Frank Bisignano: Thank you.
Operator: Next, we’ll go to the line of Jason Kupferberg from Bank of America. Please go ahead.
Jason Kupferberg: Good morning, guys. I just wanted to follow-up on the Fintech segment and the dynamic you saw there, where you switched kind of from the – or the clients wanted to switch kind of from the license model to more the recurring ASP model. Do you see this as kind of a one-off development with a handful of clients? Is this a broader trend? Just anything you can give us maybe around where that segment sits now in terms of percentage of revenue that’s kind of more periodic versus recurring and what you’re projecting on that front going forward?
Frank Bisignano: Yes. I think there’s a series of factors. I’d go back on the full year 4%, with non-periodic revenue. And clearly, we ultimately sign a number of transactions, but they became ASP instead of license, which we thought we had visibility license. We also like to remind everybody that fourth quarter historically, is where fourth quarter in the last month is where these things happen and going down to the wire. Like it wouldn’t any software sales, as I know, having been a large buyer of software for years and jobs I have done. So, I think that – it’s not necessarily a trend, but it does have clients, and we saw it last year, too, in different ways. Clients who believe that given regulatory, given cyber, giving a series of factors.
The ASP model will help their P&L, and their ability to perform better than the license would have. I think it’s an institution-by-institution choice. It’s not the first time we’ve seen it. And I think a lot remains to be determined.
Jason Kupferberg: Okay. Good color. Just on a separate note, we saw last month, Fiserv applied for a bank charter in Georgia. Can you just talk about the steps, potential time line to get that application approved, what the benefit to Fiserv would potentially be, whether that’s on the cost side, or ability to provide additional solutions to merchants? Thanks.
Frank Bisignano: Well, yes, let me bring pure clarity to what that is, because there’s clearly lots of questions about why Fiserv is applying for a bank license. And obviously, before we did that, we talked to the ABA, we communicate to our clients. It’s a very specific purpose license that allows for sponsorship of merchant acquiring. Historically, you needed a bank and that’s within the Visa and MasterCard rules. And our ability to be able to have an institution for that sole purpose that will allow us, to be a sponsor for our own merchant acquiring in certain instances, will be valuable as we can control more of the outcome than we could before. Very specific purpose very clear to our banks. We’re not competing with them.
We have great bank partners, as you know, probably the largest bank portfolio in the world. When you take merchant business and all our other businesses, and where our business to help our banks grow. This ultimately supports our smaller banks, who do not have sponsorship and we can bring it. It became more, clear in the merger when we were able to cross-sell, to our community banks and others, which we would have not have that First Data that our ability them ourselves would be very valuable.
Jason Kupferberg: Thank you, Frank.
Operator: Thank you. Our next question comes from Dave Koning from Baird. Please go ahead.
David Koning: Yes. Hi, guys. Great year. And I guess my question on merchant. So you guided 25% to 28% organic. And then you talked about 14% benefit from FX and inflation. So, you’re down to a core of kind of 11% to 14%, do both North America and international grow in that range, which presumably is taking quite a bit of share?
Robert Hau: Yes. So the merchant business overall, obviously, good growth. Our international regions Europe, Latin America, APAC, all growing very nicely. EMEA larger than Latin America, growing a bit slower from an organic standpoint. Broadly our North American business, very high single-digit growth rate. And obviously, the international business is growing meaningfully higher than that given the size of the business and the opportunity to continue to grow and add merchants and sell more services there also. But good business, most definitely in all four regions.
David Koning: Got you. And just a quick follow-up. FX losses, will you not add those back again through 2024? I know Q4 seems like the anomaly, you won’t add those back. And maybe how big do you expect that to be an interest expense in 2024?
Robert Hau: Yes. So let me be – make sure we’re clear. What we adjusted out was actually not fourth quarter, not December, it was December 12. It was the one day devaluation that the new President of Argentina, put into place to a – little more than a 50% deval, and it was only the impact of revaluing the balance sheet, which in most currencies stays on the balance sheet. But because Argentina is hyperinflation, or highly inflationary, the accounting rules require you to revalue the balance sheet through the income statement. We did that every day of 2022. We did it every day of 2023, with the exception of the one-time significant transact, or significant move that, we felt was really non-normal course, non-operational. So, we dialed that piece out only.
All of the other 364 days went through the income statement. And in fact, were larger than what we took in that one day. We have that that will occur in 2024. Obviously, if there’s other – another significant deval, we may evaluate that. We’re not anticipating that. We think things are “more stabilizing” in Argentina remains to be seen. It’s a unique economy. We’ve got some great leadership down there, that are running our Latin America business that have been through these cycles multiple times, over decades of leadership. So, we feel very good about being able to handle, the kind of ongoing normal things. This one-time one-day deval is what we dialed out.
David Koning: Got you. Thanks, guys. Great job.
Robert Hau: Thank you.
Operator: And for our final question, we’ll go to the line of Ashwin Shirvaikar from Citi. Please go ahead.
Ashwin Shirvaikar: Thank you. Hi Frank, hi Bob. I guess my question is, with regards to the cadence of segment revenues and segment margins, what should we expect through the year? Because there are, I think, a couple of factors at least with regards to how, I guess, Argentina impact plays out? Does it reduce through the course of the year? And then Carat, I would imagine, much better back half of the year, because the lack of comp, tough comp, factors like that. I mean, how should we think of cadence through the course of the year?
Robert Hau: Yes. I think, first off, broadly, across the company. I don’t see a big variation from quarter-to-quarter or first half to second half. There are obviously some specific comparisons within individual segments, or individual margins. But broadly, generally in line across the board with the one nuance in our merchant acceptance business. I would expect organic revenue, to be higher in the first half of the year than in the second half of the year. Because we do anticipate, some improvement in interest rates and inflation in the second half relative, to what’s going on there, as the economy deals with some of the things that the government is putting in place hopefully with their expectation that, they ease inflation and interest rates remains to be seen.
But of course, that’s offset by FX. So on an adjusted revenue basis, from a margin standpoint and EPS, relatively stable. The other thing I would just reiterate, we talked a bit about it in our prepared remarks. Cash flow will definitely have some variation with tailwinds in the second half of the year after some headwinds in the first half. But again, we have a good degree of confidence in the $4.5 billion for the full year.
Ashwin Shirvaikar: Got it. And then the quick follow-up is Fiserv’s small business index, I guess, how indicative is it, of the health of Fiserv’s own client base? And can you comment, generally speaking, on small business health? It seemed to me like your economic assumptions call for more or less a soft landing, but I just want to clarify.
Robert Hau: Yes. First off, the latter part, yes, I would agree. We are anticipating, I think, like the rest of the world at this point, a soft landing things seem to be on track for that. A bit softer macro environment, modestly slower GDP in 2024. The FSBI is based upon a very broad set of data that we have across our company that we then extrapolate to the entire U.S. market. So, it is not a direct indication of Fiserv activity. If there are differences in region mix of – we’re very strong in restaurant. We might have more restaurants than, we do nail salons, or so we go through the NAICS codes across the country, different industry weightings, different regions. When we take our data and extrapolate it, across the U.S. So it’s very much a very real-time indicator of the health of small businesses.
