Good morning, ladies and gentlemen, and welcome to the FIS First Quarter 2021 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Nate Rozof, Corporate Finance and Investor Relations..

Good morning, and thank you for joining us today for the FIS First Quarter 2021 Earnings Conference Call..

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 5, 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 in over $350 million in proceeds for our remaining stake..

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 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’re 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 GAAP and organic results. As a reminder, the only difference between GAAP and organic revenue growth for our operating segments this quarter is the impact of currency. Our Banking segment accelerated to 7% on a GAAP 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 PaymentsOne, 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. Merchant’s 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 U.K. drove a 5-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 percentage 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 lower expected interest expense for the year by about $60 million to approximately $230 million.

Total debt decreased to $19.4 million -- $19.4 billion for a leverage ratio of 3.6x exiting the quarter, and we remain on track to end the year below 3x 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%, consistent with revenue of $3.365 billion to $3.39 billion. 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 billion 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%, equating to an EBITDA range of $6.075 billion 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 $0.15 at the midpoint above our prior guidance. By all measures, this was a great quarter for FIS.

The investments we’re making in driving strong new sales -- 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?.

Your first question is from the line of Dave Koning with Baird..

Yes. Congrats on the momentum..

Thanks, Dave..

Thanks, Dave..

And I guess, first of all, the banking wins continue to be really, really good. And I’m just wondering, how do we think about like 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.

Does the current wins really help ‘22 and beyond or already in the back half? Or how do we think about that? And then is this high single digits a year from now revenue?.

Yes. I think we’re really confident on what we’re seeing during the sales side. Bruce and his team are doing a fantastic job driving sales. You see us bringing -- he’s bringing a lot of new capabilities to the market. Modern banking platform has been very successful.

That’s why we’re very confident that these onboardings are going to continue to accelerate our growth from here throughout 2021 and to 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.

We’ve made a huge investment in banking over the last several years with new product, data center consolidation, cloud enablement, et cetera, and seeing the results of that in market now as we speak..

All right. And then I guess just as a follow-up, in the Merchant segment, Q1, I was just looking at the revenue, it was about 103% of Q1 of ‘19.

And I guess I’m wondering, Q2, when you say 30% to 35% growth, do you mean ex the tax shift last year? Because if that’s right, then Q2, there’s momentum to a higher percentage of revenue relative to Q2 of ‘19. I just want to make sure that 30% to 35%, what the base revenue is for that..

Yes. Within the 30% to 35%, Dave, you’re right, the tax shift is probably 3 to 4 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% that -- of the 2-year ago stack.

Is there a reason for that?.

Yes, it’s off the 2Q number from last year. As we’ve talked about, we’ve got about 3 to 4 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 guide that we could meet or exceed, Dave..

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

Great quarter.

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

Yes, Ashwin, I’ll let Bruce take that one..

Good morning, Ashwin. When we think about the sales cycle, what I would say is that the actual sales cycle that we have is relatively consistent on the days in the sales cycle to close. What I would say has changed a little bit is that the mindset and the view of where the market’s moving towards.

And so you’re seeing a lot more people pre-sales 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, 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 vaccinations over there? 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?.

Yes. We’re certainly seeing volume growth coming back. 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..

The next question is from the line of George Mihalos with Cowen..

Congrats on some very solid results here..

Thanks, George..

Thank you..

Of course. I just wanted to delve in a little bit on the dynamic between the revenue growth and the volume growth, which, 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? And just curious how much of a contribution or how much of an improvement are you seeing in, say, a vertical like travel that has been under a lot of duress since 2020?.

Yes. 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’ve 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 NICE and those sort of products? Or is it sort of business as usual from a competitive standpoint?.

Yes. For us, George, it’s been business as usual from a competitive standpoint at this point. You see what -- our issuing business did extremely well. And 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 has 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..

Your next question is from the line of Darrin Peller with Wolfe Research..

Nice job on the quarter.

When we look at that spread, just to follow up on the revenue and volume print in Merchant, 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 or 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 in Merchant..

Yes. I think if you go back historically, you would see roughly about 3 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 travel and 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 the quarter. We’re seeing a lot of momentum in that area right now..

Yes, Darrin, I mean, the team has 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, the NAP completion and migrations completely behind us.

When you look at everything we’re doing on the gateway and fully launched, and you see how quickly our new gateway is ramping up and with the changes Bruce and his team has 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 Worldpay, too, on our side. 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.

And now that you have new big ones like a BMO coming on, what are your expectations in terms of timing for onboarding? Is it -- 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?.

Yes. We’ve talked about this on a lot of calls, Darrin. But I mean, it’s really the complexity of day 1 implementation that’s going to drive time line. So some of our customers that we’re signing are coming on with a new capability or a new product day 1. 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 you think about these large wins, it’s not only what you’re getting in revenue stream on the day 1 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 time line still is determined a little bit by the overall complexity of the day 1 launch.

And the team has done a remarkable job of automating these new technologies. Historically, where certain things might have taken weeks or months in the past where 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, they’ve 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 now they’re realizing they’ve got to make a move. I mean 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 in -- especially in the large bank market..

Yes. If I could just add on to Gary’s comment. To your -- Darrin, 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 has talked about, MBP 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 of years ago.

So the team is really focused on getting faster and accelerating that revenue as we bring clients on board..

Your next question is from the line of David Togut with Evercore ISI..

Good to see the guidance increase and the strong bookings growth..

Thanks, David..

Yes. Looking at the second half for Merchant Solutions, can you talk through your expectations for U.K.

reopening since heritage Worldpay was almost 100% UK-based? And also the return of travel and airline in the back half of this year?.

Yes. We certainly -- even thinking in Q2, you’ll see some of the U.K. reopenings benefiting that 30% to 35% growth, our expectation around international growth, which would include U.K. 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 Markets 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 have got off to a fast start program. So we saw a little bit of some second quarter activity pulled into the first quarter. We were pleased with that.

Beyond that, we do anticipate second quarter to still being 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..

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

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 4 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 4 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 early in the year in terms of the full year forecast..

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 revenue growth even this early in the year..

Okay. One of the metrics that really got my attention was that 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?.

Yes. 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, we see growth from our historic CAGR 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..

Your next question is from the line of Ramsey El-Assal with Barclays..

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 midpoint by just about -- at the midpoint by just about $100 million.

So I was just curious how you’re thinking about the contribution 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 callouts in terms of the contribution from those 2 sources..

If 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 in-year impact of that is probably -- our estimate is about $60 million to $75 million from revenue synergies 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 at the top end of the range up as well to that midpoint of $100 million 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 million to $75 million, 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 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..

Yes. So a great question on the crypto. I think 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, and 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 in -- around crypto.

We have really have gotten out to a great start there and driving a lot of acceptance in crypto, and we would expect that, that will continue to drive a lot of growth for us as we move through the year..

Yes, Ramsey, just to build on that. I mean, to be real clear, we’ve seen crypto really move into an asset class, right, which is really, really a lot around investment, et cetera. And so the team has done a great job, I think, of positioning it.

They’ll 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 a point of presentment currency, 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 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. It sounds like it might be a growth driver in capital markets as well at some point..

Yes, absolutely..

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

I wanted to follow up on the comment on international expansion, the 9 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, 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? How meaningful is this likely to be now over the next year or 2?.

Yes, Lisa, I’ll jump in here first and let the guys add in. But as we articulated at the time of the deal now going back a couple of years, geographic expansion for us was really part of our strategy.

It was part of -- 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 we 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, 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..

Yes. I’ll just build on a little bit, Lisa. I mean 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’ 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-com business and our new sales, our ability to launch in these new countries, bring e-commerce capabilities as a day 1 stepping point and think about our global nature of our clients in e-com, 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 e-com basis into that, and as they grow, we grow. So, it’s certainly a contributor to our revenue synergies.

And as you see, we’re raising that again on this call. So feel really good about how all this is coming together..

Okay. Yes, good. And a quick follow-up for me is just on RealNet, the network of networks for real-time payments, pretty exciting. Can you -- and I know this is an area you guys have always been on the forefront of.

Could you just describe in more detail like 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 money movement around the world?.

Yes. Lisa. Thank you. I was hoping someone was going to ask, so..

A network of networks.

How can we resist?.

Yes. So really excited about this 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 the 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..

Our next question is from the line of Dan Dolev with Mizuho..

Guys, great results..

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..

Yes. We hadn’t closed out April from a revenue perspective here is the first of May. But I would think they’re going to continue to flow higher, obviously, than the volume profile. We’re seeing good yield dynamics over the course of April.

It will 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?.

Yes. I think we’re looking at double-digit yield assumption in the second quarter guide compared to volume..

As a positive yield..

Positive yield..

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

Wanted to ask about the gaming space in the U.S. We’re seeing a significant ramp in approvals, states legalizing it. I know Vantiv digital entertainment historically has had a very strong position in that market.

So I was curious how you see growth evolving in the domestic market there and how you see the legacy product or what might be a new product comping against what seemed to be at least 2 notable new entrants into the domestic space?.

Yes. 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 is a very good opportunity. When we look at the things that we’re doing around our platform, whether it be the Access Worldpay, 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, it 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 and compete very well here domestically as it starts to unfold..

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

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 on -- with -- because there is some rising demand, especially in digital enablement and self-service and in 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. And -- but that IT spend is positioned on where we’ve made investment, which is cloud-native technology.

So whether it’s -- 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 Digital One in the movement of customers there and launching the NYDIG arrangement there or you go to monitor 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 but -- because the spend is focused where we’ve made investments over the last 3 to 4 years. So we’ve got really good timing on the market and feel really good about it..

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

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, as you look at the margin profile for the company as we come out of the pandemic, does that -- is the 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 Worldpay 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..

Yes. That’s where I was going to go. I mean not only we’re going to hit exactly what we thought or even exceed that where with regards to the combination. I mean, the team is 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 the next chapter of where we’re taking technology, we’re now taking advantage of all those historical investments. So our ability to expand 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 and new technology. So we 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..

Yes. If I can jump in there. What I would say is the merchant space, over the course of the history, has been 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 the subsegments that have kind of emerged within the merchant vertical, 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 a 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..

Your final question is from the line of Tien-Tsin Huang with JP Morgan..

I know you’ve covered a lot already.

I wanted to ask with -- on the Merchant side, now that you have a new acquiring platform and you finished up the NAP migration, I’m just curious if that allows you to sort of change your sales motion 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 interest in consolidating vendors.

So I’d love to get your perspective on that..

Yes. No, I think -- I’ll let Bruce build on. But Tien-Tsin, I think it absolutely allows us to lean forward on the balls of our feet more. I mean 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 and 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 multicurrency, the multi-country, all on a unified, most modern platform in market, we feel great about where we are..

Yes. The point I would just kind of underscore there that Gary brought out is 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 is really moving towards us. And so we think there is going to be an acceleration in the sales motion there..

Great. No, that’s encouraging. Just I have to ask also just lastly, Gary, for you on the M&A front. We’ve seen in some -- it seems like bank JV activity is picking up, seeing some consolidation as well and capital raising on the private side, too.

So is your appetite here a little bit differently -- different than, say, 90 days ago? Just what’s your thinking here on doing acquisitions?.

It’s always a great question. 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 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 the our stock price is undervalued. So we think the best company, obviously, to buy right now is ourselves.

So -- but we’ll continue to watch the market, and we’ll continue to look for opportunities that can bring us new capabilities or that makes sense financially and the timing works and cultural lines. But -- and as long -- 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, increasing our dividend and buying back shares, all while investing in transformation and as we drive into our growth curve..

At this time, that is all for questions. I will 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..