Fidelity National Information Services, Inc.

Good morning, ladies and gentlemen, and welcome to the FIS First Quarter 2021 Earnings Call. At this time, all the participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Nate Rozov, corporate finance investor relations.

Good morning, and thank you for joining us today for the FIS first quarter 2021 earnings conference call. This call is being webcasted. Today's news release, corresponding presentation, and webcasts are all available on our website at FISglobal.com. Gary Norcross, our chairman and CEO, will discuss our operating performance and review our strategy to continue accelerating revenue growth and maximizing shareholder value. Woody Woodall, our Chief Financial Officer, will then review our financial results and provide updated forward guidance. Bruce Lothers, President of FIS, will also be joining the call for the Q&A portion. Turning to slide three, today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to the Safe Harbor language. Also, throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, adjusted net earnings per share, and free cash flow. These are important financial performance measures for the company, but are not financial measures as defined by GAAP. Reconciliations of our non-GAAP information to the GAAP financial information are presented in our earnings police. With that, I'll turn the call over to Gary who will begin his remarks on slide five.

Thank you, Nate. Good morning and thank you for joining us. We achieved very strong start to the year, exceeding our expectations across the board in the first quarter. As shown on slide five, we realized accelerating revenue growth, exceptionally strong new sales, and significantly expanded margins across all our operating segments. Our WorldPay revenue synergies are also accelerating through increased cross-selling as well as ramping volumes on prior synergistic sales. As a result, we are increasing our 2021 and 2022 revenue synergy targets to $600 million and $700 million, respectively. During the quarter, we leveraged our continually strong free cash flow to begin buying back stock, fund our increased dividend, and make strategic investments in intriguing new companies that are accelerating new capabilities and pushing the boundaries of financial technology. I'm also pleased to share that we divested our remaining minority position in Capco in April, netting a very positive return for our shareholders and over $350 million in proceeds for our remaining stake. These exceptional results demonstrate the strength of our business model, the success of our client-centric focus, and our disciplined capital allocation strategy. Given that focus, we consistently invest in platform and solution innovation in the areas of greatest demand, As a result, FIS is the most modern scale provider in market with a unique suite of solutions that enable our clients to transform their environments, grow their businesses, and engage with their customers in dynamic new ways. We're quickly becoming one of only eight companies in the S&P 500 with revenues approaching $14 billion, growing more than 7% with an already high and expanding mid-40s EBITDA margins. We believe there is no one in our industry better positioned. With our strong start to the year, we expect accelerating organic revenue growth and strong earnings throughout 2021, giving us the confidence to raise our full-year guidance. Turning to slide six. In banking, new sales grew 17 percent year-over-year, reflecting a 24 percent CAGR since the first quarter of 2019, as our investments in new solutions continue to yield impressive results, not only in our traditional business, but in emerging areas as well. For example, Green Dot, the world's largest prepaid debit card company with over $58 billion in annual volume, chose to expand our relationship this quarter to now include one of our B2B solutions to support their commercial customers, as well as our online chat and social media solution for customer care to serve their mobile digital bank. In addition, we are helping large financial institutions upgrade their legacy technology by moving to our next-generation cloud-based solutions. BMO Harris selected the modern banking platform this quarter, making them our 11th large win, and I'm pleased to share that 40% of our earlier wins are already live due to our software's elegant and modular design. This rapid onboarding continues to give us confidence in our accelerated revenue growth outlook for the remainder of the year. BMO chose to partner with us because of our open, cloud-native, and scalable platform. which will help them modernize the services they provide to their customers, speed new products to market, and increase their operational efficiency. Vietnam's largest bank, BIDV, also chose FIS to upgrade their core banking software to harness the power of our global reach and world-class scale. With this win, we are now the core processor of Vietnam's two largest banks. As we think about continuing to increase our growth, we have several new solutions in our banking segment that we've launched recently and more in the pipeline to be released later this year. To highlight a few examples, PaymentsOne is the newest and most modern card issuing platform in the market, delivering an agile and frictionless payments experience across all card types on one unified platform. We spent the past year migrating more than 1,000 of our issuing clients to this platform and have also seen strong demand from new clients where we've already installed more than 300 new financial institutions since the launch of this solution. RealNet is another innovative new solution being launched, which enables account-to-account transactions over real-time payment networks across the globe. This cloud-native SaaS platform will function as a network of networks, allowing our clients to seamlessly leverage multiple payment types to transact effortlessly around the world and across borders in real time. RealNet is proof of our strategy to support the global movement of money across the entire financial ecosystem for our clients in banking, merchant, and capital markets. We've also launched an industry-first crypto banking solution, which we created in partnership with NYDIG. Traditionally, consumers and corporations had to go outside of their existing banking relationships to acquire Bitcoin. Once an FIS Core banking client enables this capability, their customers will be able to view and transact their Bitcoin holdings alongside their traditional accounts in a single view. Our new solution taps into the advanced functionality of Digital One to provide consumers with a user-friendly in-app experience. It will also allow our banking clients to grow their businesses through a new source of income by providing Bitcoin services through a seamless, easy-to-use digital experience. Each of these new launches reflect the power of our technology innovation and deep domain expertise. Turning to Merchant on slide 7. We revamped our go-to-market strategy, significantly improving new sales results as evidenced by our exceptional 76% growth. Our new sales success doesn't just reflect easy comps. New sales were up 39% over the first quarter of 2019, translating to an 18% CAGR over the past two years. We continue to successfully expand our financial institution partner program to serve SMBs. As an example, we formed an exclusive merchant referral partnership with CIT Bank this quarter. In this strategic takeaway, we will cross-sell merchant processing to CIT's over 45,000 customers expanding on an already successful relationship with our banking segment. We also continue to expand our leading ISV partner network, adding 20 new ISVs in the UK this quarter, as well as several more in the US and Canada that span a diverse range of verticals from retail, hospitality, salons and spas, to event ticketing, education, property management, and many others. As we look at large enterprise and leading global brands, we are the provider of choice due to our unique omnichannel capabilities, expansive global reach, and best-in-class authorization rates. As an example, we won 80 new global e-commerce clients this quarter, more than doubling our new sales from last year. To keep pace with the demand, we are investing to grow our sales force by over 300 more professionals this year. During the quarter, for example, we won impressive new clients like HelloFresh, the well-known meal kit delivery company, and Didi, which is the Uber of China. We also want a diverse set of marquee clients, such as Intercontinental Exchange, Betbull, a premier online sports betting company, and the Nature Conservancy, a preeminent global conservation organization. We continue to consistently win share in travel and airlines, including Norwegian Cruise Lines this quarter, and expect leading companies like this to accelerate rapidly as the industry recovers. As we think about newly formed high-growth sectors, FIS is the leading acquirer for cryptocurrency, with revenue from this vertical growing by five times over last year. OKCoin, a leading cryptocurrency exchange, selected FIS this quarter to help them grow their business. We serve five of the top ten digital asset exchanges and brokerages globally, including innovators like Coinbase and BitPay. The results of our investment in new and modernized merchant technology is certainly showing in our sales success throughout our various merchant verticals. During the quarter, we successfully completed the final client migrations to our next generation acquiring platform, also known as NAP, which enables us to offer a more agile experience and modular offering while still providing tailored solutions for our clients. We processed over 1.8 billion transactions on NAP during the first quarter and continue to expect accelerating growth now that we are aggressively selling in market. In addition to our new fully launched acquiring platform, we have seen tremendous success with the launch of our new gateway. Through our new simple APIs, merchants can go live on our platform faster while still benefiting from our full global breadth and sophisticated solutions. Our new APIs provide a seamless, easy-to-integrate single point of access for our clients, and transactions are ramping exponentially, ending the first quarter at more than 4 million transactions per day. This represents more scale than all but two of our largest e-com competitors in less than two years post-launch. All of this shows that FIS is increasingly differentiated by our ability to bring innovation at scale that is enterprise-ready from day one in a way that few can claim or offer today. In addition to leveraging our innovative portfolio of technology assets, our clients are also relying on us to support their expansion into new geographic markets. This quarter, we expanded our services into South Africa, Nigeria, and Malaysia, and we plan to bring online several more countries later this year. Since the combination with WorldPay, FIS has now brought acquiring to nine new countries. Turning to slide eight. In capital markets, we've made remarkable progress since acquiring SunGarden in 2015. We completely changed the revenue growth profile from persistent declines to accelerating top-line growth. And I'm pleased to say that we are now consistently growing faster than our peers. We simultaneously improved margins and moved the business to over 70% reoccurring revenue. During the first quarter, average deal size increased 36%, with new logos representing 30% of new sales. clearly showing that we are winning share. New sales of our SaaS-based reoccurring revenue solutions are also very strong, increasing by 57% this quarter. For example, our differentiated solutions and deep treasury expertise are motivating leading corporates like GlaxoSmithKline to select FIS to power their treasury management systems. In addition, our comprehensive suite of solutions, strong track record and speed of implementations is very attractive to emerging fintechs like Acorns and Robinhood. These two fintechs are utilizing our solutions to further drive financial inclusion. As another example, Futu is a next-generation online broker-dealer who selected FIS this quarter to help power their growth in securities, finance, and trading. Securian Financial is a great example of a diversified financial services company who partnered with us this quarter to deliver a leading cloud-based risk modeling and management platform. They selected FIS because they needed a partner who could support their growth and scale, while at the same time being nimble enough to help them quickly respond to changing regulatory requirements. I'd like to conclude my prepared remarks on slide nine before handing the call to Woody. The consistent execution of our strategy is driving our success. Ongoing investments in new solutions, advanced technology, and expanding distribution are generating strong new sales and competitive takeaways while accelerating revenue growth across all our operating segments. Our relentless focus on achieving efficiency and scalability through automation and integration continues to enhance our profitability and margin profile. Lastly, we see our exceptional free cash flow generation as a competitive advantage. It allows us to consistently invest for growth and to generate superior shareholder returns through return of capital and M&A. In summary, Our strategy is continuous transformation, pivoting to growth while simultaneously driving efficiency and scale through the strategic allocation of capital. I will now turn the call over to Woody to discuss our financial results and forward guidance. Woody?

Thanks, Gary, and thank you all for joining us today. Starting on slide 11, I will begin with our first quarter results, which exceeded our expectations across all metrics to generate an adjusted EPS of $1.30 per share. On a consolidated basis, revenue increased 5% in the quarter to $3.2 billion, driven by better-than-expected performances in each of our operating segments. Adjusted EBITDA margins expanded by 10 basis points to 41%. Strong contribution margins and synergy achievement within each of our segments more than offset increased corporate expenses from unwinding last year's COVID-related cost actions. We continue to make excellent progress on synergies, exiting the quarter at $300 million in run rate revenue synergies, an increase of 50% over the fourth quarter's $200 million. Accelerating revenue synergy attainment is driven primarily by ongoing traction and ramping volumes within our bank referral and ISV partner channels, as well as cross-sell wins related to our new solutions and geographic expansion. Given our progress to date and robust pipeline, we are increasing our revenue synergy target for 2021 by 50%, or $200 million to $600 million, and for 2022 by $150 million to $700 million. Our achievement of cost synergies has also been very successful. We have doubled our initial cost synergy target of $400 million, exiting the quarter with more than $800 million in total cost synergies. This includes approximately $425 million in operating expense synergies. Our backlog increased mid-single digits again this quarter, as strong new sales more than offset our recognition of revenue in the quarter. Turning to slide 12 to review our segment gap and organic results. As a reminder, the only difference between gap and organic revenue growth for our operating segments this quarter is the impact of currency. Our banking segment accelerated to 7% on a gap basis or 6% organically. up from 5% growth last quarter. These strong results were driven primarily by ramping revenues from our recent large bank wins, recurring revenue, and issuer growth. Our issuing business grew 10% in the quarter, driven primarily by revenue growth from payments won, increased network volumes, and economic stimulus. We expect both of these tailwinds to continue, driving accelerated growth into the second quarter in support of our outlook for mid- to high-single-digit organic revenue growth for the full year. Capital markets increased 5% in the quarter, or 3% organically, reflecting strong sales execution and growing recurring revenue. The capital markets team is driving a fast-start program for the beginning of 2021 and appears to be trending toward the higher end of our low- to mid-single-digit organic growth outlook for the year. In merchant, we saw a nice rebound with growth of 3% in the quarter or 1% organically, accelerating 10 points sequentially as compared to the fourth quarter. Merchants' first quarter performance was driven primarily by strength in North America and e-commerce, including significantly ramping volumes on our new acquiring platform. COVID impacts on travel and airlines, as well as continued lockdowns in the UK, drove a five-point headwind in the first quarter. Slide 13 shows the significant ramp in volumes and revenue that the merchant business generated throughout the quarter. Importantly, as volumes rebounded, yields grew significantly. We ultimately exited the quarter generating approximately 70% revenue growth during the last week of March, including 5% points of positive yield contribution. We expect this positive revenue yield tailwind to continue to expand in the second quarter and continue throughout the remainder of the year. Based on March exit rates and second quarter comparisons, we expect merchant organic revenue growth of 30% to 35% in the second quarter. The expanding investments we are making in merchant technology platforms and global sales execution will yield long-term benefits for our clients and significant new wins for our business. As Gary highlighted, we are very pleased with the execution of our segments. With accelerating revenue growth and strong new sales, each of them are winning market share. Turning to slide 14, we returned approximately $650 million to shareholders in the quarter through our increased dividend and share repurchases. Starting in March, we bought back approximately 2.8 million shares at an average price of $143 per share. Beyond this return of capital, we also successfully refinanced a portion of our higher interest rate bonds, which extended our average duration by a year and lowered expected interest expense for the year by about $60 million to approximately $230 million. Total debt decreased to $19.4 billion for a leverage ratio of a 3.6 times exiting the quarter, and we remain on track to end the year below three times leverage. Turning to slide 15, I'm pleased to be able to raise our full year guidance so early in the year based on our strong first quarter results and second quarter outlook. For the second quarter, we expect organic revenue growth to continue to accelerate to a range of 13 to 14 percent, consistent with revenue of 3.365 to 3.39 billion dollars. As a result of the high contribution margins in our business, we expect adjusted EBITDA margin to expand by more than 400 basis points to approximately 44%. This will result in adjusted EPS of $1.52 to $1.55 per share. For the full year, we now anticipate revenue of $13.65 to $13.75 billion, or an increase of $100 million at the midpoint as compared to our prior guidance. driven primarily by accelerating revenue synergies. We continue to expect to generate adjusted EBITDA margins of approximately 45%, according to an EBITDA range of $6.075 to $6.175 billion. With our improved outlook, successful refinancing, and share repurchase to date, we are increasing our adjusted EPS guidance to $6.35 to $6.55 per share, representing year-over-year growth of 16% to 20% and an increase of 15 cents at the midpoint above our prior guidance. By all measures, this was a great quarter for FIS. The investments we're making are driving strong new sales and accelerating our revenue growth profile. As a result, we remain confident in meeting or exceeding our increased outlook for 2021. I would like to thank our colleagues for their ongoing effort to drive FIS forward and to empower our clients to succeed. Operator, would you please open the line for questions?

Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question is from the line of Dave Countix with Baird.

Yeah. Hey, guys. Thanks and congrats on the momentum. Thanks, Dave. I guess, first of all, the banking wins continue to be really, really good. I'm just wondering, how do we think about the lag from the strong signings to hitting revenue? You're already getting a lot of momentum from previous wins, but it seems like your pace is so much stronger now than before even. you know, does the current wind really help 22 and beyond or, you know, already in the back half or, you know, how do we think about that? And then is this high single digits, you know, a year from now, revenue?

Yeah, I think we're really confident on what we're seeing doing the sales side. Bruce and his team are doing a fantastic job driving sales. You see us bringing, you know, he's bringing a lot of new capabilities to the market. You know, Modern Banking Platform has been very successful and That's why we're very confident that these onboardings are going to continue to accelerate our growth from here throughout 2021 into 2022. I'll remind you, a lot of these sales, in fact, almost all of them are just highly SaaS-enabled solutions in our cloud. So the reality is, as growth and demand grows, as new capabilities roll out on all these wins, you'll continue to see our revenue growth accelerate here. So we can't be more pleased with where the banking segment is. You know, we, we made a huge investment in banking over the last several years with new product data center consolidation with cloud enablement, et cetera, and seeing the results of that in market now as we speak.

All right. Thank you. And then I guess just as a followup in the merchant segment, Q1, I was just looking at the revenues about 103% of Q1 of 19. Um, And I guess I'm wondering, Q2, when you say 30% to 35% growth, do you mean X the tax shift last year? Because, you know, if that's right, then Q2, there's momentum to, you know, a higher percentage of revenue relative to Q2 of 19. I just want to make sure that 30% to 35%, you know, what the base revenue is for that.

Yeah, within the 30% to 35%, Dave, you're right. The tax shift is probably three to four points of benefit in there. Certainly, we saw April volumes in excess of the 30% to 35%, so we're trending well there. Obviously, where we're at, we feel like we're getting our hands around our ability to project into the future, but there's still a little bit of uncertainty there, so we feel very confident in the guide that we gave for 2Q that we can meet or exceed that guide, and that's how we think about the 30% to 35%. So is it off the...

30% to 35% growth off of Q2 last year? Because that puts you a little bit below the 103% of the two-year-ago stack. Is there a reason for that?

Yeah, it's off the 2Q number from last year. As we talked about, we've got about three to four points of benefit from that tax shift from last year, and then we're seeing very good results into April. And we wanted to make sure we produced a guy that we could meet or exceed, Dave.

Yeah, okay. That all makes sense, and I really appreciate it. Thank you. Thank you.

Your next question is from the line of Ashwin Sherbakar with Citi.

Thank you. Hey, Gary. Hi, Woody. Hey, Ashwin. Thank you. Thank you. You know, I also want to go back to the steady drumbeat of large bank wins that you've had, and ask sort of, you know, is the sales cycle shrinking now as prospects realize that they must act with urgency? Can you give us some, you know, inside baseball of what these deal discussions look like maybe?

Yeah, Ashwin, I'll let Bruce take that one. Hey, good morning, Ashwin.

You know, when we think about the sales cycle, what I would say is that the actual sales cycle that we have is relatively consistent. you know, on a days in the sales cycle to close. What I would say has changed a little bit is the mindset and the view of where the market's moving towards. And so you're seeing a lot more people pre-sale cycle kind of making those determinations on their own. And that's really accelerating the whole process for us. And so I think you'll continue to see this. Our pipeline is very robust around this area and look forward to continuing to see this accelerate as we move forward. Got it. Thank you, Bruce.

So the second question is on merchant solutions. Obviously, you guys mentioned here some strength incrementally going into April. Would that also include the UK given the high rate of, you know, vaccinations over there and is that market opening up and sort of what the sequential benefit of that might perhaps incrementally look like if you could break that down?

Yeah, we're certainly seeing volume growth coming back. You know, April's benefit was about 40% or so in terms of total transaction and volume growth that we saw, which is in excess of the 30 to 35. The blend of that, obviously, is a little higher internationally, actually. So as you see some of the openings happening, we believe international and the U.K. will actually be an incremental benefit in Q2 compared to the U.S., but obviously as restrictions and reopenings continue to move forward, We're seeing very strong growth across both U.S. and international operations and expectations. Okay. Good to hear. Thank you.

The next question is from the line of George Michalos with Cowan.

Hey, guys. Good morning, and congrats on some very solid results here. Thanks, George. Thank you. Of course. Just wanted to delve in a little bit on the dynamic between the revenue growth and the volume growth. Again, you're sort of getting that positive mix shift on the yield. Just looking at that delta exiting March, I'm just curious. You had some obviously underperforming verticals. That benefit in April, is that really being driven by verticals like hospitality coming back? Just curious how much of a contribution or how much of a are you seeing in, say, a vertical like travel that has been under a lot of duress in 2020?

Yeah, travel overall continues to be in duress, still down around 60%. But what we are seeing is retail and restaurants, for example, opening back up. We're seeing the yield dynamics that we talked about being a tailwind for us continuing into the second quarter and believe will be a tailwind for the full year. We anticipate volumes for the full year to be roughly high single digit to low double digit, and obviously we're guided to revenue growth of mid to high teens. So you're seeing yield dynamics that will benefit the entire year. The exit rate of plus 5% in the last week of March, the April what we've seen so far, and our expectations for Q2 would be higher, obviously, than that 5% positive yield, and we think that trend will continue over the course of the year.

Okay, great. So it sounds, again, like that travel benefit is still very much ahead of you. You really haven't seen much of any benefit in April. Just as a quick follow-up as it relates to sort of the debit processing business, just curious, the DOJ suit against Visa, has that changed any of the dynamics for you guys as it relates to, you know, to Nice and Visa? and those sort of products, or is it sort of business as usual from a competitive standpoint?

Yeah, for us, George, it's been business as usual from a competitive standpoint at this point. You see our issuing business did extremely well. I think Woody talked about it being up 10%. I highlighted in my prepared remarks the takeaway on the new PaymentsOne platform. We're seeing great growth through our NICE network, but I think the team's done a nice job of presenting our value proposition. And so for us, we're just continuing to compete in the market and take share.

Thanks, guys. Congrats.

Thank you.

Your next question is from the line of Darren Peller with Wolf Research.

Thanks, guys. Nice job on the quarter. You know, when we look at that spread, just to follow up on the revenue and volume spread in merchants, Is there any way to give us a sense of what the normalized spread could be going forward longer term, especially with this new mix that we're seeing with more digital, more e-com? And I guess on that note, I didn't see a data point on e-com growth specifically this quarter for what it was into April, even relative to that very strong rebound. Or maybe just comment on e-com integrated, some of the other specific channels and merchant.

Thanks, guys.

Yeah, I think if you go back historically, you would see, you know, roughly – about three points of benefit from revenue yield over volume historically. I think once everything normalizes out, let's call that 2022-2023, we would anticipate to continue to see some of that traditional yield over volume dynamic continue as we continue to provide capabilities in market. If you look at e-com itself, e-com growth in the first quarter, ex-traveling airlines was about 45%. and inclusive of travel and air was about 25%. So very strong growth in e-com, very good sales. I think Gary mentioned about 80 wins in quarter. We're seeing a lot of momentum in that area right now.

Yeah, Darren, I mean, the team's done a great job of just retooling the whole go-to-market. Obviously, we had some big programs that we had to get completed with the WorldPay integration and that. completion and migration is completely behind us when you look at everything we're doing on the gateway and fully launch and you see how quickly our new gateway is ramping up. And with the changes Bruce and his team's made in the go-to-market, I mean, we had great sales, not only in e-com, but I mean, we had great sales across our integrated channels, our banking channels, our large enterprise, and feel really great about what that's going to do as far as accelerating revenue growth in that merchant channel.

That's great to hear. We've had pretty good checks on Access World Pay, too, on our side.

You know, when we look at the banking wins, just a quick follow-up is you've invested so much over the past couple of years in terms of engineering and skill set around implementing those new large contracts. So now that you have new big ones like a BMO coming on, what are your expectations in terms of timing for onboarding? Has it improved now versus what it was, let's say, last year? And then the margin, the incremental margin for these coming on, is it a little bit easier to scale? Thanks again, guys.

Yeah, we've talked about this on a lot of calls, but I mean, it's really the complexity of day one implementation that's going to drive timelines. So some of our customers that we're signing are coming on with a new capability or a new product day one. Obviously, that launch can accelerate very, very quickly. The great news on that is then once you launch that solution, you'll start bringing additional products on across the deposit side of the retail bank, and then you'll move into lending, as we've talked about in the past. So as you think about these large wins, it's not only what you're getting in revenue stream on the day one launch, but how that revenue stream is going to accelerate over the coming years, which is why we're so excited about it. But the implementation timeline still is determined a little bit by the overall complexity of the day one launch. But the team's done a remarkable job of automating these new technologies. Historically, where certain things might have taken weeks or months in the past, or literally you've got them now to days or hours with automation, standing up new environments, et cetera. So the investments, to your point, that we've made in these newer technologies have really put us on a differentiated playing field in the market. And as Bruce talked about earlier, we're now starting to see the demand get generated from within the client. So, you know, now they're realizing they've got to make a move. I mean, you know, the environment's got to change. They have to embrace cloud. They've got to embrace cloud-native technologies in order to compete, to get their cost structures in alignment, to compete with the new disruptors. So we're in a really good position, especially in the large bank market.

Yeah, but I could just add on to Gary's comment to your – Darren, to your question about the investment, we have really modernized our infrastructure, our technology infrastructure. We then focused on our applications, and we've got a host of award-winning platforms, as Gary's talked about, MVP certainly being one of them. And now as our team kind of pivots and continues to really focus on accelerating everything that we're doing on the business processes aspect. So when you talk about things of just code deployment, for example, Now when we deploy code, 95% of that is automated versus what it was just a couple years ago. So the team is really focused on getting faster and accelerating that revenue as we bring clients on board.

That's great. Makes sense. Thanks, guys.

Your next question is from the line of David Toged with EvilCore ISI.

Thank you. Good to see the guidance increase and the strong bookings growth. Thanks, David. Looking at the second half for merchant solutions, can you talk through your expectations for UK reopening since Heritage World Pay was almost 100% UK-based and also the return of travel and airline in the back half of this year?

Yeah, we're certainly even thinking in Q2, you'll see some of the UK reopenings benefiting that 30% to 35% growth. Our expectation around international growth, which would include UK, is higher, particularly in the second quarter. For the remainder of the year, we have forecasted some improvement in travel and airlines, but I would tell you we still think it's going to be diluted compared to where it was in 2019. and do not anticipate that full recovery until sometime into 2022. We lapped a good bit of travel and air this quarter. We'll lap more of it in the second quarter, and then I actually think we'll see it return closer to normal, but that will be probably 2022 before we get there, David.

Got it. And is most of that travel, is that mostly domestic, or is there a good portion of cross-border in there as well?

There's a good portion of cross-border in there, and that's particularly where the higher yields are.

Got it. Just a quick final question. In capital market solutions, the 3% revenue growth is against your toughest compare, since you were up 7%, I believe, in Q1 of 2020. So there seems like there might be some upward potential on the guide, the low-to-mid single-digit organic, as the compares get easier and you roll on some of the new bookings. Is that an accurate read?

A couple of thoughts there. They got off to a fast start program, so we saw a little bit of some second quarter activity pulled into the first quarter, and we were pleased with that. Beyond that, we do anticipate second quarter to still be in the low to mid-single digits, and then the remainder of the year, third and fourth quarter, to pace mid-single digits or higher, David, getting us to sort of the higher end of that low to mid-single digit guide we talked about in my prepared remarks. but feel very good about acceleration into the back half of the year this year.

Understood. Thank you very much.

Thank you. Thank you, David.

Your next question is from the line of Jason Kupferberg with the Bank of America.

Hey, thanks. Good morning, guys. Woody, I just wanted to pick up on your comment that you guys are expecting high single-digit to low double-digit volume growth in the merchant segment. this year. And I guess if I just look at the first four months of the year, just trying to piece together the math from the slide in the deck, as well as your comments on April, it seems like you're up maybe about 17% through the first four months of the year. So just the high single to low double, especially with some easy comps still ahead of you, seems potentially conservative. So I just wanted to check that math and see if you're just simply taking a prudent approach, you know, early in the year in terms of the full year forecasts.

I think that's right, Jason. It's difficult to forecast volumes for the full year in the first quarter, particularly in the backdrop that we're working in. The real comment was around we believe we'll continue to see positive revenue yield over the course of the year, and then the volumes will be what the volumes are ultimately. But we're certainly seeing that improvement. The revenue yield trend that was a headwind last year will be a tailwind the entire year this year and just gives us confidence in our mid- to high-teens performance. revenue growth, even this early in the year.

Okay. One of the metrics that really got my attention was the e-com sales being up 2x year over year, and I'm wondering if there's a material contribution to merchant revenue growth this year from those sales, or is that more of a 2022 event?

Yeah, this is Bruce. The team has done a phenomenal job. really kind of accelerating our sales process around that. You can see the e-com business as a whole continues to accelerate. I think when we look at this year, you know, we see growth from our historic figure of our growth rate to where we're going to be this year. So we feel that that will contribute a little bit this year and into 22.

Okay. Thanks. Congrats on the results. Thanks.

Your next question is from the line of Ramsey L. Afal with the Barclays.

Hi, Gary, Woody, and Bruce. Thanks for taking my question, and great to see the outperformance this quarter. I wanted to ask about the full-year guidance raise. It looks like you raised full-year revenue synergies in the year by about $200 million, but you raised overall revenue guidance at the midpoint by just about $100 million. So I was just curious how you're thinking about the contribution of from core this year versus revenues and that guidance raise? It feels like conservatism to me, but I just wanted to ask if there were any call-outs in terms of the contribution from those two sources.

You think about the incremental $200 million that we raised today, I would tell you it does ramp over the course of the year. The end-year impact of that is probably, our estimate is about $60 to $75 million from revenue synergy specifically, and then obviously we're seeing operating performance that's helping as well. That's what allowed us to pull the bottom end of the range up a little higher and the top end of the range up as well to that midpoint of 100 you described. But it will ramp over the course of the year in terms of revenue synergies, and we call it in-year contribution of 60 to 75, probably towards the higher end of that.

Got it. Okay, so the ramp is the differential there. I also wanted to ask about the crypto banking effort, which I think is really fascinating. And could you comment a little bit on the demand environment there in terms of, you know, your clients looking to offer those types of services and also maybe comment on whether you are contemplating offering acceptance of crypto on the merchant side of your business at some point?

Yeah, so a great question on the crypto. I think, you know, as we look at it, this is something that has built a lot of demand in the marketplace and there's a lot of interest in Our institutions are inquiring about it, and how do they meet the needs of their customers? And so we feel this is a great offering in an emerging space, an emerging asset class, and we feel very good to kind of lead the market in offering this to them. I believe in Gary's comments, we talked a little bit about on the acquiring space and our lead position there as well around crypto. We really have gotten out to a great start there. and driving a lot of acceptance in crypto, and we expect that that'll continue to drive a lot of growth for us as we move through the year.

Yeah, Ramsey, just to build on that, I mean, to be real clear, you know, we've seen crypto really move into an asset class, right, which is really a lot around investment, et cetera, and so the team's done a great job, I think, of positioning it to offer it to our financial institutions, and we've had, as Bruce just mentioned, a lot of demand there, and then Whether it moves truly to, you know, a point of presentment currency, you know, that remains to be seen. But to Bruce's point, it's just been a home run with these exchanges and where we're acquiring and converting, you know, other currencies into crypto. And it's really been a nice job by the team of identifying an emerging market and taking advantage of it. And as we highlighted today, finding hyper growth because of it.

That's great. Sounds like it might be a growth driver in capital markets as well at some point. So appreciate it. Thanks so much.

Yeah, absolutely.

Your next question is from the line of Lisa Ellis with Moffitt Nathanson.

Hey, good morning, guys. Thanks for taking my question. I, um, I wanted to follow up on the comment on international expansion, the nine new countries since the close of the WorldPay acquisition. That was one of the biggest synergies originally from the deal. Can you just elaborate a little bit more on your progress there, kind of what's involved, you know, what's going well, less well than you expected, what's sort of involved, and what type of revenue growth or contribution you're anticipating, you know, how meaningful is this likely to be now over the next year or two? Thank you.

Yeah, Lisa, I'll jump in here first and let the guys add in. But, you know, as we articulated at the time of the deal, now going back a couple years, geographic expansion for us was really part of our strategy. It's always been part of the strategy for us to accelerate our growth rate, follow our clients around the globe, and we continue to do that and continue to accelerate our expansion into these geomarkets I think one of the great things the team has done is really across our organization, working with our risk team, our legal teams, they've really put a playbook together of getting into these markets. And so I would expect to see us continue to move through the geographic expansion, and that will absolutely contribute to the acceleration of our growth. As I kind of just mentioned, you know, when we look at the merchant business, And we look at the organic growth from a historical CAGR perspective, we absolutely see our organic growth accelerating as we look into 21 and going into 22.

Yeah, I'll just build on it a little bit, Lisa. I mean, you know, when you look at our raise on the revenue synergies with the WorldPay integration, you see the significant contribution that all of our strategies are producing. And as you mentioned at the start of this, we really felt confidently that with the combination of WorldPay, FIS's expertise in these global countries could allow us to expand quite rapidly. And I think you're seeing that. And when you look at where we are just even on the e-comm business and our new sales, our ability to launch in these new countries, bring e-commerce capabilities as a day one stepping point. And think about our global nature of our clients in e-comm. We talked about on multiple calls the enterprise nature of those customers. they're seeing that as an opportunity because now we're opening up new markets for them. And then as they open up those new markets as well, we capture that volume. So it's really a win-win combination of us absolutely penetrating into those markets, but also taking our global companies on an econ basis into that. And as they grow, we grow. So it's certainly a contributor to our revenue synergies. And as you say, we're raising that again on this call. So I feel really good about how all this is coming together.

Okay. Yeah, good. Thank you. And a quick follow-up from me is just on RealNet, the network of networks for real-time payments. That's pretty exciting. And I know this is an area you guys have always been at the forefront of. Can you just describe in more detail what RealNet will enable you to do that you haven't been able to do before or that's differentiated from what others can do around, you know, money movement around the world? Thanks.

Yeah, Lisa, thank you. I was hoping someone was going to ask. A network of networks.

How can we resist? I know.

Yeah. So really excited about this is, you know, as we look at kind of new opportunities and kind of adjacent markets, things that we really want to expand and grow on. When I look at RealNet, I think of it more in the construct of kind of payments orchestration. So it allows us to really connect different networks, different payment rails on a global basis. And I think this is something that we're going to be very excited. So whether it's connecting to central banks, real-time payment infrastructures from country to country, to card networks, to different delivery mechanisms for payments, We feel there's really a need there and an opportunity for us to step in and orchestrate payments in a most optimal way for our clients. And so we're very excited about this. We think that the use cases are going to be really substantial as we move forward. And I think our team, as you know, has been involved in kind of real-time payments certainly over the last decade. And we have a lot of expertise in here, but bringing really that concept of payments orchestration to a network of networks is really unique and an exciting opportunity for the company.

Terrific. Thank you.

Good talk. Okay. Your next question is from the line of Dan Dolove with Mizuho.

Hey, guys. Great results. Thanks for taking my question. Thanks, Dan.

Thanks, Dan.

So really quickly, you mentioned April volumes, I think, 40%. Can you maybe give us some sense of the revenue trends in April? And then I have a follow-up.

Yeah, we haven't closed out April from a revenue perspective here. It is the 1st of May. But I would think they were going to continue to flow higher, obviously, than the volume profile. We're seeing good yield dynamics over the course of April. it'll flow all the way through into the second quarter where we think yield dynamics will significantly outpace volumes for the second quarter for sure. But that's how we've been thinking about it. The yield dynamics continue to flow in excess, and the overall volume dynamics continue to be robust through April.

Great. And then maybe just to touch on that, what is kind of the yield assumption embedded in the second quarter guidance? Appreciate it.

Yeah, I think we're looking at double-digit yield assumption in the second quarter guide compared to volume as a positive yield.

Of course. Awesome. Thanks, guys. Really appreciate it. Thanks, Dan.

Your next question is from the line of Craig Maurer with Autonomous Research.

Yeah, hi. Thanks for taking the question. Wanted to ask about the gaming space in the U.S. We're seeing a significant ramp in approvals, states legalizing it. I know Vantive Digital Entertainment historically has had a very strong position in that market. So was curious how you see growth evolving in the domestic market there and how you see the the legacy product or what might be a new product comping against what seemed to be at least two notable new entrants into the domestic space?

Yeah, so the gaming space is, as you said, it's one we've played in historically and done very well in, and we continue to see that opportunity in front of us as a very good opportunity. When we look at The things that we're doing around our platform, whether it be the Access World Pay, we feel that we're positioned very well. What I would say is the gaming market, as everyone knows and you alluded to in your question, has come along slower, and it is finally starting to kind of accelerate here domestically. We have a great gaming business internationally. We have a lot of assets to bear there, and so I think we're prepared well to compete internationally. and compete very well domestically as it starts to unfold.

Thank you.

Your next question is from the line of Jamie Friedman with Susquehanna.

Hi. Great results here. Gary, I was wondering if you might share any view on bank IT budgets for 2021 Is that not how you look at it? Do you see rising end demand or are you kind of making your own weather?

No, I think it's a combination of both. I think we're catching a tailwind because there is some rising demand, especially in digital enablement and self-service and modernization. And so we're in a really good spot in the upper bank market. In the lower end, we continue to see some consolidation, but we tend to be the benefactor there as well. But we are seeing growing IT spend as people are coming out of the pandemic. But that IT spend is positioned on where we've made investment, which is cloud-native technology. So whether it's, you know, we highlighted PaymentsOne and the success, about 300 new financial institutions onboarding that platform in the last year. You look at what we're doing in DigitalOne and the in the movement of customers there and launching the NYDIG arrangement there, or you go to Modern Banking Platform and look at the success and the size and scale of those. So I think we're well positioned in an increasing spend, because the spend is focused where we've made investments over the last three to four years. So we've got really good timing on the market and feel really good about it.

Great. Exciting times. I'll drop back into you. Thanks. Thank you.

Your next question is from McCartick Mehta with the North Coaster Research.

Hey, good morning, Gary and Woody. I just wanted to get your perspective on the merchant business and FIS as a whole. You've obviously made a lot of inroads in 2020, and I'm wondering, you know, as you look at the margin profile for the company as we come out of the pandemic, Does that – is it change from when you originally thought what it was going to be, considering all the changes you've been able to make?

No, I'd say no, not directly. We anticipated to be able to drive really good margins all the way back to the world pay combination, inclusive of synergies and operating leverage within the business. I think that's proving out. It's really around getting our volumes back and continuing to execute on that long-term strategy. So we feel really good about the margin profile and our ability to continue to drive margins on a go-forward basis through operating leverage and new capabilities. So I wouldn't say it's a significant change.

Yeah, that's where I was going to go. I mean, not only are we going to hit exactly what we thought or even exceed that with regards of the combination. I mean, the team's doing a very nice job of now moving into the next round. Bruce talked earlier about how much faster we're moving. And it's really all through automation. So as you think about, you know, the next chapter of where we're taking technology, we're now taking advantage of all those historical investments. So our ability to extend margins even further in the coming years, we're very comfortable with. And we talked about that on the last call, about pushing our margins even higher in 2022 and beyond just due to all these other automation and AI-type utilizations of new technology. So I feel really good about the positioning and the outcomes.

It seems like the company is really well-positioned to drive margins higher. And then just one last question. Have you seen a change at all in the competitive nature on the merchant side? I didn't know if the pandemic had created maybe a more competitive environment or if the environment is about the same.

Yeah, if I can jump in there, what I would say is the merchant space over the course of history has always been a very, very competitive space, just like our banking space, just like capital markets. So what I would say that has kind of emerged has been that pandemic has created a catalyst, if you will, an accelerant to the marketplace. And as we look at it, we look at their subsegments that have kind of emerged within the merchant vertical segment. and there's people that have emerged in those subsegments and are competitive in those subsegments. We play exceptionally well in the enterprise commerce space. That's the large-scale, complex stuff that Gary talked about just a moment ago that is multi-country type of transactions. We're playing exceptionally well and very, very competitive in those spaces. There are some of these subsegments that historically we hadn't played in that have emerged, and now we're looking at them And we view those as TAM expansion opportunities for us. And so we're very excited about moving into some of these and being competitive and playing in these markets.

Thank you very much. Really appreciate it.

Your final question is from the line of Tianjin Wang with JP Morgan.

Hey, thanks so much. I know you've covered a lot already. I wanted to ask on the merchant side, now that you have a new acquiring platform and you finished up the, the, the net migration, I'm just, just curious if that allows you to sort of change your sales motion and, and maybe be a little bit more aggressive or go to market a little bit differently here. I'm assuming at least we're hearing that there's quite a lot of merchant activity or, or interest in consolidating vendors. So love to get your perspective on that.

Yeah, no, I think I'll let Bruce build on, but I think it absolutely allows us to, to lean forward on the balls of our feet more. Those were major programs that we had to get complete when we did the WorldPay combination. We knew that. We had to finish building out the NAP acquiring platform. We had to migrate all of the clients. Bruce talked about the success, and I did as well, of Access WorldPay, and now you're starting to see it in the sales engine. In fact, given the demand that we're seeing in our prepared remarks, we talked about adding 300 more salespeople just to the merchant business. And so that could give you the indication or not the demand we're seeing and the confidence we have in our capabilities to compete and win share. And you've seen a great result of that over the last, not only in Q1 in our sales success, going back to Q1-19, but we also saw it ramping in Q4. So I do think more and more large enterprise merchants are consolidating down to single providers. And when you get to Our capabilities, our ability for the ease of access, the multi-currency, the multi-country, all on a unified, most modern platform and market, we feel great about where we are.

Yeah, the point I would just kind of underscore there that Gary brought out is, you know, as the market continues to mature around commerce and having a broad solution set, we play very well in that space. And it's really a strength for us. So the market's really moving towards us. And so we think there is going to be an acceleration in the sales motion there.

Great. No, it's encouraging. Thanks for that. Just I have to ask also, just lastly, Gary, for you on the M&A front. We've seen some things like Bank JV activities picking up, seen some consolidation as well, and capital raising on the private side too. So I'm Is your appetite here a little bit different than, say, 90 days ago? Just what's your thinking here on doing acquisitions?

You know, it's always a great question, and we always look at it very hard. As you guys know, M&A is always going to be an important part of our strategy to help drive scale and new capabilities, and we've gone through that on every call. Our appetite's really not changed from where we were last quarter. We still think – You know, properties are really pricey in market. We are having great success organically with our sales engine. Woody highlighted the amount of stock buybacks we did in Q1. We still see that our stock price is undervalued, so we think the best company, obviously, to buy right now is ourselves. But, you know, we'll continue to watch the market, and we'll continue to look for opportunities. that can bring us new capabilities or, you know, that makes sense financially and the timing works and culture aligns. And if we can find that, we would still be willing to do some M&A, but I don't think our viewpoint on it has really changed since Q1 at all, and you're going to continue to see us lean heavily into paying down our debt, you know, increasing our dividend and buying back shares, all while investing in transformation and as we drive into our growth curve.

Yep, no, you've been doing that. Hope you – makes a lot of sense. Hope you appreciate me asking. No, no, I appreciate it. Thank you. Thank you, guys.

Stay in tension.

Okay, at this time, that is all for questions. I'll now turn the conference back to Gary Norcross.

Thank you, and I want to provide some closing thoughts as we end the call. We are emerging from the pandemic with an even stronger competitive position than when we entered it. Our ongoing commitment to growth and innovation is unwavering, and we will continue to enhance our value proposition by continuous modernization of our platforms and delivering new capabilities to the market. Our achievements and success are built on the dedication and hard work of our colleagues, clients, and communities. We rely on these key stakeholders to continue advancing commerce in the financial world. Together, we will win as one team and deliver on our commitments. In closing, I'd like to thank you for your investment in FIS and our colleagues who are delivering value to our clients each and every day. We appreciate your support. If you have any further questions that were not addressed on this call, then please contact our investor relations team. Thank you, stay safe, and goodbye.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may all disconnect.