Frank Bisignano
Chairman, President & Chief Executive Officer at Fiserv
Thank you, Julie and thank you all for joining us today. Fiserv is off to a strong start in 2023. With first quarter adjusted revenue growth of 10% and adjusted earnings per share of $1.58, up 13%. Adjusted operating margin of 33.6% was up 160 basis-points. Organic revenue growth was 13% above our 7% to 9% outlook for the full year, demonstrating our ability to sustain accelerated growth. Importantly, the growth was multi-dimensional. It included elevated contributions from card processing, non-card payments and digital banking solutions. Growth was also strong in all three of our international regions and in merchant acceptance.
Investment on behalf of our clients and with our partners is paying-off. We believe that accelerating our investment over the last three years, both organic and via M&A has extended our leadership position among the WinDex. This counters the narrative over the last few years that many start ups in the Bahamian and WinDex space would drop and potentially replace the legacy companies. Our results show that our strategy to innovate and disrupt, on behalf of, not in place of our longstanding bank emerging customers was on the mark. These investors have indeed, raise the bar for the tech in WinDex. But we met and, in some cases, exceeded that bar without all the investment and innovation.
The power of our business model is in a virtuous cycle of generating revenue growth across the scale businesses leading to greater operating margins that probably produces significant cash to reinvest in the business for faster organic growth and value-accretive acquisitions while the remainder is returned to shareholders through share repurchase. The market has shown that legacy companies across many industries with scale and willingness theory will offer sustainable value to clients and shareholders.
Let's talk for a moment about how the benefits of our breadth, scale in advancements have driven innovation. For small and medium-sized businesses we developed a cloud-based SaaS operating system for their payment needs with Clover. Now we're allowing these businesses they easily accept multiple payment types, and we are seamlessly integrating software and services to address their broader business needs. For large enterprise businesses we developed an integrated omnichannel system called Carat to manage payment needs across in-store and online sales channels, and we're adding SaaS based solutions that improve our clients' efficiency and enhance their customers' experiences.
For debit and credit issuers we've already built the most comprehensive suite of solutions, and we continue to innovate. CardHub was built off of the tools acquired with Ondot, and now, offers a comprehensive set of modern digital cardholder experiences. More than 1,000 financial institutions are now using CardHub which can be fully integrated into their mobile banking app allowing these issuers to offer their customers a unified digital card experience that only a few of the largest financial institutions can provide today.
SpendTrack does bank, small and medium-sized business clients what CardHub does for its retail customers. This differentiated mobile first platform offers card management and AI-enabled expense management with work flows specific to their business needs. Built from our Spendlabs acquisition SpendTrack has helped us win more credit, debit and network business with banks and issuers that caters to SMBs. For small and medium-sized banks, we provide a full suite of the digital banking tools that help them convey with the largest banks for mobile apps, to spend management to Zelle B2B payments.
And in July with the launch of FedNow will help them participate in the new wave of real-time payments, optimize on now network that connects banks to each other, to all payment routes and to essential applications. For banks of all sizes, we've built a path to the cloud through both our industry-leading DNA core platform and now within that our native cloud solution, acquired last year. And in support of our biggest investment of all the combination of First Data advisor, we are finding new opportunities across our client base, that are aligned in ways that only Fiserv can enable. Here are just three examples of the power of our combined franchises.
First, Star and Accel, the third-largest debit network in the country helps card issuers and merchants realize attractive economics on debit transaction routing and satisfy new Reg II requirements for at least two unaffiliated networks on each card to route card not present and transactions. Second, our Fintech cloud-native banking core is laying the groundwork as an operating system at-scale for financial institutions and merchants looking to offer embedded finance. Third our output solutions business offers a full range of capabilities beyond what either predecessor company had. For example, we are now able to offer communications and card manufacturing solutions to our entire client base from retail private-label issuers to general-purpose credit issuers, health-care providers, banks and governments.
As we look to the remainder of 2023, we start with a firm foundation of above plan revenue and earnings. Still, we think it is wise to balance this strong start, with the potential for macro-economic headwinds in the second half of the year. So, we are lifting the lower-end of our prior 2023 guidance for both organic revenue growth and adjusted EPS and maintaining the upper-end at this point. We now anticipate organic revenue growth of 8% to 9% and adjusted earnings per share of $7.30 to $7.40.
So, let's discuss the trends we are seeing in each of our segments now and for the rest of the year. Merchant acceptance continues to be a very strong grower posting 18% organic revenue growth in quarter including significant strength in Latin-America and in Asia, and continued gains in North America. This growth reflects overall consumer spending resilience but is also a testament to our strong distribution channels, ability to develop new products and services that resonate. Success in selling more solutions to our existing merchants. And the power of diversification across verticals merchant size and geography. It's not yet clear whether broader macro headwinds are beginning to impact consumer spending, but we did see payment volume growth slow a bit late in the corner. We continue to see good demand in the grocery vertical as well as in restaurants, especially QSRs.
We are starting to see consumers rotate towards non-discretionary spending and reduce basket size. The decline in inflation is impacting volume growth, particularly in the metro vertical. This did not impact Fiserv revenue which very large metro providers and other enterprise is based on transactions, not dollar volume. Our golden advantages in this environment are our breadth of distribution, business both large and small, and a good mix of non-discretionary spending about half of our volume. Still, we are mindful that higher interest rates may weigh on consumers and now as we anticipate second-quarter revenue growth in this segment to ease, from the very strong first quarter levels. This, of course, is contemplated in our guidance.
Clover revenue growth remained strong, up 22% in the quarter. We continue to add merchants at a healthy pace, an extended value-added services penetration, another point to 17%. Now, one year since our Merchant Investor Day, we are all on-track to achieve the targets we set for 2025 $10 billion in Merchant Acceptance revenue, $3.5 billion in Clover revenue and Clover value-added services penetration of 25% for Clover a consistent average rate of growth over this time period, was not in our calculus. Instead, the growth rate should accelerate over the next three years as we add more products increase software and penetration and reach new markets.
In the first go there, for instance, we integrated Bill Pay and enhanced brand management into Clover and improved access to Clover Capital via our client dashboard. In the past 12 months we introduced upgraded Clover Mini and Clover Flex hardware. Later this year we'll add a low-cost smart POS point pad to address the needs of small merchants who want simpler access to the Clover operating system and software. During the quarter, Fiserv launched support for Apple tap to pay on iPhone for SMBs on the Clover platform and for U.S. enterprise clients.
This will enable businesses from large enterprises through medium and small businesses, dell into micro merchants to securely accept contactless payments on iPhones, without the need for additional hardware, like an external card reader. As contactless payment usage arises, we are excited you enable new and existing clients to use this seamless and secure solution on iPhone to help run and grow their business.
On the Carat platform, we continue to expand our capabilities in broad omnichannel solutions for enterprise merchants. We renewed and expanded our contract scope with several large merchants, this quarter, including Fanatics, and a major hotel chain. We also recently signed Pay by Bank agreement with Walmart, that includes traditional APH processing and incorporates Fiserv's NOW Network and Real-time payments capabilities. Our Payments and Network segment also had a very strong quarter posting 13% organic revenue growth that included double-digit gains in all three business lines. Issuer solutions, primarily representing Credit current issuing and output services, card services, including debit processing and debit networks Star and Accel and our digital payment services including Zelle and our bill-pay business.
This strong performance drove growth that was above our medium-term guidance of 5% to 8% and includes a couple of points of growth from a few discrete factors which Bob will cover in more detail later. Positive trends continue and should carry full-year growth toward the high-end of the range. Several years of large card issuer wins in North America will drive revenue growth in the coming years with a pipeline that includes new win opportunities as well as follow-on sales to existing clients as we extend our value proposition.
Our issuer clients have been active in deploying three a highly innovative products, advanced events, our new AI-based fraud solution. New card controls and alerts developed by Ondot, and point-of-sale loan solutions that help issuers complete with be BNPL providers. Recently, Citi signed on for our POS loan product and PNC went live. USAA is in the process of implementing advanced events while Credit One has signed on as well. International issuer solutions was another bright spot in the quarter, with wins across all three of our regions. In Latin-America, a leading Argentine fintech will chose Fiserv to provide credit card processing services for its new digital-first credit card product launch. It's already live in Mexico and will go-live in Argentina and Colombia in the coming months.
While it chose our first vision platform for its local presence and global cloud API gateway that maximizes the digital user experience with APIs for card-issuing, dynamic verification and installment payments among other services. We're excited about the additional opportunities as we roll-out the next-generation cloud-based first vision platform later this year. And in EMEA, we signed a contract with National Bank of Kuwait, the country's largest bank to process their debit acquiring business on our first vision platform. This follows a fourth quarter win with this client for prepaid process that.
Turning to card services our debit network and processing business. Growth remained strong as we continue to add new issuing business with our core and non-core bank clients and signed merchants for debit transaction routing via our networks. The adoption of REG II has brought another large merchants, Uber, to our networks. We will provide Uber the benefit of the added choice that comes from the dual network mandate for card-not-present debit routing. We see many more merchants in our debit networks pipeline ahead of the new rule set to take effect July 1st.
Our digital payments activity continues to grow and fail implementations and transactions. We have over 1,200 financial institutions live on Zelle today with the potential to add hundreds more to all installed-base this year. Financial institutions that use us for Zelle services are connected to the Fiserv NOW network, which also provides easy access to FedNow, the Federal Reserve's Real-time payments system. We have six banks in the pilot phase and over 20 financial institutions, committed to go-live post FedNow launch in July. We're encouraged by the opportunity that many more banks and credit unions, especially since we think our NOW network as a single integration layer offers the ideal way to access FedNow.
NOW is a network of networks, connecting financial institutions, billers, consumers and businesses with real-time money and digital movement across all rails, including card ACH, Zelle, FedNow and The Clearing House. In Asia, we are working with leading banks across the region on digital transformation initiatives. This includes Bangkok Bank, the largest bank in Thailand that will expand its mobility digital banking platform, into new domain and BBO the largest bank in the Philippines, we are bringing core banking microservices to enhance BDOs third-party systems integration. We're also working with National Payments Corporation of India, to enable the Unified Payments Interface on RuPay credit cards for issuers on our India processing hub.
Turning to our FinTech segment, organic revenue growth of 3% was slightly below our medium-term guide of 4% to 6%, which we attribute to timing and a strong first quarter last year, creating a higher comparison point. Implementations from the healthy series of wins over the past few years will provide growth in the second half of this year. We continue to see organic growth in this segment within the guidance range. Importantly, we have not seen an extended disruption from the banking turmoil that arose in March. Thus far, there are no follow-on effects across our banking client base as we continue to monitor it with our enterprise risk framework.
We see the opportunity to sell our regulatory suite to banks who may increasingly need them. And we are well positioned to be a net winner among acquirer banks should M&A activity heat up. Many larger banks already use a variety of our services, and we've demonstrated the ability to scale our modern platforms. In April, we marked the one-year anniversary of the FinTech acquisition and have been very happy with its progress. We've seen strong interest from new and existing clients, which has contributed to meaningful growth in our FinTech pipeline. Importantly, in the first quarter Fiserv renewed the FinTech partnership with ONE, a leading banking fintech backed by Walmart. FinTech will be the system of record for a growing number of ones expanding banking services. Ramping this opportunity will represent a high-profile achievement and scale that could attract other banks and merchants to the proven FinTech solution.
Now let me pass the discussion to Bob for more detail on our financial results.
