the market, because they do confirm for us that the world is changing. And I think you will see us look for our inherent competitive advantages. So we think we have a treasure trove of data. And so whether it's around fraud or better authorization rates or better ability to know your customer, better ability to make decisions on the basis of transactional data, we think that's quite important, investing in and advancing our e-commerce capabilities, whether it is some of the voice that we talked about today, but really leveraging the unique strengths that we have because we have the ability to take advantage of the platforms that we're operating today and making them better. So whether it is moving to the cloud or using AI and RPA as ways to get there faster, we have all of that capability. We're quite excited to do it. And I think we'll be able to share some of that in March, but I do think we're going to continue to see announcements that talk to the fact that the world is changing, and it's incumbent upon us to make sure we're staying in front of that change, but really focused on the areas where we have strong competitive positions, and that will make us stronger.

Just had a follow-up question as it relates to the ISV channel and all the progress you're making there. Appreciate the commentary on the revenue growth being up I think 60% you said. But can you actually size that business for us in terms of revenue dollars? I think the last time that First Data did that was back in 2018 when I think it was around $50 million or so.

Yeah, I would say, George, that compared to the $14.5 billion or so of revenue that we have, it's certainly a small -- it's certainly on a relatively small base. But that relatively small base is growing quite comfortably, and we're excited about that. And we're also excited about using some of the differentiated -- sorry, the competitively differentiated services that they have across other parts of the ecosystem. So it's, again, a relatively small base but growing in a very, very nice clip.

And as you know, the space on balance, relative to merchant acquiring globally, is still quite small.

Yeah. Appreciate that. And then just a quick follow-up, a housekeeping item for Bob. The nickel of dilution from the Investment Services' majority sale that is net of the $500 million being redeployed in buyback, right?

Yes, that's correct. But more importantly, that's actually an aggregation of four divestitures in total. So Investm ent Services being part of that, but yes, the capital redeployment is included in that calculation.

Just one quick one. Really good sales numbers again. That 10% for the year, would you confirm that that is a annual contract value, not TCV? And if so, could you give us the comparable numbers for the last couple of years? I think you previously reported it on a TCV basis.

Yeah. You're right, Chris. We have changed our methodology to align with how First Data had talked about and reported sales. And so -- but we have not talked about the quantum. We've always only talked about percent growth. But I would say that that percent growth is obviously up 10% for the year, but importantly, up 30% over the last six months.

Jeff, I wanted to just ask a little bit about First Data SMB portfolio, especially in the US. I know, Frank, in the past you've talked about attrition or retention rate of that portfolio. And I'm just wondering where it stands today and just your opportunity to maybe improve the yield in that portfolio.

Yeah, as you probably remember the long journey that we took. But today, we're in a much different place than when we started on the journey. I think we talk about being a gainer of share and growing our portfolio here, and I think when you look at what attrition rates have done versus when we first started on it, they're practically in half. So we are a much different portfolio than when I talked to you years ago. And I think you see it in the growth in the merchant numbers that we have in total.

And I think, Kartik, one of the things that's interesting when you dig in and look at the data is you -- not only is Clover really an attractive vehicle in the acquiring market, but the fact is that we see better retention. And the beauty there is it's a platform, right. So we have add-on services that we talk about, so better retention, more services, happier clients. So it really is both sides and it's one of the things that the First Data team -- the original First Data team had done quite well.

And then just one last one, Jeff. Just as far as use of capital is concerned, I know you said you're going back to buying back shares. I'm wondering what your thoughts are on repaying debt in 2020 or maybe if you have a goal or something in mind for the debt for the company as we end this year.

So, Kartik, I would say that we've been very consistent since the time we announced that we were going into this transformative combination that we would repay debt and grow EBITDA at a healthy clip to get our to debt-to-EBITDA ratio down to our historic levels. And I think we said we would do that over an 18- to 24-month period. We ended the year at 3.8 times, Bob paid down $600 million of debt in the fourth quarter. And so we'll continue to move down that path. The good news is, is we were able to move back to our programmatic buying at the very beginning of the fourth quarter. And so we think we have the firepower to do both and certainly we'll meet our commitments to the agencies.

I think you mentioned that you've signed 80 new direct-to-merchant e-com wins for the year and 23 in the fourth quarter alone. This isn't a metric that First Data historically reported. So is this kind of growth a change from the historic win rates on direct-to-merchant e-com? And if so, I assume it is, what are you doing differently and do you -- are you executing against a specific strategy to diversify away from processing for payfacs and going more direct-to-merchant in that business?

I would say that while we have not shared that metric previously, as you know well, we think it's important that people understand that not only do we have strength through our very important joint venture partners, but that on a direct basis, we are able to win business worldwide. And we think the fact that we won 80 logos for the year and this is 80 new logos to the firm, which I think is quite important, again, 24 in Q4, a range -- granted a range of size of merchants, but some very important names.

So from that perspective, I would say it's a continuation of the strategy that Frank and his team started, but we have been putting more -- and what I mean me, I mean the collective company, just putting more focus and energy. A part of it is having a stronger technology platform, part of it is more focused on innovation, part of it is more sales focus, part of it is better service through existing clients. And so, it's the entire gamut that Frank and the team started. We're continuing to make it a high priority. As you and I've discussed, e-commerce and technology-based acquiring on balance is a very high priority for the company, just like SMB is and everything else, but obviously this space is important. And being a consistent share gainer is our absolute objective.

And then maybe my quick follow-up. On the issuer processing businesses, realizing there is still sort of split in the current reporting across a couple different segments. Can you just provide a little bit of color on how the combined issuer processing businesses are doing? And specifically, combined revenue growth trajectory and how you're tracking so far on these synergies that you've been expecting across those two businesses as well, both domestically and internationally?

So, Lisa, I would say that it probably will make more sense to cover this in-depth -- in a little bit more depth in March, but at a high level, we are not -- we have not combined our respective original issuer processing businesses. They run different platforms. They're different value propositions. We are looking to combined capabilities and move them more ubiquitously across platforms where it makes sense. We're looking to make sure that we have the right clients on the right platforms where it makes sense. And so we like the fact that we now, both sides of the original organizations, have more tools in the tool chest to go out and serve clients and win business.

I would say that on the traditional, the original First Data issuer processing business, specifically on the credit side, we're seeing some really interesting opportunities in the market. It's one of the places that that you will see us invest kind of thinking about more as next-gen capabilities there. So very important specifically on the credit side. And also we're seeing a better-than-anticipated responsiveness in the Fiserv original clients both domestically and internationally in providing those kinds of capabilities, whether they be more integrated into the core systems in the US but outside the US sold into our larger Signature or other relationships. We're seeing that to be a little bit better than we would have expected at this point.

And thanks everyone for joining us this afternoon. We appreciate your support. We're excited for the future. If you have additional questions, please don't hesitate to contact our Investor Relations team. Have a great evening.

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