Dive Brief:

• Fiserv still expects its Clover point-of-sale unit to take in $3.5 billion in revenue this year, despite disclosures during the first-quarter earnings call that suggested the fast-growing business was plateauing, Chief Financial Officer Bob Hau said at an investor conference last week. “That's our expectation to deliver that $3.5 billion dollars, and we feel good about our ability to do that,” Hau said.
• “I certainly recognize that the reported (Clover gross payment volumes) for the first quarter, and our outlook for the second quarter at 8% was a surprise, or a disappointment,” Hau acknowledged at the Barclays Emerging Payments and Fintech Forum on May 20.
• The volume growth flat-lining over the two quarters was due at least partly to the company focusing on “quality” volume from small businesses that are large enough to buy additional services offered by Fiserv, with the company less interested in “micro-merchant,” he said. “We could get lots more volume, but that would not be the quality volume,” Hau said.

Dive Insight:

Following Fiserv’s first-quarter earnings report on April 24, analysts and investors wondered what the slowdown in Clover’s volume might mean. For instance, analysts at Keefe, Bruyette and Woods suggested it might be a sign that Fiserv, which had developed a payments reputation similar to the “gold standard” names Visa and Mastercard, was slipping.

The Milwaukee-based company reported specifically that Clover’s revenue climbed 27% over the year-earlier quarter despite the slowdown in payments volume growth. 

Restaurants and other merchants use the POS to take consumer payments. Hau noted in his comments last week that the first-quarter growth this year was in addition to 30% revenue growth for the first quarter of 2024, over 2023.

“Clover’s rapid growth fueled optimistic valuation cases but in the most recent quarter, a sharp slowdown in Clover’s payment volume growth — not revenue — sent the stock tumbling (~18%),” the Keefe, Bruyette and Woods analysts wrote in a May 17 note to their clients. “While revenue growth remains solid (+27% in 1Q), many fear this volume inflection is the first derivative, raising concerns that the second derivative—revenue growth—could eventually follow suit.”

Hau’s comments came after the price of Fiserv’s stock plunged following the first-quarter earnings report and the outlook provided afterward in a webcast with analysts. He delivered a preamble at the Barclays conference meant to address those investor concerns. ”Clearly, it’s been a difficult stretch for all of us investors,” Hau said in those initial remarks.

The challenge for the Clover service, which has been expanding at a rapid rate across geographies, comes as the company has had a change in leadership. Earlier this month, Mike Lyons became Fiserv’s CEO after Frank Bisignano was confirmed as the Trump administration’s new commissioner overseeing the Social Security Administration.

Clover’s volume slowdown could have something to do with reports earlier this month that consumer sentiment was slumping, despite a rebound reported this week. Fiserv’s chief operating officer, Takis Georgakopoulos, told the Barclays audience that the economy wasn’t affecting the company’s outlook.

“When you look at the actual spending data, you see a modest slowdown, not a decline,” Georgakopoulos said, noting a drop in the average tab amount for some sectors, like restaurants. “So, I would say slower growth, but still growth.”