Good morning, everyone, and thank you for joining us today for the FIS first quarter 2023 earnings conference call. This call is being webcasted. Today's news release, corresponding presentation and webcast are all available on our website at fisglobal.com. With me on the call this morning are Stephanie Ferris, our CEO and President; and our CFO, Erik Hoag. Stephanie will lead the call with a strategic and operational update, followed by Eric reviewing our financial results and providing forward guidance. Turning to Slide 3. Today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties and 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 adjusted free cash flow. These are important financial performance measures for the company but are not financial measures as defined by GAAP. Reconciliation of our non-GAAP information to the GAAP financial information is presented in our earnings release. With that, I'll turn the call over to Stephanie.

Thank you, George, and thanks to everyone for joining us this morning. I'm pleased to report that FIS is off to a very strong start in 2023. Our financial results exceeded our expectations on all key metrics: revenue, adjusted EBITDA and adjusted EPS. Organic revenue growth outperformed across all three of our operating segments. This outperformance was driven by a combination of both stronger execution, as well as better-than-anticipated macroeconomic impacts, including consumer spending and higher levels of deposit account and transaction growth across the financial services sector. Heritage FIS, which includes our banking and capital markets businesses, posted strong recurring revenue growth of 6%. Merchant revenue grew 2% driven by 15% organic growth in our e-commerce business, well ahead of the broader market. We remain focused on improving cash flow and efficiency across the company and are on track to delivering on our greater than 80% free cash flow conversion target for the year. These are very strong results against our expectations and can be attributed to our leadership team and our colleagues across the globe, all pulling together to build our future forward. I'm extremely proud of the team, and I'm very excited about and confident in the future of FIS. As a result of our strong performance, I am pleased to announce we are raising our full year outlook. First quarter results meaningfully exceeded our expectations, reflecting stronger revenue growth of 3% across the enterprise. Solid execution and a more favorable macro environment fueled this outperformance. Banking and Capital Markets recurring revenue growth of 6% exceeded our expectations, benefiting from elevated financial services activity, including higher levels of deposit account and transaction growth. Within the Merchant segment, improved execution and stronger consumer spending drove most of the revenue upside. E-commerce had another very strong quarter with 18% organic growth, excluding the Russia-Ukraine impact in the quarter, contributing an additional point of merchant revenue growth relative to our internal expectations. We are updating our second quarter and full year guidance to reflect consistent trends from the first quarter to the second quarter, with a very slight moderation in the high levels of trading volume experienced in Q1. Our outlook for the full year has strengthened relative to the outlook we provided in February across all of our operating segments. Given our overall strong results and improving operating performance, we are increasing our full year 2023 outlook, while continuing to account for risk associated with macroeconomic impacts to our Merchant segment in the back half of the year. We understand the importance of delivering on our commitments and are confident in our recently raised outlook. We continue moving forward with a high sense of urgency and are making progress across our range of initiatives. The spin-off of Worldpay is on track. We are making meaningful progress both internally with the formation of our separation management office and externally with our regulators. Our Future Forward initiatives, designed to drive greater efficiency, effectiveness and growth, are off to an exceptional start. I'm confident we will not only deliver on our 2023 cash savings target of $500 million, but achieve at least our $1.25 billion of cash savings target by year-end 2024. On the governance front, we've taken broad steps forward to align all management compensation with operating share price performance. These changes were made to further align our executive compensation programs with long-term shareholder interest. We've also reorientated our sales force compensation plans to align to our stated goal of pursuing high-quality, higher-margin deals. We are driving a performance-based culture both top down and bottom up across the globe. We are making good progress preparing for the planned spin-off of the Worldpay business. This is a testament to the hard work, focus and dedication of our FIS colleagues and business partners tasked with marshalling forward the separation quickly. We are making meaningful progress having created a separation management office to work with both Charles Drucker, and me. In addition to working towards securing required regulatory approvals, we are urgently negotiating commercial revenue and separation agreements across the two companies with an eye towards minimizing business disruption and dis-synergies. While we are not yet ready to provide formal dis-synergy estimates on this call, we are actively working to minimize the impact of any dis-synergies. I'd like to offer a framework for thinking through the potential impact, which we believe will be very manageable. Previously, the company disclosed that it achieved a total of $750 million in revenue synergies and $500 million of operating expense synergies post the Worldpay acquisition. We expect to maintain the majority of the $750 million revenue synergy achievement, with Worldpay continuing to act as an important distribution partner for FIS post spin. We also expect to maintain a meaningful portion of FIS Worldpay operating expense integration savings. Additionally, my partnership with Charles Drucker is already bringing focus to the business and is driving meaningful results in key areas, such as sales execution, and maximizing pricing opportunities across all of FIS. As I mentioned earlier, our enterprise transformation program Future Forward is off to a great start. We are confident not only on achieving our targeted $500 million of cash savings in 2023, but have direct line of sight into executing on the additional $750 million of cash savings expected in 2024, while investing in improved client service and next-generation product development for our clients. As of the first quarter of 2023, we've achieved a total cash savings on an annual run rate basis in excess of $210 million. We expect operating expense savings to accelerate over the course of the year. While we are reiterating our Future Forward cash savings target of at least $1.25 billion for year-end 2024, the team is continuing to identify additional opportunities across the enterprise to unlock growth, efficiency, and effectiveness for FIS and our clients. While we are confident the program will deliver meaningful cash savings for FIS, it will not come at the expense of clients who remain at the center of our decision-making. We believe our solid first quarter recurring revenue growth underscores the importance of our customers' place in our offerings and services and our commitment to their own future. Given recent events across the global banking sector, we want to provide you with an update regarding trends across our banking segment. While recent developments have driven volatility in markets and across the banking sector, we do not expect this activity to impact us significantly in the near term, and believe FIS is well positioned to be a beneficiary of the recent disruption in the long term. Our confidence is underpinned both by current factors we are presently seeing in our business and historical precedent, which points to resilient bank IT spending following periods of financial duress. A recent study by Curinos, a leading provider of data, technology and insights to financial institutions, noted: Recent events should have a limited impact on near-term revenue for core processors as the current situation is impacting deposit balances, not accounts. Additionally, technology processing spend across the banking industry has also historically been resilient during prior challenging cycles of uncertainty. In line with Curinos' perspective, since the onset of the SVB fallout in early March, we have seen elevated increases in our accounts on file serviced across our core platforms, which is the primary driver of our banking revenue. The resilience of accounts on file is not surprising to us. It aligns with what the banking industry experienced during prior challenging periods as the Curinos study noted, and supports our confidence in our outlook for the banking segment. As depositors disperse funds across multiple bank accounts, ultimately driving more account growth, FIS is well positioned to benefit as a leading provider of core banking technology, particularly to large financial institutions, which is the primary base of our FIS business. Additionally, to the extent the recent turbulence results in increased regulation, FIS is well positioned to benefit across both the banking and capital markets segments. FIS boasts a highly diversified customer base with no one client accounting for more than 1% of company revenue. Given our SKU towards somewhat larger banks, consolidation across the FIS space should benefit us as we would expect these larger banks, many of which are FIS customers, to be the buyers of distressed financial institutions, and this is exactly what we've seen play out thus far with respect to recently sold failed financial banks. Additionally, 60% of our revenue growth is predominantly tied to accounts and 40% to transactions. Since the SVB announcement, we've seen a modest acceleration in accounts on file and transaction volumes remain steady. Given these dynamics, we do not anticipate a significant impact to our business associated with the recent events. Before turning it over to Eric, I'd like to close with a quick refresh of the new agenda we introduced just a few short months ago and the significant progress we are making executing against this goal. As you can see, we are moving urgently to put FIS on a path for sustained value creation for all stakeholders. The macroeconomic conditions, whether consumer or financial services related, have positively impacted our results in the first quarter. And regardless of whether they remain or decline from this point forward, we are confident enough to raise our outlook for the year. The planned spin-off of Worldpay is on track, creating two world-class companies with a sharpened focus on their respective client bases. Our Future Forward initiative is progressing ahead of schedule, accelerating the transformation of FIS into a more agile and efficient company better positioned to drive innovation. And lastly, we're focused on returning Heritage FIS back to the compounder model of the past, with a focus on steady revenue growth, margin expansion, improved free cash flow generation and a sustainable double-digit total shareholder return. With that, let me turn it over to Eric, who will take you through the financials.

Thanks, Stephanie, and thank you all for joining us this morning. I'll begin on Slide 14 with some additional detail on our financial results before moving into our increased guidance, Future Forward achievement and capital allocation priorities for Heritage FIS. Our first quarter results exceeded our expectations across all financial metrics. Revenue increased 3% organically to $3.5 billion, with an adjusted EBITDA margin of 38.7% and adjusted EPS of $1.29. Revenue growth came in 2 points above the high end of our outlook. As Stephanie mentioned, this outperformance was driven by a combination of both stronger operating performance, as well as better-than-anticipated macroeconomic impacts, including consumer spending and higher levels of deposit account and transaction growth across the financial services sector. Adjusted EBITDA and adjusted EPS exceeded expectations through both operational strength and the benefit in net interest expense. Moving to cash flow on our balance sheet. Capital expenditures decreased 32% year-over-year to $279 million or 8% of revenue, reflecting the benefits of our Future Forward initiatives. We generated free cash flow of $641 million or 84% conversion, and returned over $300 million to our shareholders through dividends. Lastly, we exited the quarter with $20 billion in total debt, yielding a leverage ratio of 3.2 times at a weighted average interest rate of 3%. Turning to our Heritage FIS results on Slide 15. We're pleased to report organic revenue growth of 4%, driven by 6% recurring revenue growth. Our backlog continues to be strong and durable, exiting the quarter at $22.5 billion. As previously mentioned, our sales teams are transitioning to target higher quality, more profitable new sales which will drive sustainable high-margin growth. Because of this, we would anticipate some softness in backlog over the short term as the team aligns to these initiatives. This change in sales initiatives is fully incorporated into the increased outlook for the year. Ultimately, the result of this will be higher quality new sales, laying the foundation for sustainable growth in revenue, EBITDA and cash flow, while providing best-in-class capabilities for our clients, as well as emphasizing our high-margin, sticky recurring revenue offerings. Overall, this is a very strong start to the year for Heritage FIS segments as we saw stronger-than-anticipated operating performance, driving results above our expectations. At the segment level, Banking increased 2% organically in the quarter, which was 2 points above the high end of our outlook. This outlook was underpinned by recurring revenue growth of 4%, which exceeded our expectations. Strength in recurring revenue was driven by strong execution from our business in conjunction with elevated account and transaction growth during the quarter. As expected, adjusted EBITDA margins contracted 250 basis points to 40.1%, primarily driven by a 23% reduction in termination fees and one-time license revenue. This performance in margin improved compared to our fourth quarter results, and we continue to anticipate sequential margin improvement through 2023, leading to expansion in the back half of the year. For the second quarter, we are anticipating banking organic revenue growth of 0% to 2%, which incorporates a continued reduction in nonrecurring revenue, and we remain confident in meeting or exceeding our organic growth outlook for the year. Turning to our capital markets results and outlook on Slide 17. Capital markets increased 7% organically in the quarter, exceeding the high end of our outlook by 2 points. The overperformance in the quarter was underpinned by 11% recurring revenue growth, with a 4-point tailwind associated with elevated activity in the financial services industry. Adjusted EBITDA margin expanded 30 basis points to 48.2%. Margin expansion in the quarter was driven by high contribution margins on our revenue growth as well as the underlying strength of the one-to-many operating model. We continue to see resilient strength in the operating performance of Capital Markets, and believe our multi-year transition to SaaS-based engagements has laid the foundation for resilient growth. For the second quarter, we anticipate organic revenue growth of 4% to 6%, primarily associated with an assumption of recurring revenue normalizing off the elevated growth seen in the first quarter. For the year, we're reiterating our outlook of 4% to 6%, inclusive of a tough license compare in the fourth quarter. Turning to Slide 18. Our Merchant segment increased 2% organically, exceeding the high end of our outlook by 2 points as we saw better-than-expected consumer spending and accelerated growth in e-commerce. Broadly speaking, we're seeing continued strength in our e-commerce subsegment, accelerating to 15% in the quarter with strong sales and exceptional growth in our Worldplay for Platforms offering. Worldplay for Platforms continues to benefit from our ongoing investments and renewed leadership structure, and we continue to see a significant opportunity in this attractive vertical. Our SMB and enterprise subsegments saw trends similar to our fourth quarter 2022 results. Consistent with our guidance, margins contracted 350 basis points to 43.5%, primarily due to unfavorable revenue mix. Global volume increased 9% on a constant currency basis to $551 billion. This acceleration was a result of stronger consumer spending across our enterprise and e-commerce subsegments. In the quarter, volume growth outpaced revenue growth as a result of higher spending in nondiscretionary verticals, for example, grocery and drugstore market share gains within the PayFac vertical. Turning to Slide 19 for a further review of Heritage Worldpay's outlook for the year. As we entered the year, we had anticipated an organic revenue decline of 2% to 4%. The guide reflected a 300-basis point headwind associated with attrition in the SMB subsegment, and further macro deterioration impacting growth by an additional 500 basis points. Our first quarter results outperformed our expectations by 2 points compared to the high end of our outlook. While the business continues to be impacted by the headwinds in the SMB subsegment, consumer spending performed better than expected in the U.S. and the U.K. As a result, we're updating our second quarter and full year guidance to reflect relatively consistent trends from the first quarter to the second quarter, and improved consumer spend in the back half of the year. Because of this, we now anticipate second quarter organic revenue growth of negative 1% to plus 1%, and full year organic revenue growth of down 2% to 1%, a material improvement compared to initial expectations. This outlook for the second quarter assumes relatively similar trends across our subsegments compared to the first quarter. On the margin front, we will continue to see improvements through the year consistent with normal seasonality and further aided by our Future Forward initiatives. Turning to Slide 20 for a review of our increased 2023 guidance. Given our strong start to the year, we're confidently increasing our full year 2023 outlook to incorporate the overperformance seen in the first quarter. Specifically, we're increasing our revenue and EBITDA ranges by $85 million and $35 million, respectively, accounting for a $0.06 increase in our adjusted earnings per share outlook for the year. This increase is aligned directly to our first quarter results compared to the high end of our prior guidance. Our increased outlook over the remainder of the year has strengthened relative to the outlook we provided in February, based on the current trends in our businesses. With that in mind, for the year, we now anticipate consolidated organic revenue growth of 0% to 1%, adjusted EBITDA margins of 41.5% to 42.2% and adjusted earnings per share of $5.76 to $6.06. As I stated in our last earnings call, our philosophy continues to remain conservative in our forward projections as we continue to build credibility and deliver on our commitments. This increased outlook continues to account for risk associated with macroeconomic impact in our Merchant segment, and we would anticipate further upside if macro trends remain stable. As previously mentioned, we continue to anticipate margin improvement over the course of 2023 as we ramp the benefits associated with Future Forward, and we're reiterating our outlook for free cash flow conversion of over 80%. Lastly, we provided additional assumptions on our forward guidance in the appendix, as well as a revised 2022 organic base to account for some small shifts in our operating segment rollouts. Turning to Slide 21 for a financial update on Future Forward. We remain committed to rightsizing our expense base while ensuring minimal impact to our clients or colleagues. Aligned to this commitment, Future Forward centers around investing in sales and support, automating and improving processes, and improving the ways we work. As Stephanie mentioned, we're reiterating our targets for operational expense savings of $300 million exiting 2023 and $600 million exiting 2024. We had a strong start to the year with annual run rate savings of over $100 million exiting the quarter, with an in-quarter benefit of over $15 million. We continue to target a $200 million reduction in capital expenditures during 2023, with an incremental $100 million reduction in 2024. In the quarter, we achieved annualized CapEx savings of over $110 million as we executed rapidly on the Future Forward initiative. We're extremely pleased with our early progress, and we'll continue to provide quarterly updates on achievement throughout the program. I'll conclude with a recap of our capital allocation priorities for Heritage FIS on Slide 22. Following the successful execution of the spin, Heritage FIS will remain focused on reducing debt, increasing our dividend and utilizing excess capital for share repurchase or tuck-in M&A. First, we continue to target a long-term leverage ratio of approximately 2.8 times. To achieve this, we would anticipate reducing total debt, while also benefiting from adjusted EBITDA growth over a multi-year period. Next, we remain committed to a 35% dividend payout ratio for Heritage FIS. Following these two pillars, we will utilize excess cash or debt capacity for share repurchase or optionality around tuck-in M&A opportunities. Our default use of excess capital will prioritize share repurchase at current valuations while we assess M&A opportunities in their risk-adjusted returns. This capital allocation strategy is conservative in nature, while providing a robust value proposition for long-term shareholder value over a multi-year period. I'd like to thank everyone for their time this morning.

And today's first question will come from Tien-Tsin Huang with JPMorgan. Your line is open.

Great. Thank you so much. I appreciate all the disclosure and the good results. I wanted to dive in on the banking side, which is really good to see. And just maybe Stephanie and Eric, just check your confidence in maintaining the 0% to 2% outlook here on banking. Because when I think about the inputs, I think about backlog conversion, attrition, pricing. I mean you commented on the underlying recurring revenue growth through deposits. So, is the formula different now than maybe what we saw with the banking turmoil and SVB, et cetera? Any thoughts there?

Yes. Thanks, Tien-Tsin. Yes, so happy with the output for the first quarter. Very confident in our guide for banking. I think what you've seen is, as we came into this year, we had expected backlog growth to mute. That was in our guide, and we're not seeing any incremental impact from anything going on in the banking business. What we're seeing is organic growth, and you saw it come through in the first quarter as we benefit from accounts across the financial services landscape increasing broadly across our portfolio. So, we're seeing net new deposit accounts and, broadly, net new financial services accounts across our entire portfolio. So, we feel really good about the organic growth. You can see it there in our first quarter, and we feel really good about the guide.

I appreciate that information. Slide 11 is very helpful. Regarding the Merchant side, Eric, you mentioned the spread. Could you provide more details about what is influencing the mix compared to pricing? I know you brought up the PayFac aspect, but any additional insights would be appreciated. Thank you.

Yes, I'll take that, and Eric can add on if he wishes. We were really pleased with the volume growth. Starting from the top, we saw very strong volume growth, driven by our enterprise segment, which performed better than expected in terms of volume, along with significant e-commerce activity in the first quarter. Regarding the yield dynamics, there are two main factors influencing the yield. First, our nondiscretionary segments, such as Kroger and grocery and drug stores, increased their mix. Since these are priced based on transactions rather than volume, they resulted in a slightly lower yield despite the higher volume. Second, we are continuing to gain substantial market share in our PayFac business, which is strategically important for us and has a lower yield but higher volume. These two elements significantly impacted the yield in the fourth quarter. We anticipate seeing sequential yield improvement each quarter for the rest of the year as we maintain positive performance and the mix adjusts. Those are the primary reasons.

One moment for our next questions. And that will come from the line of James Faucette with Morgan Stanley. Your line is open.

Thanks, very much. Wanted to talk a little bit just about your expectations for the macro environment generally. Obviously, the first quarter came in a little bit stronger with better economic resilience than you anticipated in your original outlook. If we look at the magnitude of beat versus the guidance raise, it seems like that we're not increasing the guidance quite as much as the beat this quarter. Have you just anticipated that some of that weakness that you originally built in kind of pushed out? Or can you just talk through the assumptions that lead you to that kind of current guidance outlook?

Sure. When we provided guidance a quarter ago, we anticipated a 500 basis point headwind related to Merchant macro. At that time, our full year guidance was a decrease of 2% to 4%. We have now raised the Merchant guidance to a decrease of 1% to 2%. The midpoint of that guidance has improved by 150 basis points. I estimate that the remaining Merchant macro headwind is approximately 350 basis points.

Got it. As for the preparations for the eventual split, I understand you're working on that. What is your perspective on whether there might be any additional changes needed regarding interest expense? Also, when can we start assessing what the capital structure will look like? You've been quite clear about your vision for the Heritage FIS overall, but I'm curious about the timing and any other factors we should consider beyond these dis-synergies.

Yes, we are working hard and at a fast pace to address everything. Unfortunately, I don’t have a solid update to share at this moment as we continue to work through the details. Charles is collaborating closely with us on this. As we approach the spin, we will have a clearer perspective. I can't commit to a specific timeline for next quarter, but rest assured we are making significant progress. However, until we gain a clearer understanding, I can't provide much guidance just yet.

One moment for our next question. And that will come from the line of Dave Koning with Baird. Your line is open.

Hi, guys, and Great job.

Thank you.

Yes. My first question is about capital markets. You mentioned that some elevated activity contributed to a 4% tailwind in the quarter. What was that about? And is that likely to be less recurring, possibly diminishing in Q2?

Yes. Thanks for asking that question. So, lots of trading volume, right, across all of our banking cores as well as across our capital markets business. We saw trading volume at a peak that we haven't seen since COVID. So that business and the leader of that business did a fantastic job supporting all of that volume growth. And that's what drove a couple of percentage points of the beat in recurring revenue that we had posted. So, as we come into the second quarter, we're slightly moderating that growth back down as we're starting to see people moderate in terms of transaction volume across those portfolios, but it's still pretty elevated.

Got you. And maybe just a follow-up question. In Merchant, I think the first half, the way you're guiding is a little better than the back half. But I think to Tien-Tsin's question, you said the yield impact gets a little better through the course of the year. So, does that mean volume decelerates a little bit through the year?

I think that's a fair or a fair assumption as you think about it. Yes, we would think 9% volume in the first quarter was really strong. As we think about it coming into the back half of the year, we think about a bit of moderation just on a conservative guide.

One moment for our next question. And that will come from the line of Rayna Kumar with UBS. Your line is open.

Good morning. Thanks for taking my question. I just want to ask about FedNow, since it's going to be released in July, what will FIS will be with that release? And do you view it as an opportunity here?

Thanks for the question. We're closely collaborating with the Federal Reserve to support our financial institutions in implementing FedNow across our client base. We will play a significant role in promoting the adoption of FedNow. This is another payment method entering the market, which aligns with our expertise in various global payment solutions. We are enthusiastic about enabling this for our financial institutions. Although it's still early to fully assess the scope of the opportunity, we are prepared and ready to assist financial institutions as they adopt and implement it.

Got it. That's helpful. And then I just can't ask about Payrix. You've owned that for a year now. Can you talk about the progress of the acquisition and how it's altering your go-to-market strategy in the SMB space?

Yes. So, our Payrix acquisition is hitting on all cylinders. You can see it's a big part of the e-commerce growth story that we're seeing. As, that to we brought that capability in-house, which really helped solidify our Worldpay for Platforms offering out to those software platforms that want to either integrate payments, embed payments or become a PayFac. So, we have a full suite of offerings now offered out the Worldpay for Platforms offering. It is growing significantly. The volume is growing significantly. We couldn't be more pleased with the success of it.

One moment for our next question. And that will come from the line of Lisa Ellis with MoffettNathanson. Your line is open.

Thanks, for taking my question. Terrific. Stephanie, I was hoping maybe you could comment a little bit on initiatives you have underway on the talent side as you're going through the transformation at FIS. Just thinking about things like are you bringing in some external talent, what are you doing around sort of retaining and making sure morale is improved or maintained throughout this period. Thank you.

Thank you for the question, Lisa. I really appreciate the incredible culture and talent here at FIS, which is a big reason for my return and for joining such a skilled leadership team. However, as you might expect, some team members have expressed a desire to retire, similar to when Eric took on Woody's role during his retirement. Consequently, we are reshaping the leadership team in response to these transitions. We're excited about our recent additions, including a new Chief Technology Officer and a new President of Platforms and Enterprise products, as we focus on enhancing our product and technology offerings to continue delivering top-notch products and services to our clients. After Martin Boyd's retirement last year, we also appointed a new Head of Banking Solutions. Our goal is to balance the exceptional talent we have with some outstanding new talent, working collaboratively to advance FIS into the future.

Great. Thank you. And then this one maybe it could be free to view I guess. But just a follow-up on Banking Solutions, can you just remind us the mix within Banking Solutions of recurring versus nonrecurring professional services, sort of how you think about that segmentation, and then maybe elaborate a little bit on the comments around pivoting the sales team to focusing on more kind of higher quality recurring revenues, kind of what's that change? Thank you.

Lisa, it's Eric. Thanks for the question. In the first quarter, as I mentioned in my prepared remarks, we saw a significant decline in nonrecurring revenue in banking, e.g., we're seeing an increase in recurring revenue. So, the split between recurring and nonrecurring was roughly 86.14 in the first quarter. And then from a sales perspective, Stephanie, do you want to...

Yes. In the fourth quarter, we hired a new Chief Revenue Officer and shifted the sales team to concentrate on products with higher margins and profitability. FIS offers an impressive range of products that cater to all the needs of financial services and payments companies. We've performed well in sales, as evidenced by our backlog. However, as we move into 2023 and beyond, we are refocusing on enhancing below-the-line margin expansion and driving sales of higher-margin products to align our margins with expectations. Consequently, we anticipate our backlog will begin to flatten, which is something we expected and is factored into both our original and current outlooks. The transition is going smoothly.

One moment for our next question. And that will come from the line of Jason Kupferberg with Bank of America. Your line is open.

Good morning, guys. I wanted to actually maybe pick up right there where you left off, Stephanie, just on banking and the backlog. Understanding it will take some time to fully implement this updated go-to-market strategy, what do you think backlog growth starts to resume? And then what are the implications of the newer go-to-market strategy for your medium-term outlook on banking?

Yes. Great question, Jason. So, I think backlog expectations are going to remain muted for the rest of the year as we reposition the pipeline and put the higher-margin products ahead of the lower-margin products. So, on a short-term basis, I would expect it to be muted. I think as we come into 2024, though, I feel really good about where we're going to end up in terms of new sales. And then we're also really focused on the other levers. So, if you think about focusing on attrition compression, pricing and new sales as well as the positive organic we're seeing again in the business, we feel really good as we come into 2024 and 2025, that some of those levers we can pull on and bring us back to growth. And then if you remember, a lot of the reason, in 2023, our growth was muted in the Banking Solutions businesses because we're growing over a lot of termination and nonrecurring fees. And we're really focusing the sales force on driving recurring revenue. And so, as we just lapped that in 2024, that will drive a couple of percentage points of growth for us.

Yes. Jason, to elaborate on that, our first quarter results for recurring revenue in Banking Solutions showed 2% organic growth and 4% recurring revenue growth for the quarter. This is somewhat of a validation of the normalized growth range of 3% to 5% that we discussed a quarter ago.

Helpful. Yes. That's a great data point. Maybe just switching gears to merchant for a second. What would you say is really driving the higher outlook for the year? I mean which segment, is it more on the enterprise side, the SMB, the e-com? Is it is a little bit of all of the above? And just anything you might be able to share with respect to what you've seen in April in Merchant volume and transaction trends.

Yes. I think generally, consumer spend across all of our segments and then better operating performance. It's really across all three. But we're very, very bullish on our e-commerce business. We continue to drive all of our investments in there. Payrix is in there. It's going very well. But I would say it's really across the board. We did see some moderation in recession in the U.K. But I'd say it's generally across the board.

One moment for our next question. And that will come from the line of Darrin Peller with Wolfe Research. Your line is open.

Thank you. When we consider the banking and capital markets, particularly after the spin-off, could you remind us about the business model you expect? For investment grade, if we look at the long-term goals, it seems we should be targeting around 3% to 6% across banking and capital markets. Strategically speaking, regarding banking, are you still focusing on smaller, incremental gains? Are you including a major bank or a big win in that forecast yet? More importantly, could you clarify how we can bridge from our current growth to reach those targets long-term?

Yes. We outlined this during our fourth quarter call, and I'm happy to repeat it. Regarding Heritage FIS, we expect growth of 3% to 5%. When considering banking, we anticipate that it should grow organically on its own. In 2023, we are facing two influences. Firstly, we do not have any large strategic sales anticipated in our 2023 forecast, and we don't think we'll need those sales to achieve our medium-term growth target of 3% to 5% for Heritage FIS; any large sales would be on top of that. Secondly, in 2023, we are growing over a number of nonrecurring items, which will provide a 1% to 2% boost as we progress into 2024. Therefore, we feel very confident about achieving the midterm 3% to 5% growth for Heritage FIS based on these factors.

Sure. As a quick follow-up regarding the potential dis-synergies, you mentioned in your prepared comments that you are taking steps to reduce them to almost nothing. While I understand it may not be completely zero, it appears you are gaining confidence that the impact will be minimal, perhaps less than some have predicted. Could you provide a bit more detail? I realize you might not have an exact figure at this stage.

Yes, happy to. So, look, I think what I said is and talking about the revenue synergies, we would expect to retain the majority of those previously achieved. I mean we feel really good about that. Worldpay will continue to be a distribution partner for us, and we're in the process of building out commercial partnership arrangements with them. So, we feel really good about that. On the operating expense side, I think, I said that we would look to maintain a meaningful portion of those. And then obviously, we would look to manage anything that's left over. They're not going to be zero. It's just not possible. But we are looking to manage them, and we're working very diligently.

One moment for our next question. And that will come from the line of Vasu Govil with KBW. Your line is open.

Hi, thanks for taking my question, and congratulations on a strong quarter. I guess, Stephanie, just starting on the banking side maybe, has the nature of your conversations with bank clients changed over the course of the last month given what's gone on in banking? And any insights on what they're thinking in terms of tax spend? And is there a risk that current events will further elongate the new sales cycle?

Yes. I want to start by noting that we are not experiencing any delays in the sales cycle. Most of the activities on the banking side are related to specific banks. We are observing new accounts being created across our portfolio as consumers diversify their banking relationships, which is generally beneficial for most banks. What remains crucial for us is to strengthen our partnership and our role in the ecosystem, especially as banks navigate their current challenges. We play a key role in ensuring that deposit and money market accounts are opened, and our systems are stable and operational. We work closely with financial institutions regardless of the circumstances. Throughout this quarter, I am extremely proud of the team, as it reinforces our significance to the financial ecosystem. Many of our clients expressed their gratitude for our support, whether they had more accounts or needed additional reporting, all while our systems stayed reliable. I truly appreciate my team for their efforts this quarter. Our clients' focus remains aligned on how to further digitize and modernize their banking platforms. It's essential for these financial institutions to prioritize their technology investments since their consumers are still not returning to branches. The demand for digital and omnichannel financial services and products is ongoing and increasingly important. Therefore, we are not seeing any reduction in backlog or discussions about the products and services that help them attract new business. Overall, the environment continues to be positive and stable.

Great. Thank you. And a quick follow-up on the Merchant segment. I sort of got the comment that you were expecting a slight deceleration in volumes in the second quarter. Anything specific you can talk about April relative to the first quarter? And then any big differences you were seeing in the U.S. versus U.K.? Thank you.

Sure. So, April trends are very consistent with March trends. Our first quarter trends were consistent with what everybody else has told you. January and February were elevated as everybody grew over COVID. March moderated slightly, but still very strong. And March and April are pretty consistent. So, feel really good coming into the second quarter. But they do modestly decelerate as you think about January and February. U.S., U.K., U.S. consumer continues to be very strong. And I think everybody saw in the first quarter was stronger than we expected coming out of the fourth quarter. So not seeing any net detail there quite yet. The U.K. is moderating. I would say it's not starting to improve, but its decline is slightly moderating. So, it did slightly better than we expected. It's going to have easier grow-overs as we go throughout the year, and we're anticipating that, that environment gets a little bit more positive. But I wouldn't call that yet in terms of improving.

One moment for our next question. And that will come from the line of Dan Perlin with RBC Capital Markets. Your line is open.

Good morning, everyone. I wanted to ask about the Worldpay spin. We've received quite a bit of detail this quarter. Stephanie, could you remind us about the acquisitions you're targeting in that area? Specifically, what size of acquisitions do you think will be necessary to address some of the challenges you're seeing in the SMB sector? Additionally, what opportunities do you see in the current environment? I understand these activities are planned for late 2023 or early 2024, but I'm trying to gauge your planning as it relates to M&A in that context.

Yes, that's a great question, Dan. Charles and I have been actively engaged in these discussions. The advantage of Worldpay is its large-scale platform with global reach. With our Payrix asset, if we identify the right product and distribution channel, we can integrate it into the platform to generate additional revenue and margin. It's an exciting opportunity. As we consider the growth of the merchant business, I believe we can return to mid-single digits and then push towards upper single digits. With improved execution, we can get back on track in '24 and '25. I also see acquisitions contributing one or two percentage points to revenue growth. There are numerous opportunities available, and our distribution scale can be beneficial for these types of companies. I expect there will be a continued focus on expanding the e-commerce business, as we hope it will account for 50% of our overall revenue. However, we're not quite ready to discuss specific details of the strategy yet. I'm optimistic about our potential for M&A in that area, which could lead to significant revenue and EBITDA margin growth due to our platform's scale and distribution. Yes. Charles and I have been very engaged in these discussions. The impressive aspect of Worldpay is its large-scale platform and global reach. Our Payrix asset exemplifies that if you select the right product and distribution channel, it can be integrated into the platform to generate additional revenue and margin. This presents an exciting opportunity for future growth. As we look ahead to the merchant business, I believe we can return to mid-single-digit growth and eventually push that to upper single-digit growth. I expect the business to regain traction in mid-single-digit growth through enhanced execution in 2024 and 2025. Moreover, acquisitions could contribute an additional one or two percentage points to revenue growth. There are numerous opportunities for us, and we offer substantial distribution scale to potential partners. I anticipate efforts to further expand the e-commerce segment, with our goal being for it to represent 50% of the company's total revenue. While I'm not ready to disclose specific details on potential acquisitions, I remain optimistic about our capacity for mergers and acquisitions in this area, which can significantly boost revenue and EBITDA margin growth due to our platform's scale and distribution capabilities. Yes. Regarding the potential for dis-synergies, I recall you mentioned in your prepared comments that you're making every effort to minimize that risk to nearly zero. While I understand it may not be completely eliminated, it seems like you're increasingly confident that the impact will be less than some have previously suggested. Can you provide us with a bit more insight? I realize we’re not ready to discuss an exact number yet. Yes, happy to. So, look, I think what I said is and talking about the revenue synergies, we would expect to retain the majority of those previously achieved. I mean we feel really good about that. Worldpay will continue to be a distribution partner for us, and we're in the process of building out commercial partnership arrangements with them. So, we feel really good about that. On the operating expense side, I think, I said that we would look to maintain a meaningful portion of those. And then obviously, we would look to manage anything that's left over. They're not going to be zero. It's just not possible. But we are looking to manage them, and we're working very diligently.

One moment for our next question. And that will come from the line of Vasu Govil with KBW. Your line is open.

Hi, thanks for taking my question, and congratulations on a strong quarter. I guess, Stephanie, just starting on the banking side maybe, has the nature of your conversations with bank clients changed over the course of the last month given what's gone on in banking? And any insights on what they're thinking in terms of tax spend? And is there a risk that current events will further elongate the new sales cycle?

Yes. I want to emphasize that we are not experiencing any lengthening of the sales cycle. What we are observing on the banking side is mainly relevant to specific banks. There are new accounts being created across our portfolio as consumers distribute their accounts among different banks, which is generally a positive trend for most of the banks. For us, the key point is that our role remains vital within the ecosystem, especially as banks navigate their current challenges. We play a crucial part in ensuring that all deposit accounts and money market accounts are successfully opened, and our systems are stable and operational. We work closely with our financial institutions regardless of the circumstances. I am incredibly proud of our team this quarter, as we clearly demonstrate our importance to the financial system. Many of our clients expressed their gratitude related to their operations, whether it involved managing more accounts or requiring additional reporting, and our systems continued to function smoothly. The activity we saw this quarter reflects the ongoing focus of our clients on digitizing and modernizing their banking platforms. Financial institutions cannot afford to overlook necessary technology investments, especially since consumer foot traffic in branches has not returned. The demand for delivering financial services and products digitally and through various channels is only increasing. We have not observed any slowdown in our backlog or in discussions regarding the products and services that enable them to attract new business. Overall, the environment remains positive and stable.

Great. Thank you. And a quick follow-up on the Merchant segment. I sort of got the comment that you were expecting a slight deceleration in volumes in the second quarter. Anything specific you can talk about April relative to the first quarter? And then any big differences you were seeing in the U.S. versus U.K.? Thank you.

Sure. So, April trends are very consistent with March trends. Our first quarter trends were consistent with what everybody else has told you. January and February were elevated as everybody grew over COVID. March moderated slightly, but still very strong. And March and April are pretty consistent. So, feel really good coming into the second quarter. But they do modestly decelerate as you think about January and February. U.S., U.K., U.S. consumer continues to be very strong. And I think everybody saw in the first quarter was stronger than we expected coming out of the fourth quarter. So not seeing any net detail there quite yet. The U.K. is moderating. I would say it's not starting to improve, but its decline is slightly moderating. So, it did slightly better than we expected. It's going to have easier grow-overs as we go throughout the year, and we're anticipating that, that environment gets a little bit more positive. But I wouldn't call that yet in terms of improving.

One moment for our next question. And that will come from the line of Dan Perlin with RBC Capital Markets. Your line is open.

Good morning, everyone. I wanted to ask a question about the Worldpay spin. We've received a lot of details this quarter, but could you remind us, Stephanie, about the acquisitions you need to focus on in that area? Specifically, what are your thoughts on the size of acquisitions that might help address some of the issues you're seeing in SMB? Additionally, what do you see in the current environment? Are there potential opportunities right now? I understand this will happen late in '23 or early '24, but I'm trying to gauge your planning for allocating to M&A in this context.

Yes, that's a great question, Dan. Charles and I have been very active in these discussions. The impressive aspect of Worldpay is its scaled platform with global distribution. Through our Payrix asset, we can identify the right product and distribution channel, add it to the platform, and it will generate additional revenue and margin. This is an exciting opportunity for growth. As we look at the merchant business, there is potential to get it back to mid-single digits and eventually accelerate to upper single digits. I believe the business can regain its footing with better execution as we move into 2024 and 2025. Additionally, I see acquisitions contributing one or two percentage points to revenue growth. There are numerous opportunities available, and our distribution scale can greatly benefit these companies. I anticipate a continued focus on driving the e-commerce sector, as strategically we aim to have that represent 50% of the company's overall revenue. However, it's too early to discuss specific targets or details as the strategy evolves. Overall, I am optimistic about our opportunities for mergers and acquisitions in this area, which can lead to significant revenue and EBITDA margin growth due to our scale and distribution capabilities.

One moment for our next question. And that will come from the line of Ashwin Shirvaikar with Citi. Your line is open.

Maybe sticking with the Future Forward. I was kind of hoping to understand better what's initially driving the savings. Is it the efficiency side, effectiveness growth? What sort of what sort of initiatives? And what's dropping to the bottom line versus being reinvested? And that's a question both on the OpEx side and the CapEx side, if you could kind of provide what the go-forward assumption is.

I'll discuss our initiatives and investments broadly, and then Eric can provide more specific details for the quarter. Firstly, it's important to note that all of this is contributing directly to our bottom line, as we are not reinvesting in these initiatives right now. We've successfully reduced our TAI spending year-over-year by winding down programs that weren't delivering expected returns. Our capital expenditures have also decreased year-over-year. We are carefully reviewing our portfolio to prioritize projects that yield better returns and focusing on delivering products and services to our customers while driving automation in our processes to enhance client experience. Our main emphasis has been on generating profitable revenue while managing our expenses and improving productivity. This has been our primary focus during the first two quarters. Looking ahead into 2023 and 2024, we aim to accelerate our product rollout to market, expedite implementations, and improve client experience through automation and AI initiatives. We're dedicated to ensuring our spending on capital and operating expenses will contribute to both client and company growth. These are our key initiatives for the near and long term, and I'll hand it over to Eric to discuss how to interpret these over the quarter.

Yes. From a financial perspective, we have approximately $100 million reduction in capital expenditures in the first quarter compared to the previous year. In terms of operational expense savings, we achieved around $15 million in the first quarter. As we expected, this improvement will continue to build throughout the year. Looking ahead at margins for the remainder of the year, we anticipate sequential improvement in margins, with Future Forward having a significant impact in the second half.

Understood. And maybe I can end with a couple of numbers questions. Last time you explicitly indicated the 500-basis point macro impact. What's that now? And then interest expense, $137 million versus, I think, $20 million savings. So, what specifically happened in 1Q for the lower interest expense?

Sure, sure. So, on the macro Merchant assumption, we had talked about 500 basis points, 5 points of headwind in our call a quarter ago. The midpoint of the Merchant guide has improved by 150 basis points, Ashwin. So, I would say the macro assumption for Merchant is now 3.5 points. Interest expense, your second question around interest expense, interest expense is down as we did an incremental revolving credit facility to deal with 2 maturing bonds this year where we had favorable pricing on the revolving credit facility.

Okay. Thank you, everyone, for joining us this morning. 2023 is off to a strong start and the FIS team is making great strides towards moving the company forward. I couldn't be more confident in our future. We look forward to connecting with many of you over the coming weeks and further updating you on our progress. Have a great day.

Thank you all for participating. This concludes today's program. You may now disconnect.