Fidelity National Information Services, Inc.

and to support our clients. Early on, we executed company-wide crisis management measures to protect our colleagues' health and safety. This included transitioning over 95% of our employees to work from home, expanding our employee benefits to include extended sick leave related to COVID-19, and enhancing our telemedicine benefits globally. We also broadened FIS Cares, our employee-funded charity, to benefit our more than 55,000 employees around the globe in this time of critical need. Additionally, we are doing our part to help our communities on a broad scale. We have contributed supplies and personal protection equipment to the communities we serve, and we have donated thousands of prepaid cards to military families in the U.S. and abroad. In the U.K., we partnered with the Government Banking Service to provide health care workers with groceries and other supplies. We are also being nimble. by leveraging our innovative technology and software development capabilities to quickly deploy new offerings and upgrades for our clients in this rapidly changing environment. For example, we swiftly implemented our real-time lending service for many of our financial institution clients to enable them to streamline and speed the processing of the Paycheck Protection Program under the U.S. CARES Act. To date, this service has driven much needed funding to more than 140,000 small businesses throughout the U.S., We also assisted several U.S. states to enable online purchasing of food for benefit recipients, and we issued additional prepaid EBT cards to move critical government funds into the hands of the people and families who need it most. We are providing free virtual terminal access for merchants and retailers to enable them to easily accept secure online and contactless transactions. We continue to support the world's commerce that extends to providing payment processing to the U.S. and U.K.' 's largest grocery and drug stores as well as ensuring several well-known streaming services, enabling the world during this difficult time. In addition, in our capital markets group, we quickly increased our capacity to support three times normal trading volumes, which contributed to this quarter's positive results. And finally, through our newly created FIS Ventures program, we committed to invest $150 million over the next three years in promising fintech companies, keeping us at the forefront of innovative technologies and digital transformation. We continue to serve our clients with strength and stability as the backbone to the global financial ecosystem, ensuring that transactions and accounts continue to be processed 24-7. I'm very proud of the way our employees have responded to shelter-in-place restrictions while maintaining our client-first and community-giving spirit that forms the culture of FIS. Turning to slide six, our durable business model positions us well to navigate uncertainty. Our highly reoccurring revenue model, coupled with our leading position in resilient markets, including financial services, e-commerce, and non-discretionary verticals, provide predictable revenue streams and lessen our exposure to volatility. As Woody will describe in a few moments, we have multiple levers to reduce our overall expense and protect our margins near term. Many of these reductions will benefit us now and into the future. Given our strong balance sheet, robust cash flow generation, and liquidity, We have ample capacity to continue to invest throughout the duration of the pandemic. Moving to slide seven. I want to reinforce that while these are extraordinary times, our long-term strategy remains unchanged. We're committed to supporting our clients by advancing the way the world pays, banks, and invests. Our strategy is to accelerate organic growth by aggressively investing in innovative technologies and capabilities within our core business. and executing large scale M&A to expand into secular high growth markets. This truly sets us apart from our competitors. We will build on our differentiation by developing cutting edge solutions through our modernization and innovation investments and continue to accelerate the integration of WorldPay. As you are aware, we embarked on a transformational modernization journey several years ago, beginning an ambitious new software development cycle to re-architect our solutions to be open modular and cloud-based. We did this because we believe that the financial services industry was moving towards its own transformation, and we wanted to be able to empower our clients and the greater industry to change. Fast forward to today, and clearly given our consistent sales success, FIS is leading the transformation of future-ready innovations like automation, cloud-native technologies, and digital omni-channel. As you think about this strategy that was implemented multiple years ago, COVID-19 will only accelerate this transformation. Going forward, we are excited to increase our commitment to this strategy and to continue powering the digital economy by providing our clients with access to innovation, world-class scale, and data and insights. Our business is strong and has a long runway for growth. We are not slowing down and our priorities remain consistent. First, we will continue to invest in innovation, sales, and delivery to capitalize on our growing new sales pipelines. We had some exceptional wins in the quarter that I'll take you through in just a moment. Second, we will continue to execute on integration initiatives to accelerate synergy achievement. Third, we will scale in secular high-growth markets and invest in disruptive technologies to reinforce the durability of our business model. Finally, we will drive efficiency through continued technology investments and by further streamlining our functional model. Moving on to slide eight, our clients are clearly responding to our strategy. Our overall sales for the company was up 15% year over year, led by continued strength in our banking segment. Due to the strength of our sales, our overall company backlog increased by 6%. In banking, I'm excited to announce that we signed another three modern banking platform wins. First, Opal Bank is the first European-based bank to choose our new modern banking platform, demonstrating its global capabilities. Second, we are empowering one of the world's premier investment banks to help them enhance their retail operations by leveraging our modern banking platform and our private cloud. This will be a new launch for this powerhouse as they begin to offer retail checking accounts and other services. Third, one of the largest Canadian banks chose FIS to modernize their broad U.S. business by leveraging our modern banking platform and Digital One solution. All three new wins cited the superior advanced platform architecture, which will ease their path to innovation and drive increased openness across their institutions as reasons why they chose FIS. Combined with the three top 30 bank wins that we announced last quarter, this signifies six strategic wins in back-to-back quarters. These are significant for many reasons, but the most important one is the growing movement of large financial institutions to sunset legacy on-premise systems and invest in FIS new next-gen and cloud-based solutions to enable their future success. Even in a pandemic, these clients are not stopping their investments necessary to transform. Turning to our merchant segment. Although we are seeing significant near-term impact from the ongoing pandemic, our impressive scale and advanced suite of services has enabled us to continue to win new deals. A large global retailer will consolidate relationships with approximately 40 different providers around the world exclusively to FIS. This reinforces our ability to leverage our differentiated global reach to win share of wallet across large multinationals and global brands. In addition, we want to deal with a growing specialty retailer in the healthcare vertical to implement our payment technology at their over 600 U.S. locations. The merchant chose FIS because our unique technology and scale advantages continue to create significant value relative to the competition. In capital markets, client demand continues for our end-to-end solutions delivered through a SAS model. We signed a deal with a leading financial services company to provide a cloud-enabled commercial lending solution that will allow them to meet new U.S. regulatory requirements. A large financial institution chose our cloud-based platform to manage credit and market risk. This significant win is another great indicator of our cross-selling abilities as this continues to be a large banking solutions client. These wins further reinforce that our unique strategy remains compelling to our clients and is helping them progress their transformation during these uncertain times. As we look to the future and our increasing implementation backlog, now more than ever, remote capabilities have become essential, so we've taken our cloud-based remote service model to the next level to provide the most robust, uninterrupted support available. Our remote delivery capabilities are proving invaluable. During the last six weeks, we have moved the fully remote implementations within banking and have increased professional services to 90% remote delivery within capital markets. This includes the implementation of our three new pivotal top 30 bank wins, that we announced last quarter, which all remain on track. I continue to be proud of the role we play at the center of the global financial ecosystem at a time when we are needed most. Thanks to all of our colleagues for your hard work and perseverance. I'll now turn the call over to Woody to discuss our financial results.

Woody? Thank you, Gary. I'd also like to welcome everyone to today's call and wish you and your families well. This morning, I will review our first quarter results and provide an integration update before transitioning into the COVID-19 impact on our segment revenue. I'll then discuss our margin profile, which continues to be positively impacted by our achievement of cost synergies. We are also pulling short-term cost levers that we traditionally use in response to macro headwinds in order to support near-term profitability. I will wrap up with our strong balance sheet and liquidity position. All of our remarks substantiate that we will have the financial strength and wherewithal to support our clients through the pandemic. We will use this time to invest in new products and advanced technology, as well as to accelerate the integration of WorldPay. This will position us to emerge from this challenging environment in an even stronger competitive position, as Gary mentioned a moment ago. Turning to slide 10, the majority of our recurring revenue is expected to see little or no impact from COVID-19. We did, however, see impact to transaction-related revenues across our merchant and banking segments this quarter, particularly in March as government actions and lockdown orders became widespread. On a consolidated basis, organic revenue growth was 2%, including a 1 percentage point headwind associated with a previously discussed one-time benefit received during the same period in 2019. On a like-for-like basis, growth would have been 3%. Adjusted EBITDA increased to $1.2 billion during the quarter, and our margins expanded 510 basis points to 40.5%. Margin expansion was driven by accelerated WorldPay synergies, as well as the proactive expense levers we pulled in response to COVID-19. Adjusted EPS increased 10% to $1.28 per share, primarily due to the cost discipline I just mentioned. Turning to our segments, banking solutions revenue increased 1% organically, overcoming two points of one-time benefits received in the prior year period. On a like-for-like basis, banking solutions would have grown 3%. Revenue growth was driven by new sales wins, as we've described over the past several quarters. Banking adjusted EBITDA with $614 million, representing 140 basis points of margin expansion, to 42%. Merchant Solutions reported flat organic revenue growth. Prior to the spread of COVID-19, performance in this segment was robust, maintaining the accelerating double-digit growth trends that we reported in the fourth quarter. The pandemic significantly impacted transaction volumes in the second half of the quarter, However, we have recently seen improving trends in some areas. Merchant adjusted EBITDA was $422 million, representing significant margin expansion to 45%, primarily due to the WorldPay acquisition. Our capital market segment showed great resilience, growing 7% organically. This exceptional performance was primarily driven by continued growth in recurring revenue, following several quarters of strong new sales, as well as strong quarter of license renewals. Capital markets adjusted EBITDA, was $280 million, representing 260 basis points of expansion to 44%. As we have done in the past, FIS continues to optimize our portfolio of assets by positioning certain non-strategic businesses for either closure or sale. As a result, certain assets were reclassified from banking and merchant into the corporate and other segment. These operations represent less than 2% of first quarter revenue. Turning to slide 11. Revenue synergies increased 25% sequentially to $100 million on an annualized run rate basis. We continue to see strength in our premium payback initiative, bank referral agreements, as well as optimization of our portfolio and debit card routing. We had several key wins this quarter, which reinforced the power of our combination. First, another leading US retailer will implement our innovative premium payback solution. Demand for this product is strong and growing. of our innovative technology development capabilities with WorldPay's stellar reputation among the world's leading merchants as clearly paying dividends. Second, we signed two new referral agreements with leading financial institutions, adding hundreds of branches to our distribution network. Third, we developed an innovative healthcare solution with a leading benefits provider. The transactions are acquired by WorldPay as the merchant processor and approved by FIS using our own authorization engine. Even in the face of COVID-19, we are confident in our ability to achieve our 2020 and 2022 revenue synergy targets based on these impressive new wins and our rapid progress to date. Turning to cost synergies, these also increased 25% sequentially to $580 million on an annualized run rate basis. We continue to make significant progress in consolidating our merchant and issuer platforms and reducing duplicative corporate costs. In addition, we are rationalizing our facility footprint and driving functional alignment within our organization to accelerate our attainment of cost synergies. In total, we now have line of sight to at least $700 million in cost synergies on an annualized run rate basis by the end of this year. Turning to slide 12, given the current macro environment, I wanted to provide some additional transparency on the areas of our business which have seen impact from the pandemic. On a consolidated basis, the majority of our revenues are expected to see little or no impact from COVID-19. Most of our business is supported by recurring revenue, which gives us comfort in our ability to weather extremely challenging periods. In our banking solution segment, financial institutions rely on our mission-critical infrastructure to continue moving money and fuel the economy. More than 80% of this business is based on a recurring revenue model, which is resilient and predictable. We anticipate this portion of banking solutions to remain fairly insulated from COVID-19. As Gary discussed, New sales have been strong and our pipeline continues to build with a heightened demand for next generation technologies and outsourcing. Approximately 13% of the banking segment's recurring revenue mix is transaction related and has more exposure to changes in the macro environment. For example, debit, credit, and network volumes declined as shelter in place orders expanded around the globe. While banking also has professional services revenue, our teams have done an excellent job modifying our processes to provide these services remotely. Based on these rapid innovations, I expect modest impact in the short-term and actually long-term benefit as we implement these new remote processes. While our banking business is highly resilient, impacts from the ongoing pandemic pushed revenue growth trends to flat to slightly down in April, and we would expect this growth trajectory to sustain in the short-term. In our merchant solutions segment, we are leading acquired globally, and we are differentiated by our technology-enabled solutions, and the diversity of our client portfolio, which includes sophisticated multinational clients, leading global brands, innovative startups, and everything in between. This business is based on transactional revenue, primarily driven by consumer spending. Although COVID-19 caused acquiring volumes to deteriorate, we expect to see these volumes to start to return as lockdown orders are eased and businesses begin to reopen. Looking at merchant solution trends during the quarter, organic revenue growth was 10% in January. Beginning in February, our travel and airlines verticals started seeing a drop in volume, initially in Asia. These verticals eventually reached 90% plus volume declines following the adoption of travel restrictions by various countries before stabilizing at these low levels. As global social distancing policies, lockdown, and shelter-in-place orders became increasingly widespread, we began to see the impact spread across many of our traditional point-of-sale verticals, including retail and restaurants, with volume stabilizing down approximately 30% year over year in April. There are some bright spots. Non-discretionary verticals such as grocery and drug are resilient during recessionary periods and have recently experienced strong consumer demand growing nearly 20%. In addition, we are seeing strength in e-commerce, excluding travel and airlines, with transactions increasing more than 30% in April, primarily driven by strong growth in digital and online retail. In total, consumer spending trends are depressed with merchant solutions volumes declining approximately 30% year-over-year and organic revenue growth trending down about 40% for the second quarter based on April volumes. The 10-point delta between volumes and revenue is primarily caused by the delay of the U.S. tax filing deadline from April 15th to July 15th. We processed millions of consumer tax payments with our bill of direct solution, pushing the associated revenue out of the second quarter and into the third quarter. Based on our current analysis of trends, we believe April should be the low-water mark. We have seen signs of stabilization across the segment and even some improvement in traditional point-of-sale volumes during the last few weeks. We anticipate further improvement in transaction volumes as shelter in place and lockdown ordinances are relaxed. Finally, capital markets were shielded from the impact of COVID-19 during the quarter, primarily due to our large and growing recurring revenue base. In April, capital markets organic revenue growth was relatively flat as professional services and licensed sales began to see impact, and we expect this growth trajectory to sustain in the short term. We are confident in the long-term growth trajectory of our business, which is positioned to resume accelerating growth in 2021 and 2022 as the global economy recovers from this pandemic. Turning to slide 13, we are maintaining our commitment to invest for the future, as we continue to drive the accelerating growth profile of our business for the long term. Our capital spending plans remain unchanged in 2020, enabling us to use this time to further invest in innovation and next-gen technology while others are retrenching. We will continue to invest in our global sales force to capture the market demand for our solutions, as well as enhancing our implementation and delivery capabilities to convert our impressive new wins into revenue without disruption. We've identified more than $1 billion in total cost savings initiatives that we will execute by the end of 2020. In addition to accelerating permanent cost actions that will enable us to achieve at least $700 million in world pay cost synergies by the end of the year, we are also taking additional proactive expense reduction measures to protect our earnings and cash flow. These actions are generating more than $300 million in short-term savings through a significant reduction in short-term bonuses, restricting travel expenditures, and reducing hiring of non-revenue generating roles and third party expenses. These actions are designed to minimize the impact of employees and future growth. While these initiatives have an immediate and material impact to our second quarter and full year 2020 margin profile, they will not fully offset the loss of significant transaction related revenue as these revenue streams carry a very high contribution margin. Given the impacts to date, we would anticipate margin contraction in the second quarter. Based on the strength of our business model, synergy attainment, and other expense actions, we continue to anticipate margin expansion for full year 2020 over 2019 levels. Turning to slide 14, we have ample liquidity of $3 billion as of March 31st, which includes cash and cash equivalents of $1.4 billion and $1.6 billion of available revolver capacity. We don't have any bond maturities in 2020 with our next maturity of 500 million euros during the first quarter of 2021. We also generated $539 million of free cash flow compared to $249 million in the prior year period, representing an increase of more than 100% year over year. Our board of directors approved an approximately $216 million dividend that will be paid on June 26. Our capital allocation priorities remain focused on deleveraging the balance sheet. As a result of the pandemic, our 2.7 times leverage ratio target is now expected to extend into 2021. We are focused on free cash flow generation, which will allow us to continue debt repayment and make ongoing investments in innovation and delivery. As Gary described, we remain committed to our strategy and will continue to invest for growth. Our strong execution and the resiliency of our durable business model gives me confidence in FIS now and into the future. This concludes our prepared remarks.

Thank you, ladies and gentlemen. At this time, if you'd like to ask a question, please press 1, then 0. The prompt has changed. So once again, it is 1, then 0. And you may remove yourself by repeating that command. And our first question will go to Darren Feller with Wolf Research. Please go ahead.