US TECHNOLOGY: Fiserv: 3Q25 Results
Credit Negative - FI significantly reduced its FY25 guidance amid reset Argentina growth expectations and a reprioritization on longer term growth initiatives. The company also announced Paul Todd as the new CFO, who joins Mike Lyons who took over as CEO earlier this year. We see elevated execution risk with the name as the company seeks to overhaul its growth strategy leading to higher spending associated with its new "One Fiserv Action Plan." Although the company reiterated its 2.5x-3.0x leverage target, we see risk of higher leverage, currently at 3.0x, as growth slows down while still pursuing higher shareholder returns and higher M&A activity.
• Adj. revenue was below street consensus at $4.92B ($5.33B est.), and was 1% YoY organically; Merchant +5% YoY, Financial Solutions -3% YoY
• Clover revenue was +26% YoY, down from +30% YoY last quarter; clover volume was +11% YoY excluding the 2024 gateway conversion. Clover FY25 revenue is now expected to be $3.3B down from $3.5B prior guidance.
• EBITDA decreased by 4% YoY and margins were stable at 46%.
• FCF was $1.3B compared to $1.8B in the prior year quarter and the company bought back $1B of stock.
• Gross and net leverage ended the quarter at 3.0x and 2.9x, up 0.1x sequentially.
• FY25 organic revenue growth and adj. EPS guidance were revised down to +3.75% YoY and $8.55 from +10% and $10.23 prior.
• FY25 adj operating margin is expected to decrease by 200bps YoY and FCF is now expected to be ~$4.25B ($5.34B est.) from ~$5.5B prior.
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SWAPS: Long-end EUR Vol Bounces, Risks May Favour 5/10y EUR Curve
The bounce in 3m30Y EUR swaption vol since the middle of September stands out relative to short/medium tenors, underscoring the confluence of risks facing the long-end of global curves. For investors still demanding carry, the 5/10-year portion of EUR curves may still present a better risk-reward than longer-tenors, even considering the already strong year-to-date performance.
- In the Eurozone, Germany has officially passed its 2025 budget, with Bundestag focus now on passing the 2026 budget by the end of November. While uncertainty remains around the implementation of announced expansionary policies in Germany, a debt financed fiscal impulse remains the base case, which should underpin long-end yields. Meanwhile, the ongoing Dutch pension fund transition continues to add background steepening pressure to the long-end of the EUR swaps curve.
- Elsewhere, French PM Lecornu’s interview with Le Parisien on Friday has done little to assuage political/fiscal concerns in the region’s second largest economy. Domestically induced volatility in France continues to present a spillover risk for semi-core/peripheral peers such as Italy.
- Outside of the Eurozone, well known long-end risks include fiscal/political concerns in the UK and Japan, alongside continued worries around Fed independence in the US. Although global long-end rates have seen a relief rally through September, broader steepening trends remain intact.
- The decline in EUR rates vol since the Liberation Day spike in early April has been most pronounced at the short-end. This reflects increased certainty around the landing zone for the current ECB easing cycle., Most Governing Council members now consider rates to be in a “good place”, with another cut having to be clearly motivated by incoming data.
Figure 1: EUR 3m Swaptions Vol Across Tenors
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