Welcome to the Fiserv 2019 First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I will turn the call over to Tiffany Willis, Vice President of Investor Relations at Fiserv.

Thank you, and good afternoon. With me today for the call are Jeff Yabuki, our Chief Executive Officer; and Bob Hau, our Chief Financial Officer. Please note that our earnings release and supplemental presentation for the quarter 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 the anticipated combination with First Data, including expected benefits, financial projections, synergies, financing and timing of and the ability to complete the transaction. Forward-looking statements may materially differ from actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release for a discussion of these risk factors. You should also refer to our materials for today's call for an explanation of the non-GAAP financial measures discussed in this call, along with a reconciliation of those measures to the nearest applicable GAAP measure. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results and as a basis for planning and forecasting for future periods. Unless stated otherwise, performance references made throughout this call are assumed to be year-over-year comparisons. As a reminder, prior year adjusted earnings and adjusted earnings per share amounts in the press release, supplemental materials and comments are adjusted for the sale of a majority interest of our Lending Solutions business which closed in March 2018. And with that, let me turn the call over to Jeff.

Thanks, Tiffany, and good afternoon, everyone. Our financial performance carried the momentum of last year into the first quarter, highlighted by 5% internal revenue growth and 12% adjusted earnings per share growth. We also followed the record sales in last year's Q4 with one of our highest first quarter sales totals ever, further validating the demand for our market-leading solutions. Our better-than-anticipated start to the year has us well positioned to achieve our full year financial commitments. In addition to serving clients, engaging associates and delivering strong financial results, we are also focused on integration planning for our First Data combination. Along those lines, shareholders overwhelmingly approved with more than 99% support the issuance of Fiserv shares in connection with the merger. As you know, we received a second request for information on our transaction from the Department of Justice and are working cooperatively to achieve clearance. We continue to believe the transaction will be approved, business divestitures will not be required and we will close in the second half of the year, all completely consistent with our original expectations. Upon close, our #1 priority is to provide even more differentiated value to clients of all shapes, sizes and industries. For example, we've made great progress in identifying ways to further enable the offerings of community-based financial institutions and the variety of customers they serve. We see a number of client and customer advantages which we will further evaluate upon closing to determine the absolute best way to bring these to market. The integration planning teams are working well together across multiple work streams centered on delivering incremental client and shareholder value, ensuring we have the best talent and identifying ways to sustainably exceed our synergy targets of $500 million of recurring annual revenue and $900 million of run rate cost benefits. We have a shared desire to advance the market and to redefine the way in which payment and FinTech services will be delivered. Along those lines, we also announced a commitment to invest an incremental $0.5 billion on solution innovation on top of the significant investments each of our companies make today. We expect this investment to create multiple sources of client and customer value which should lead to even stronger results, none of which has been incorporated in our financial projections. With that, let's review performance against our 2019 key shareholder priorities which are, first, to continue to build high-quality revenue while meeting our earnings commitments; next, to enhance client relationship with an emphasis on digital and payment solutions; and third, to deliver innovation and integration which enables differentiated value for our clients. As I mentioned, we're pleased with our strong financial results in the quarter, including 5% internal revenue growth, led by 6% internal growth in the Financial segment and 4% in the Payments segment. We saw good performance in the quarter across our recurring revenue businesses, along with some acceleration of license revenue in the Financial segment. First quarter adjusted earnings per share was up 12% over the prior year through higher revenue growth, better-than-planned adjusted operating margin and some benefit from lower taxes. The change in adjusted operating margin was primarily from a combination of ramping client implementations, carryover from last year's tax reinvestment programs and dilution related to acquisitions and divestitures, all of which Bob will discuss in more detail. These investments are focused on driving additional client value and should contribute to a continuing step up in our internal revenue growth rate over the next several years. Free cash flow conversion of 90% was generally consistent with our expectations for the quarter and the full year given the cadence of expected investments throughout 2019. Our second priority is to enhance client relationships with an emphasis on digital and payment solutions. As you will recall last quarter, we signed the largest new account processing client in our history, adding New York Community Bank with over $50 billion of assets. We continue to focus on growing our core account processing client base, signing 14 institutions in the quarter, including 6 on our market-leading premier platform. Also during the quarter, Aite Group issued its U.S. core banking system evaluation which named Fiserv as the sole best-in-class provider. This is based on a robust evaluation of all qualified market participants and is primarily based on vendor strength, market reputation and breadth of product portfolio. We are very pleased with this award and recognition. We also signed 6 DNA clients in the quarter, with 4 having assets greater than $1 billion, including a competitive takeaway of Nassau Educators Federal Credit Union with $3.2 billion in assets who selected DNA along with several important surround solutions. We also completed 7 new client implementations in the quarter and expect that total to build throughout the year. Increasing digital engagement with customers remains a top priority for financial institutions. Along those lines, Mobiliti ASP subscribers grew nearly 20% in the quarter to just under 8.5 million. Importantly, the average app store rating for this multi-institutional solution, a critical barometer of digital experience, has now achieved an average star rating of 4.7 out of 5. These strong results reflect our commitment to digital differentiation, enhanced user experience and expanded features such as integrated notifications, card controls and enhanced biometrics. We continue to see meaningful opportunities to help clients increase their revenue through expanded debit, credit and network programs. We signed 21 clients in the quarter, including Atlanta Postal Credit Union with over $2.1 billion in assets, which selected both debit and credit card processing to service their more than 100,000 members across the United States. Atlanta Postal Credit Union, who is not a core account processing client, also selected our credit advisory subscription service to provide additional support across their account and fraud management processes. Our third priority is to deliver innovation and integration which enables differentiated value for our clients. Building on key force momentum, we continue to see clients select Fiserv as the market continues its move towards meaningful payments innovation. In a competitive process, the top 35 bank selected Dovetail, our leading payment hub technology, to meet their evolving commercial and international business needs. We expect to see payments modernization continue for the next 3 to 5 years and believe our growing position as a front to back payments provider creates opportunities to create unique network value for our clients. In addition to payments, we're seeing growing traction in our commercial digital solutions as banks look to enhance the services to their most important customers. Commercial Center, which we acquired a couple of years ago, has added nearly 50 new institutional clients due to their market-leading functionality and capabilities. In fact, we had 8 clients go live in the first quarter alone and the pipeline remains very strong. Another example of commercial services growth can be seen in our Mobiliti business commercial digital solution. Financial institution clients grew 24% year-over-year, and the number of end business clients utilizing the service was up a very strong 65% over the prior year and 11% sequentially. We expect the digitization of commercial services to drive important value for clients and enhance revenue growth for us. Our enthusiasm and commitment for Zelle continues to expand, not just in terms of our clients, but for the market as a whole. We believe the network benefits of Zelle will enhance the services financial institutions deliver to their customers. First Citizens Bank, with over $35 billion in assets, selected Zelle in a competitive replacement. This replacement decision was driven, in part, by their ability to utilize our value-added Zelle broad and risk management capabilities. We also signed a leading online financial services provider to our turnkey Zelle solution in the quarter. We expect to meaningfully expand our Zelle leadership position this year as the market more fully embraces this important opportunity. With that, let me turn the call over to Bob to provide more detail on our financial results.

Thank you, Jeff, and good afternoon, everyone. As shared upfront we're pleased with the start of the year, driving results ahead of our internal expectations. Adjusted revenue, which includes the impact of acquisitions and divestitures, grew 5% in the quarter to $1.4 billion with internal revenue growth up a strong 5% as well. We saw solid execution across many of our businesses in the quarter, along with some timing benefits of license revenue in the Financial segment. Overall, termination fees in the quarter were essentially flat. First quarter adjusted operating income increased 3% to $457 million and was negatively impacted by the Lending Transaction. Adjusted operating margin was down 60 basis points to 31.9% in the quarter. Margin performance, which is actually ahead of our plan, including more than 60 basis points of pressure from higher client implementation costs in our digital and payment solutions and some carryover of the expenses originated from the 2018 tax reinvestment program. We also had a 20 basis point headwind from acquisitions in the Lending Transaction in the quarter. These results were fully anticipated and incorporated in our adjusted operating margin guidance of at least 50 basis points expansion for the year. Adjusted earnings per share was up 12% to $0.84 compared to the prior year. This strong start positions us well to achieve our 34th consecutive year of double-digit adjusted EPS growth. Our Payments segment adjusted revenue grew 10% in the first quarter to $845 million, which includes the Elan debit processing acquisition. Internal revenue growth was up 4% over the prior year, led by electronic payments, card services and biller solutions. Our segment growth rate was a bit lower in the quarter due primarily to the timing and mix of card services revenue which we expect will reverse later this year. Importantly, debit transaction growth remains strong in the high single digits for the quarter. And we expect the Payments segment internal revenue growth rate to accelerate for the balance of the year. The integration of the Elan debit processing acquisition is progressing very well. In addition to serving clients, we're seeing early traction in revenue synergy opportunities such as ATM Managed Services and Money Pass, our expanded surcharge-free ATM network. Elan's results will be incorporated in our internal revenue growth calculation beginning in November. Adjusted operating income for the Payments segment grew 6% to $287 million, and adjusted operating margin was down 140 basis points to 34% in the quarter. Segment margin performance was negatively impacted by more than 150 basis points from increased implementations in investment cost, business mix and compression from the Elan acquisition. As the tax reinvestment projects roll off and implementations come online in the second half of the year, we expect segment adjusted operating margin performance to improve. Mobiliti ASP subscribers grew nearly 20% in the quarter to just under 8.5 million as consumers continue to reinforce the importance of the mobile channel. In addition, Architect, one of our newer solutions, which delivers a unified experience across our -- all digital channels, continues to gain traction. We have signed nearly 70 clients to this platform since the acquisition. And after achieving the 50% subscriber growth in 2018, we expect to nearly double the number of Architect digital subscribers this year. P2P transactions, which include both Popmoney and Zelle, were up 100% versus the prior year quarter. And Zelle transactions alone nearly quadrupled versus last year. We expect to bring a significant number of new Zelle clients live this year and even more acceleration in 2020. We continue to focus on enabling our clients to navigate the evolving payments market. Adjusted revenue in the Financial segment was down 3% to $598 million for the quarter due solely to the lending divestiture which anniversaried in March. Internal revenue growth was a very strong 6% in the quarter, led by strength in our core account and item processing businesses, along with the timing benefits to license revenue in the quarter. As you may recall, we had a disproportionately high periodic revenue in last year's Q2, which will provide the basis for a tough comparing in this year's second quarter. Adjusted operating margin in the Financial segment was down slightly to $199 million due to the Lending Transaction. Adjusted operating margin expanded 50 basis points to 33.3% due to growth in recurring revenue and the timing benefit of license revenue, offset somewhat by higher product investments. Overall, we're very pleased with the Financial segment performance in the quarter. The adjusted corporate operating loss was in line with our expectations and the prior year at $29 million for the quarter. The adjusted effective tax rate was better than expectations at just under 16%, and we had a timing benefit of about $0.02 in the quarter due to some anticipated discrete tax items which favorably impacted our adjusted effective tax rate. And we continue to expect our adjusted effective tax rate for the year to be between 22% and 23%. Free cash flow was $302 million, down 4% following a very strong Q4 and also reflects the negative net impact of acquisitions and divestitures for the quarter. Free cash flow conversion of 90% was pressured primarily by the timing of working capital expenditures and negative working capital, which includes the timing of commission payments related to a very strong Q4. Looking ahead, we continue to expect our free cash flow conversion to be at least 105% for the year as CapEx normalizes and timing of working capital reverses. We repurchased 1.6 million shares in the quarter, returning $120 million to our shareholders prior to announcing the First Data transaction. We had 392 million shares outstanding with 24 million shares remaining authorized for repurchase at quarter end. And as announced, we have deferred our share repurchase program until the transaction closes. Total debt outstanding as of March 31 was down to $5.9 billion, and our debt-to-adjusted EBITDA was 2.6x. With that, let me turn the call back to Jeff.

Thanks, Bob. As we mentioned up front, sales momentum has been excellent, and we are well positioned to meet or exceed our sales target for the year. Importantly, next week, we will host a record number of clients and prospects at our annual event, Fiserv Forum, which we expect will create additional opportunities throughout the year. We followed our record fourth quarter sales performance with one of our best first quarter totals ever, which also translated to a 10% increase over last year. We saw strength across a number of areas, including account processing, card solutions, output solutions and Dovetail. Our domestic pipeline is higher than last year, and we are confident we will achieve our sales goals. Integrated sales in the quarter was down slightly after a very strong fourth quarter. And as is typical, we expect integrated sales to build throughout the year and that we will again achieve our full year objective. We continue to demonstrate our strong operational effectiveness muscle as we look to close out a 5-year $250 million program a full year early. Our first quarter results are on track, achieving $12 million of savings across multiple areas against our $50 million target for the full year. Before we wrap, let me provide some perspective on the environment. We've seen a significant amount of M&A this year in both technology providers and financial institutions, which we generally expect will continue. The prevailing themes appear centered on scale, investment capacity and innovation. From our perspective, we believe the First Data combination provides differentiated solutions, investment capacity and necessary scale to partner for the long term across the evolving financial and payments landscape. We're seeing platform investments, digital enablement, security and payments all taking mindshare. Market participants are evolving, competitiveness for core deposits remains very high, and stakes are rising for digitally enabled retail and commercial services. Last, we're seeing a slow but steady number of de novo applications and approval of which we have 1/2 since early 2018 and expect a number of these new institutions to be more technologically savvy than in the past. However, these trends -- overall, these trends remain aligned with our strategic focus and further positions your company for long-term success. As for guidance, we're on track to achieve our financial commitments for the year. We expect our full year internal revenue growth rate to be in a range of 4.5% to 5% with higher growth in the second half of the year. We continue to expect adjusted earnings per share to increase between 10% and 14% at a range of $3.39 to $3.52 for the year. Although we don't provide quarterly guidance, it's important to remind you that we had very high periodic revenue in last year's Q2, which will create a difficult compare this year. As such, we anticipate the second quarter will be the low watermark for both internal revenue and adjusted EPS growth, with strong acceleration into the back half of the year. We also expect adjusted operating margin for the year to expand by at least 50 basis points and that free cash flow conversion will be more than 105%. Lastly, our guidance does not include or anticipate any impact from the First Data transaction. We're pleased with our start to the year, delivering strong financial and sales results while investing in the strategic solutions of your company. We are bullish about the significant number of opportunities to deliver client and market differentiation while building meaningful incremental shareholder value through the First Data combination. Lastly, let me thank the 24,000 Fiserv associates around the world who work tirelessly to serve our clients with excellence and purpose each day. You are the great differentiator that has powered us to success for the last 35 years and will move us forward well into the future. With that, let's open the line for questions.

[Operator Instructions] Our first question comes from the line of Dave Koning of Baird.

I guess first of all, just you talked a lot a bit about the -- I'm sorry, the Payments segment was a little weaker in Q1. You talked about mix. And I'm just -- and I think you maybe talked about processing days and maybe Easter like there were some things that happened I think across the payments landscape. Is that a little bit what happened and why you think growth will accelerate the rest of the year?

So from a segment margin standpoint or a growth rate standpoint you're asking?

Yes, from a growth rate standpoint.

Yes. So it was a little bit lighter than what we've seen over the last few quarters. It came in at about 4%. One of the keys that we pointed out in the opening remarks is that the underlying debit volume was high single digits, so consistent with what we've seen. There was a bit of timing around some payment merchant card fees that we expect to get in the latter part -- or the rest of this year, and so we do think it was largely timing, and it'll come back on a full year basis and provide typical meaningful growth for us on a full year basis.

And Dave, as you know, you always have the day-to-day comparisons each year and with Easter falling where it did this year versus last, you always have those things. That obviously will work themselves out throughout the year.

Got you. No, that's good. And then I guess the second thing is, the margins, you did a nice job kind of laying out some of the headwinds that hit Q1. Maybe you could talk about what the underlying growth in Q1 is. And if you expect margins to go up, I think each of the remaining 3 quarters, is that fair to say?

So Dave, let me start with that and then Bob can certainly add in. I would say that as between the divestitures and the acquisitions that we've laid in, some of the taps-oriented investments, I think Bob indicated in his prepared remarks that it was more than 150 basis points in the Payments segment alone. We had some growth in the Financial segment. So if you think about it in the area of 100-ish basis points, I think that gives you a comparative sense. We also said in our remarks that we had very high periodic revenue last year in Q2. I actually think we'll have a hard time getting over that mountain in Q2, so we'll have a little bit of degradation again and then have a bunch of growth coming in, in the second half of the year when the tax program reinvestments abate, the implementations come online, the investments begin to abate and the periodic revenue is more normalized.

Our next question comes from the line of Darrin Peller of Wolfe Research.

Nice job. Let me just start in terms of feedback from clients now and at least a few months obviously, any incremental color that has given you more conviction or different confidence around the synergy, the revenue synergy on the deal? And then Jeff, the First Data results were strong. I mean was that kind of run rate in your plan as well in terms of just the type of growth?

So the -- let me take the first question, and we had talked a little bit on our Q4 call about the positive impressions and the positive responses that we were getting from the market, and certainly that's continued and we've been able to begin working together on our integration planning and putting specific energy in both the cost side and on the revenue side. And in fact, on the revenue side, based on a combination of the ideas and the focus that we have or that we built as part of the opposition process, but also in taking in market feedback, we actually have 10 teams of people across both companies focused on more than 40 discrete areas of revenue opportunity, ways to deliver client value that will turn into revenue for us, which is actually broader than we anticipated we would be at the stage. Now clearly, not all 40 of them are going to turn right now, but there's a lot of really interesting ideas that teams are putting together and we'll have plenty to pursue as we get through closing and begin to work together, but it's really been quite positive from that perspective.

All right. That's helpful. And then just on the First Data side. I mean again the trend seemed sound as well there. Is that in line with what you had expected, I guess?

Yes, I think, I mean, Darrin, what I would say is I would point back to the original call that we did in January where we said we don't think the market fully understands and embraces First Data, the performance that Frank and his team have put together. And the fact that this is a good, solid growing business with great market share and great products and great opportunities. So we feel good about those results, and we're excited to get the closing and begin working together.

Just very quickly, digital banking, in general, I mean, it still seems to be a big driver for you guys. I mean has that still been showing the acceleration, the kind of driver you saw last couple of quarters? Anything changing on the front that you could call out? Or -- I mean to us, it's an area of focus that we think the whole industry is potentially going to show inflection on further.

Yes, and Darrin, obviously, you're a fan of that and you've done a lot of work. I think one of the things that you heard in our prepared comments is often when we talk about digital, we end up talking about retail. And we're seeing just as much focus, frankly, if not more focus, on the business and commercial side of the house. And it's one of the reasons why we're quite excited about Clover and some of the other merchant capabilities within First Data because we think the intersection of those capabilities and digital enablement is -- will create a very attractive commercial and small business solution that will allow banks to -- our client banks to compete in a more fulsome way. So I think you're exactly right. That's going to continue. And I also like the intersection of digital commercial services and payments modernization.

Our next question comes from the line of Ramsey El-Assal of Barclays.

Guys, this is Damian Wille on for Ramsey. So I guess maybe I'll dig in on DNA. It's good to see that you got 6 new more wins this quarter and obviously last quarter was a big win on the larger asset sized institution. Maybe if you could just kind of profile what the pipeline looks like there and the size of institutions that you're looking at.

Yes, I mean, it is -- it continues to be quite strong. We had mentioned in Q4 that we've been slowly and intentionally moving up the ladder of asset size. And so we think once we get New York Community Bank live, that will be a fantastic proof point of not just DNA, but the full differentiated surround suite that we can deliver, whether it is Dovetail, Commercial Center, Mobiliti, all of the other fraud, risk products that go into the solution, we think that will be a strong message. So the pipeline reflects the growing interest. I also talked a little bit in my environmental comments about platform decisions. Clearly, we're seeing the market recognize the need to move to real time or at least consider moving to real time. And when major decisions are being contemplated, we tend to be in the mix. We certainly don't always win, but we're in there, and we're fighting. And one of the things that we talked about today is Aite gave us the best-in-class core provider designation, the only one of any U.S. provider. And again, we think that recognizes the combination of the strength of the company, the strength of the client base and the strength of the platforms.

Okay. And maybe I think I know the answer to this question, but is there any update that you can give us on the approval process from the regulators, specifically on the second request, maybe any color on what they are focused on and just in general the approval process there.

Yes, I mean, like I said, like we said in the prepared remarks, we are working cooperatively with the Department of Justice to secure the necessary HSR approval. There has been nothing in the process to date which is inconsistent with our original expectations. We said today we still believe we'll close in the second half of the year. We don't expect any divestitures of our businesses, and we believe we will get through this in a manner again consistent with our original beliefs -- our belief.

Our next question comes from the line of Jim Schneider of Goldman Sachs.

It's good to see the sales momentum continuing on the client side, but maybe you could provide us an update, Jeff, just in terms of where clients' heads are at in terms of overall spending priorities, maybe just talk about whether you're seeing any kind of further acceleration or urgency, especially amongst some of your smaller bank clients. And then maybe on the flip side of things, how are people viewing the BB&T SunTrust merger in terms of the overall backdrop and wanting to accelerate technology spending or maybe put the hold on it?

Yes, sure. Great question, Jim. So I would say from a perspective of the market overall, we're continuing to see a focus in digital security, payments. We're seeing a more holistic view of the implications of broader platform investments, so that's absolutely happening. With the energy on Zelle, that's another proof point around payments modernization. So we've got all of that going on. There's really a fight for deposits, and so even areas such as bill pay which haven't gotten attention over the last number of years, there is an absolute understanding that your primary bill pay account is the one that carries the majority deposits. And so you're seeing new solutions get chosen out of the basket to try to make sure that banks are winning the funding game. And so that's gotten energy and attention, and we think that will absolutely continue to happen. So -- and then also, on the commercial side, just making sure that it's not just retail digital, but commercial digital as well. Now as it relates to BB&T and SunTrust, I mean, we've heard this happen a number of times where large banks have gotten together and said, "We need scale. We need the capacity to invest." And then that is sending the message across the landscape. Most of that gets allocated not into the back office, but into the front office and to client-facing solutions, again, digital, payments and some of the Platform Solutions. Also, the whole area risk and fraud continues to be important as fraudsters have had to go -- learn to go to different places. I think that's out there. And then the last thing I would throw out is, we're starting to see a little bit of a crack in contactless. And so we have some level of comfort that -- or confidence that we'll start to see contactless start to rise. We think the introduction in the New York subways is important. So the more acceptance that we see at that level, the more we think that will drive. In contactless, the idea absolutely links quite beautifully into digital and digital enablement.

That's helpful color. And then maybe as a follow-up, clearly, since you announced your combination with First Data, we've also seen the announced proposed transaction between FIs and WorldPay. Can you maybe comment on how, if at all, that's changed your view of the competitive landscape and how difficult or easy it will be to penetrate your bank clients with additional cross-sell services going forward?

Sure. So listen, I think the real point here is that the markets are changing and they're changing fast, and the providers that don't change run the risk of having their relevance diminish over time. We believe that the combination with First Data gives us a far broader solution set than any other combination in the industry could have created because First Data is not just a merchant acquirer, but they are a -- the global leader in merchant acquiring, they are the global leader in issuer processing, and they have an incredible bench of data risk solutions, fraud solutions. There hasn't been a payment conversation in the last 50 years that hasn't included First Data somewhere in that combination. So we are quite excited about the combination and what it brings, but we also recognize that there is a need to have more of this type of combination happen over time. Our goal was to leave -- to lead that change, and we absolutely believe we've done that.

Our next question comes from the line of Brett Huff of Stephens Inc.

Competitive question. There's more consolidation going on in the smaller scale in the biller direct business. I think the #3 share looking to buy the #2 share. How do you guys look at that? Does that change the competitive dynamic? Or is it something that you've kind of seen coming for a while? Any update on that front?

Yes. I mean that, to your point, that really is not -- I mean there's been lots of fintech -- well-funded fintech players trying to grab that space in the on-demand space where we compete. We see much more focus from those kinds of players. It really just validates the opportunity that we see to bring it all together to get kind of more robust forms of distribution out there. So not just the direct channel, but a bank channel, an ISB channel which we think are quite important from those perspectives and then of course, just continuing to build out the e-commerce capabilities. We think that, that combination, the leadership positions that we both bring upon closing, will allow us to do more than anyone else.

That's great. And another one, I recall that several years ago, you guys talked about a launch of a combined payment product. I think it was -- was it Fiserv NOW?

NOW network, yes.

How does that fit in with the potential changes that may come from the First Data deal? Was that kind of a precursor of thinking about greater -- dreaming a bigger dream that you might combine the kind of things you can do with Fiserv? Or how does that fit into the new product portfolio?

Thank you. And Brett, I like the way you said dreaming a bigger dream. That, to some extent, encapsulates -- the purpose of the NOW network was really to function a little bit like a super gateway. And again, we think that what we didn't have the access to was really at scale direct down to the merchant. We have a lot of the back office, a lot of the DDA connectivity. And so the opportunity -- there are any number of the 40 opportunities that have to do with how do you think about the movement of money in a real-time ecosystem and now, we think we'll be a big part of the ultimate solution.

Our next question comes from the line of Jeff Cantwell of Guggenheim Securities.

Jeff, can you maybe spot check on the temperature of your financial institution clients in terms of how your conversations are going with them and how they're generally dealing with economic outgrowth for the, let's call it, next 12 to 18 months? We heard one of your competitors earlier today talk about optimism some at Fiserv showing as far as the outlook for the next 12, call it 12, 18 months. I'll just barely optimistic about budgets and spending on technology, really about growth. I just want to see if you could talk to us a little bit about that.

Sure. I -- we're obviously in lots of conversations and we're going to have an opportunity next week to talk with a record number of clients and prospects at our annual Fiserv Forum event so we'll certainly grab more feedback. But the feedback that we're getting is, there is opportunity out in the market. There is some belief that the beauty of the credit cycle probably will start to feel pressure at some point, but that is offset by this real focus on deposits, focus on digital, the focus on Commercial lending. So I would say it's a pretty good time. I actually feel better now than I did even when we gave guidance and Q4 results back in February, so I'm feeling like the trend is in the right direction. We are seeing a fair amount of M&A as you can see every day, but I also like the fact that we have new de novos. For the larger clients, the larger institutions and the larger -- and not just the financial institutions, but merchants as well, I think there's still a belief that the economy is in good shape. The larger institutions are putting more and more money into digital experience and so that connects quite well with our strategies, especially when you think about money movement. So it is a good time right now.

Appreciate it. And then just as a related one. I know there's a lot of puts and takes and that it's early days, but I'd just like to hear how some of that, call it, cautious optimism could potentially translate into your sustaining 5% top line growth next year might seem like a low bargain than what First Data is doing this quarter. So I would just appreciate any comments or context that you can give us there.

Sure. I mean I would say that all of the context that we've talked about in the market, all of the statistical backup that we try to give in the quarters is all about linking back to our strategy of sustainably increasing our high-quality revenue growth, and turning that into free cash flow and then allocating it to investors to build -- or shareholders to build -- I'm sorry, allocating it to build shareholder value. So from that perspective, that continues. I think we had about 70 basis points of lift last year. I think our trailing growth rate has been hovering in this 4.5% to 5% level, 5% again this quarter and our guidance for the year is 4.5% to 5%. And assuming that we do that, we would expect to have -- and we're not giving guidance, Bob, we're not giving guidance, but we would expect to see a step up in our internal revenue growth rate next year as well. And that is part of our thinking and that is all standalone Fiserv. When you layer on First Data, and to your point, they certainly had good performance in the quarter, but when you layer on the synergy opportunities along with that, along with the growth that we've had, we do expect to have a stepped-up internal revenue growth rate, generate more free cash flow and allocate that to shareholders to build value.

Our next question comes from the line of George Mihalos of Cowen and Company.

This is Allison Jordan in for George. Just 1 quick question from me. I was hoping you could provide an update and a little more color on client discussions as the First Data deal is being digested and really just your confidence level in renewing some of the larger partnerships that First Data has in place today.

Sure. So again, it's important to note that we continue to operate as separate companies, and we'll do that until close. But the feedback that we've heard is that First Data clients feel as good about this as Fiserv clients do. And we have every reason to believe that, that will actually create more incremental value, not less, in all sized clients of First Data, and certainly our objective is to make that happen.

Our next question comes from the line of Matt O'Neill of Autonomous Research. Matthew O'Neill: Maybe I could dovetail on that last one and put a finer point on it with respect to one of First Data largest partners and also I believe one of Fiserv's largest partners as well in Bank of America. There's been a lot of conservation around the renewal of the JV there. And while probably more appropriate question for First Data's management, I'm going to ask you guys if there's any discussion or any incremental ways to think about it? And maybe 1 tact to take is just given that you have your own relationship with them, but you're still 2 distinct companies, is there any involvement or any kind of back-and-forth even at a high level with respect to that particular relationship?

Sure. So Matt, again, as you know, we'll continue to operate as separate companies until closing, but to your point, we have a very long-term and important relationship with Bank of America. First Data has a very active relationship with the bank. And together, we have an even larger, more important relationship and a long history of being an important partner with Bank of America, and we fully expect that, that's going to continue for many years.

Our next question comes from the line of Joseph Foresi of Cantor Fitzgerald.

This is Drew Kootman on for Joe. I was wondering if you could touch on, just looking at longer-term margins, just touching on some of the leverage you guys have to keep the expansion going.

Yes, Drew, it's Bob. Ultimately, we pointed out during the first quarter in our prepared remarks here that we've got some headwinds in the current quarter and we saw some last year from the tax reinvestment. So these are discretionary investments we're making that were significant, more significant last year really in the second half of the year. We've got some trailing off of that in the first half of this year. The acquisition anniversarying the Lending Transaction in first quarter and the Elan transaction that will anniversary in November, all of those combined to give us an opportunity for a nice lift as we progress really into the second half. That tax reinvestment is a pretty meaningful change that you'll see in the second half of the year where we spent an order of magnitude of about $25 million or so second half of last year. We've got some trailing of that in the first half that will dwindle down. So you'll see some meaningful margin improvement that gives us that confidence of delivering at least 50 basis points margin expansion for the full year. And going forward, our continued commitment to grow top line, getting to 4.5% to 5% this year, so upwards of 50 basis points revenue growth after 70 basis points revenue growth last year, we're very focused on high-quality recurring revenue growth. That means good margin and helps us deliver that 50 to 100 basis point margin improvement over multiple years into the future.

I would add, if you take a step back and kind of think about the multiyear margin trend, one of the things, and we pay a lot of attention to this, we don't see anything systemic at all. We continue to deliver really strong operational effectiveness growth -- sorry, operational effectiveness results, continue to grow recurring revenue. One of the things that does happen when you are growing your recurring revenue up, especially around new products, that revenue tends to come on at lower margin and then it builds in over scale. There are 2 other things that if you again on that step back, if you think about the business more year-over-year, if you think about the combination of the lending divestiture last year and the acquisitions that we've done over the last 12 to 18 months, that's somewhere in the area of -- in fact, it's a little bit more than 100 basis points -- in the net effect on margin, and then the tax reinvestment program that we've talked about is in the neighborhood of, I don't know, 40-ish basis points. So those 2 things we've had to consume over the last 18 months, we'll wrap through it this year. But when you combine that kind of unusual set of items, along with the growth that we're getting, the operational effectiveness and the scaling of these new solutions, we feel really good about the underlying performance of the margins given that I think last year even through all of this, margins were down kind of minimally 30 basis points or so. And that means the underlying margin is actually growing at a -- quite a healthy clip.

Great. And then just a quick one on Zelle, I know you mentioned a couple of big wins recently. How does the pipeline look for that?

Fantastic. I mean the pipeline in terms of the number of institutions, the pipeline has never been stronger. We expect to, again, assuming that there are not systemic constraints, we will bring multiples of the number of clients that we had live at the end of 2018, we'll bring them up this year and we think it will even be higher next year. So we're feeling really good about Zelle and where it's going.

Our next question comes from the line of Bryan Keane of Deutsche Bank.

I had just 2 clarifications probably for Bob, just on financial, maybe you can help us quantify the impact of those license sales. It sounds like they boosted a little bit. So I just want to make sure we have that and maybe what that impact rolls through to the second quarter and throughout the year for license sales. And then secondly, on payments, the timing of card services, not exactly sure what that is and why that necessarily would -- picks up in the back half of the year because it sounds like that was down a little bit but does get back to the back half of the year.

Sure. The financial margin, we're up 50 basis points overall for the quarter. We did see, as you point out, some benefit of recurring the periodic revenue. License revenue was up a little bit. That was actually offset by some of the product implementation investments that we've talked about overall. So those 2 really are canceling out each other and giving us a nice underlying 50 basis point improvement on a 6% top line revenue growth. In terms of the payments, the point we tried to make on the card services merchant fees, there's some timing of those, those come in periodically so there can be some lumpiness to that. It's not based on underlying transactions. We made the point that the underlying transactions were up high single digits again this quarter, and we've seen the Payments segment order of magnitude about 5% every quarter, and it came in at 4% this year -- this quarter, that will turn for the balance of the year and we'll see good overall internal revenue growth of Payments segment on a full year basis.

Got it. Helpful. And just on financial, I think you gave it to me on the margin side. What about on the revenue side, the boost that license sales or periodic revenue had in the quarter?

Yes, it was overall kind of low single-digit millions -- high single-digit millions, $5 million, $6 million.

Our next question comes from the line of Andrew Jeffrey of SunTrust Robinson Humphrey.

Jeff, the emphasis, of course, appropriately is on community financial institutions and even as you moved up markets, just traditional banks, I guess, and generally investing in digitization and all the things they need to do perhaps a little belatedly to stay competitive. But how would you -- how do you position Fiserv especially as you combine with First Data to address syntax in particular? Is there a plan by which your technology can perhaps begin to make some inroads there? Or how do you balance, I guess, the existing constituency with opportunities with some of the challenger banks and new players in the market?

Yes. I mean that's a great question. I think the -- and the question around -- I don't know if this is specifically, Andrew, around community-based institutions, but I think, overall, there will end up being, over time, a cooperative relationship between providers of financial services, whether they be small organizations or very large, a small subsegment of the fintech community which delivers product that needs to get integrated back through, and companies like us. And in some cases, we will create solutions that don't require a fintech. But in some cases, fintechs will build stuff that clients will want and we'll integrate it, and we do that today all the time. So I do see it being a cooperative system. I don't see it being an either-or. I think as you start to get into the more important solutions around money movement, around real fully enabled digital, that's a much longer pot for fintech. And I think that we will continue to invest, we'll continue to create unique and differentiated functionality that will help all sized financial institutions and, frankly, all sized merchants win over the longer haul.

Okay. That's helpful. And then when you talk about Commercial Solutions, just to be clear because I want to understand how you're viewing it, are you talking specifically about SMB acquiring and Clover and software and kind of all the things that First Data is addressing today? Or are you contemplating an expanded suite of Commercial Solutions?

Yes, so today, today, if you think about our Commercial Center solution, we're enabling some of the largest banks in the U.S. to serve very large sophisticated commercial clients. And if you think about our Mobiliti Business solution, we're digitally enabling all sized cash management. So whether they'd be SMBs or up into the kind of the mid-tier, we have the solutions that go across the entire ecosystem. So we see opportunities, whether it be in Clover, think about it as bank merchant, whether it be in ISV or whether it'd be in the largest global e-com provider to create a new ecosystem that creates very unique value for the industry participants. And so we're quite excited about that opportunity. The one that we talk about the most because it's the nearest in is clearly back merchants. So how do we enable technologies such as Clover to be distributed either digitally or through the physical network into our clients. And integrating them into Cash Management and other kinds of solution. So -- but we do see that broad view into the ecosystem and some of the 40 work streams that we talked about that are focused on driving revenue are touching those kinds of opportunities.

Our last question comes from the line of Kartik Mehta of Northcoast Research.

A question for you, Jeff, and then one for you, Bob. Jeff, I'm assuming the conversations you're having as it relates to your combination with First Data, with big banks and community banks is probably a little bit different. And I'm wondering, as you look at community financial institutions and then conversations you've had with them, what do they see as a positive about this merger? And are there any -- do they have any concerns because of the merger?

Yes, it's interesting. The substantial majority of community-based financial institutions don't view the merchant relationship as wholly integral to how they serve the market. Part of it is because it's -- it is quite a fragmented market. Part of it is that they've got other things to do. And so the opportunity for us to bring the technology platforms together once we're closed and working is something that the institutions very quickly see how that could be valuable. And are quite excited about the different things that can be done thinking about the data that's in the merchant system and the data that's in the core system and the digital enablement, kind of digital solutions, commercial cash management real time, alerts and notifications. I mean it kind of goes on and on. So literally, the banks, the bankers, they'll sit and talk about it quite excitedly for a reasonable period of time. And then what they say is, well, let's make sure you do this and let's make sure you stay focused on what you've always been focused on. And so I don't see it as being kind of negative or on the other side of that positive point. I see it saying, I see the institutions wanting the confidence that they can rely on us to do both. And obviously, we would not have done this if we did not think we could do both.

And then, Bob, just a clarification, what are the headwinds in revenue that you're anticipating in the second quarter because of periodic revenue?

Yes, so if you recall, second quarter of last year, we had a benefit, so we had significant internal revenue growth in the second quarter, driven from the timing of license revenue partially. And so what you're seeing is that the reverse timing effect where Q1 last year saw some license revenue slide into Q2, we actually saw some benefit of Q3 pooling into Q2. And then this year, we saw that pick up in Q1 coming out of Q2. And so kind of a dual effect of that taking place in the second quarter.

So from a dollar standpoint, absolute dollar standpoint, Bob, are you able to give a range of what you expect to be the headwind in the second -- this year's second quarter?

Yes, the one thing I'd point to you is Q2 of last year, we talked about the timing benefits of that license revenue being about midteens impact.

Midteens.

Millions, sorry.

Thanks, Kartik. And thank you, everyone, for joining us. We look forward to continuing discussions. If you need anything, please don't hesitate to call -- to contact our Investor Relations team. Have a good evening.