Fidelity National Information Services, Inc. (FIS) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Jason Kupferberg, the payments and IT services analyst here at Bank of America and continuing on with the day 1 of our electronic payment symposium. We're very excited to have FIS with us for a fireside chat. And specifically, we have CEO, Gary Norcross; and we have Nate Rozof as well, who all of you know, runs Investor Relations and is an SVP in the finance organization at the company as well. So thanks, gentlemen, for joining us. We appreciate it.

Thanks, Jason. We appreciate being here. Look forward to spending -- having the fireside chat with you.

Yes. Thank you.

Great. Great. And just for the audience, if you do want to lob in questions to me through the video platform, you do have the ability to do that, and I can pass those questions along as we go through the session.

So let me kick it off with sort of a big picture question. I mean, earlier this year, the Board authorized a big share buyback, almost 15% of total shares outstanding. You made it very clear on the last earnings call, you feel the stock is undervalued and were planning to start the buyback as soon as it was practical to do so, post earnings. So maybe just to get your perspective would be helpful on what parts of the FIS story do you really feel are not fully appreciated in the stock price?

Yes, Jason, as you think about our strategy going forward, Woody and I, over the last, good grief, almost 10 years now, have always evaluated share buybacks as a valid part of the strategy. In fact, we looked at deploying investment to accelerate our growth rates. We look at interesting M&A opportunities that could also return shareholder value or the default would always be to buy back shares. But clearly, coming out of the pandemic, we felt like the intrinsic value of the stock is undervalued. And I think the market really has not fully appreciated the strength of our business and our continued share gains as a result of our leading technology through this period of time. We've seen a lot of share gains really across all of our segments, whether it's in our merchant business, our bank referral channel was up 5x, our integrated channel was up 4x. If you look at our banking business and our cross-sales and growth, we saw very, very strong demand for our cloud-native capabilities. Our capital market solutions are doing exceptionally well from a sales and increasing revenue standpoint as we migrate to SaaS and really, just our unique ability to reach across that entire ecosystem can drive cross-sales. So we thought it was a great opportunity, and we appreciate our Board supporting this and coming back and just signaling to the market that in this environment, given where the value of the shares are, we'll certainly be a buyer of stock.

Makes sense. Makes sense. And last year, obviously, during the pandemic, it was next to impossible for anybody in this sector, probably in most any sector, to forecast their business. But on this latest earnings call, not only did FIS provide full year guidance, but you provided a very concrete view on your guidance for the first quarter, specifically, and not many others did that. And I would just love to hear because we get this question sometimes, how did you approach the guidance process this year versus prior years pre-pandemic when you would put together the guidance? Because, obviously, doing it for 2021 had some unique considerations. But just to give us a flavor of to what extent did you put more conservatism into it or did you revamp some of your internal budgeting processes?

Well, I think as we just discussed, we believe that the COVID-induced uncertainty really has contributed to our share price performance. But in response, we wanted to provide guidance that people can feel very comfortable that we had a high degree of confidence in. And so as we thought about building our guidance, as we thought about building a plan for the year, the good news about our business is 2 of our segments are highly predictable, really have showed good, good response to COVID and had shown really solid performance even in a COVID environment, and that's our banking business and capital markets. So when we looked at the banking business and our continued growth in backlog across both banking and capital markets, backlog was up 7% for the company. Last quarter, it was up 8% in banking alone. It gives us really good confidence of what's going on in the banking and capital Markets segment. When we looked at merchant, we knew that the recovery would be directly tied to COVID, reopening the markets, et cetera. And so we wanted to be more conservative in the approach as we thought about merchant is something that we also thought as a company we can lean into and make sure that our investors felt comfortable. So when you look at our plan for the year, I don't know that we really changed our approach as much as we just wanted to make sure that as we looked at each quarter and how those quarters ramp throughout 2021, we felt very comfortable in achieving those. I think Woody has talked about, we were a little more conservative than we have been in the past. But we thought it was a nice balance because it's very hard to predict exactly how the market's going to reopen throughout 2021. We're seeing some acceleration of cases in Europe, for example. So we wanted to make sure that we were appropriate with the reopening across our merchant business and others. So I think we've got a very good guide in market. We feel very comfortable that we can hit that guide, and we like the way we've got our quarters laid out and presented to the market.

Okay. And so I guess it's been about roughly 6 weeks since you reported and provided that guidance. If you look at just how the environment has evolved over that 6-week period on a global basis, like, for example, you mentioned kind of the increase in cases in Europe, but kind of when you roll it all together, do you feel like there have been any surprises, either positive or negative, relative to how you would have envisioned the trajectory back at the time of the [indiscernible].

Yes. No, I think we feel very comfortable about the guidance we gave. We don't -- obviously, we don't update our guide in mid-quarter. But I do think we took a lot of these things into account as we thought through it. We knew it wasn't going to be perfect. There's always things that can impact your planning and impact your guidance. But I think we feel very good about where we are and how we position the guide for the year and for the quarter. And so we'll continue to monitor things as they go on throughout the year and adjust accordingly, if necessary.

I know in the past, you've pointed to kind of Visa and Mastercard data as a pretty good proxy for your results in merchant, at least from a volume perspective. They've provided some mid-quarter updates of their own. Has that general pattern of your merchant volumes tracking with theirs continue to hold?

Yes. I mean -- look, I mean given the largest merchant acquirer, it's really hard for our volumes not to track very closely to what Visa and Mastercard sees. I mean you saw last year, our volumes actually exceeded theirs in growth, which was an indication of the share we took even during the global pandemic. But typically, their direction that they give, you'll see our volumes straight in line with that across the various segments.

Right. Right. Okay. And so just staying on the merchant business for a minute, I know that you're guiding mid- to high teens revenue growth for 2021. I would love to just hear about some of the embedded assumptions underlying that outlook, whether it's growth by vertical channel? And maybe you can also just touch on in the context of that mid- to high teens revenue growth forecast, what are you thinking from a volume standpoint? Because I know you've got these interesting yield dynamics that are going to be. So maybe for people who are less familiar with that, you can touch on that in your answer as well.

Well, as you think about our business, look, the strength of our business is clearly in our global eCommerce capability. I mean, we're very strong in integrated payments, very strong in omnichannel. But when you really lean in on our eComm, we really get differentiated. And the more complex the relationship -- the merchant relationship, the better our technology really shines. And so we really look back over last year and as I highlighted a minute ago, our bank referral channel, our integrated channel saw record sales even in the middle of COVID. We've highlighted a number of really large eComm wins. Our cross-sell wins have been very strong coming out of the Worldpay integration. So all of that was baked into our accelerating revenue growth. When you look, we are contemplating that yield dynamic that you mentioned. So we saw situations where our yield was muted because of the type of transactions that declined during the global pandemic. We absolutely expect that yield to flip during the course of the year. So as you see, our higher yield merchants coming back online, SMB, restaurant, travel, airlines, you'll start seeing that yield transition. So we've highlighted that mid- to upper single digits growth in revenue. We've highlighted our volumes to be less than that from a growth standpoint, but that yield flipping will be a nice tailwind for us throughout this year. Now with that being said, Jason, when I think we talked about this on a number of calls, we don't expect full recovery of all of our higher yield items like airlines and travel, for example, until into some time in 2022.

Right. Yes. Yes. Which seems prudent, although I hope some of these TSA stats that have come out in the last couple of weeks, certainly shows there's pent-up demand out there, at least for domestic travel, so...

Yes, absolutely. And obviously, that will continue -- if that continues to occur, that will be a nice tailwind to the business. Absolutely.

Yes. No doubt. I wanted to pick up on the point you made around the ISV partners growing fourfold, I think you said last year. I don't know if a metric or a disclosure that people are broadly familiar with. So I would love to hear more about which verticals some of those ISV partners are concentrated in? And can you give us a sense of just sort of the revenue growth that you saw in the integrated channel as you came out of 2020?

Yes. It was interesting. As we did the Worldpay combination and we look -- we are really excited about all of the things that Worldpay was going to bring to FIS from a merchant acquiring standpoint. I talked earlier about just really our best-in-class position in global eCommerce. We honestly felt like -- while they were very strong and integrated, we felt like that they had potentially not invested in that go-to-market channel as much as we would have thought. They had really turned so much energy on global eComm. As we put the 2 companies together, we didn't decelerate our investment in global eComm. In fact, we went the opposite direction. But we did redirect some focus to really significantly expanding our distribution through these partnerships and through SMBs. And so as I said earlier, we really saw 4 and 5x increase across our integrated ISVs and also our [indiscernible] partners. And what was interesting is when you look, we have the largest partnership program in the industry today, but that expansion really occurred very broadly across a number of verticals. I think we've highlighted on prior calls, Reynolds and Reynolds; our CDK Global, which is really huge in automotive. We signed a big relationship with Case New Holland, which is industrial equipment. We did a number in leading restaurant and retail partners, including [indiscernible]. So while we don't get into specifics on revenue contribution, this will be a key, and we highlighted in the last call of that further acceleration throughout 2021 because as these partners onboard, you're going to see a nice revenue tailwind. And I think that's really kind of one of the key differentiators for us during the course of last year. Many of our competitors really hunkered down and cutoff investing. And we actually really stayed and really invested all the way through the cycle. And so I think you're seeing that in our wins and our onboarding throughout last year. And as I said, that's going to attribute to the growth that we talked about earlier.

Do you expect a lot of these newer ISVs to be moving the needle at least collectively on merchant revenue this year?

Yes. I think we do. We expect our merchant business to be very strong. We expect it to accelerate. As you think about the Worldpay business, it historically grew in that upper single digits. And we touted, even when we did the combination, that we felt very confident through cross-sells and up-sells and even just refocusing on a couple of areas, we thought that the merchant business long term could be a double digit grower, and we feel very confident in that. And I think we're seeing some indicators here as we look back on 2020, even with the pandemic, if you look at our cross-sales that we touted at $100 million exiting last year, we exited at $200 million. And now we're talking about over $500 million in revenue sales. For example, you look at some of the big ISV wins we did. We have a lot to be happy about with the merchant business and where it's going from here, especially as we push through and put this global pandemic behind us.

For sure. And I know just kind of building on that on the latest earnings call, you talked about a few big merchant clients, Amazon and Giant Eagle, Walgreens that are actually going to be adopting solutions in banking and/or capital markets. So is that cross-sell activity the result of kind of a specific new internal initiative? And maybe you can just speak to pipeline of similar types of opportunities? And anything around that would be helpful because I think that -- sounds like that might be also an underappreciated kind of leg of growth because historically, we haven't necessarily thought too much about cross-sell across those segments.

Yes. No. Look, I mean, as you think about FIS, one of the nice things about it is our breadth of application is tremendous. So we have the most comprehensive suite of financial services in the industry. One of our key differentiators, you can even go back to when we did the SunGard acquisition at FIS, really, it's our ability to leverage that comprehensive nature of financial services solutions across all customers. And it really just does expand the total addressable market that we can go after. And we leverage our go-to-market sales forces by incenting them to drive any sale into any customer, no matter the product. I shed some light on what we talked about in the last quarter. You really got Amazon, long-term merchant client. They added our capital markets treasury management system to their growing portfolio of services. Walgreens took our integrated payable solution. And Giant Eagle took some back office financial solutions that we have. So all of that's just good indication of how we're thinking about it. So even when you look at like Premium Payback, which has been a huge contributor to our revenue synergies, that's really coming out of our issuer side of our business in the banking segment and funneling that into the merchant side. So it's really important that we continue to drive that each and every day. And the way we do that, as I said earlier, is the first thing we want to do is eliminate any sales contention in FIS. So our sales reps get quota credit, they get commissioning on really any product or portfolio they sell. And then it gives an opportunity for our business owners to open up those customers. And it's been a very successful model historically for us. And based on where we are in revenue synergies, I talked about being more than $500 million as a combination. But we anticipate over $400 million in revenue synergies exiting 2021. So you really are starting to see that flywheel turn with regards to opening up the various client bases is through the full suite of capabilities.

Do you have to do any kind of additional training of the sales force to facilitate more of this type of cross-sell?

The way we've positioned our sales force, not as much as you would think, you do have to put the commissioning plans in place to get the doors open. But really, it's our subject matter experts, our product solution consultants that are also commission based. They'll step in with the expertise to help cross-sell the solution. And then you really get your account management group also incented to get the accounts open. So this has been a model we've been pursuing now for years and have had very high success with it over the years. And you're seeing that success play out in the Worldpay combination as well.

For sure. For sure. Well, let's switch over to the banking segment. It's obviously your largest. You did see some notable acceleration there in the fourth quarter of 2020. You're guiding for that to accelerate further in 2021 to mid- to high single digits. I think you were at 3% for all of last year. So that's pretty significant. So the first question I had is just the transaction-based part of the business, which I think is around 15% of the segment's revenues, and obviously had taken a huge hit around this time last year and through the spring, what type of growth are you expecting specifically for that slice of banking just kind of the -- given sort of the easy comparisons that we'll have?

Yes. Well, if you look at 2020, that transactional portion of the business, I think we disclosed, was about a 1% headwind for us throughout the year. You'll see that normalize this year and become flat to a slight tailwind. Obviously, that business has also continued to do well through the sales channel. But most of our growth in banking really is going to just come through the significant adoption of our cloud-native capabilities. I think we've shared in the past we started the investment cycle on transformative cloud-native capabilities almost 4 years ago. And we're seeing a real result in that in our sales channel coming off multiple years of now leading sales. You see our backlog continues to grow. I think I talked about earlier. Last quarter alone, the banking backlog was 8%. When you think about where we are with the pipeline, our pipeline continues to grow. So we're very comfortable. You'll continue to see increased growth. And that really is just all going back to that investing aggressively in more new cloud-native modern technologies that the markets are reacting to.

And do you guys still on an annual basis factor in a little bit of just potential headwind from customer M&A, which is always sort of unpredictable? Is some of that embedded in the guide again this year for banking?

Yes. Yes, absolutely. We consistently -- Woody and I have looked at this over our careers, and it just consistently adds into about 150 bps of headwind every year. So we do bake that in. It is very hard to predict. So -- and from time-to-time, provide a little lumpiness. But it's just year in and year out about 150 bps of a headwind. And so every year, we look at it. We always do a bottom-up build of all of our plans. We take in the [indiscernible] escalators. We take in all of our volume increases and estimates based on -- and then we take all of our new sales, onboarding, et cetera, et cetera. And then we take that 150 basis points of headwind and back into the guide that way. So we've been very consistent over the years.

That's helpful. So yes, speaking of new sales, I think it was $3.5 billion last year in banking, which I think was a record high. And maybe you can just walk us through implementation time lines for these bookings in 2021? And any risks that you could potentially face as you look to execute on a fairly sizable number of these concurrently?

Yes. The implementation time line, it varies. But I would say on average, it's about 12 months. I mean, you'll have some, depending on the nature of the installment, could be -- could go longer. You've got some that goes -- that take a little less and onboard more quickly. Speed to revenue is a very important thing for us, and improving our implementation time line is something that the teams are very focused on. But I would say, on average, it's 12 months. There's really very little significant implementation risk on these deals, Jason. Frankly, I think people would be surprised how many contracts we sign in a year in banking. And so there's really no one single implementation that has huge concentration risk related to the overall guide. When you look at our modern banking platform, we've had huge success. We've talked about a little over $100 million in run rate coming out of just that product this year alone. Those implementations have gone very well, but it also gives you an order of magnitude of just how many other deals we're signing to drive that upper single-digit growth in banking. So don't have real concerns about implementation risk. I had a little bit of concern probably when COVID first hit. I think I've shared in the past, had you told me we'd be able to go to full 100% remote implementations, I would have said the industry is just not ready. But -- you know, right? This is one of the good things that, frankly, came out of COVID. I mean our clients came together with us and really partnered, and we innovated around the implementation cycle, and here we sit today with 100% of our implementations going remote in the banking business. So I feel really good about where we are this year and feel good about the pipeline and the business that the sales team is closing.

So that $100 million of modern banking platform revenue that you're guiding to for 2021, is that exclusively for the deposit module? Or have you built anything in there for the lending module? I know that's kind of just come out of pilot.

Yes. No, that's absolutely just the deposit suite that's been sold and the existing customers that have been sold. So it really gives you an order of magnitude of the size of the arrangements that we're signing. These are obviously large transformational deals. So as you think about the lending module, I mean, it's as big of an opportunity as the deposits. A lot of people want to focus on lending, which is great. It's, as you said, the very first phase of that dropped into Q4. But we still have tremendous opportunities in retooling the retail banking side on the deposit side. We're just getting started with modern banking platform, and Code Connect and Digital One. And it's going to be a real significant tailwind for us in the coming years with this application. But lending is big or bigger opportunity than the deposit will be over time.

Yes. It's interesting. I mean, can you give us any color just in terms of initial conversations you're having with MBP customers about them taking on the lending module? And what kind of time lines are we looking at? I mean, I would imagine it's not a terribly long sales cycle if they're already -- if they've already signed up for deposit, once they've made a decision to do that. So maybe you can just talk about how that goes in conversations? And then what does the implementation time line look like for lending versus deposit?

Well, like all of these things, let's answer that question first. I mean, the implementation time line depends on how you're going to deploy. So if you're going to deploy by converting the back book of business, that takes longer, obviously, than if you're just going to deploy the new capability and book on new loans going forward on the existing system. The quick answer is most of our customers we've signed to date are all focused on deposits right now. These are really big implementations for them. They want to make sure they get it right. There's a lot of downstream connection points and a lot of process reengineering that has to occur. We are starting to have, though, with that being said, lending conversations with other new customers that haven't taken the deposit yet. So as we described on our banking platform, we're in the very first inning of the game here. So we've got all of our existing core banking customers that will need to migrate over the next decade. We've got a lot of new share we're taking here, where people are really taking a step function from very old legacy capabilities to this new cloud-native technologies. So we're having really -- when you look at our backlog around modern banking platform, it continues to grow. Our mega deals that we like to call mega deals, which are transactions greater than $50 million, those continue to be up. I think they're up 70% in the pipeline alone. So if you look, there's a lot of exciting things. And a lot of it points to the investments we made on these newer technologies, modern banking just being one of them. I mentioned a couple of other ones as well. But we're doing a lot of that investment and modernization to really be the first to market with cloud-native-based technologies and leveraging our cloud that we talked about in the past.

Right. Right. So I mean, do you think the lending module can start driving any appreciable amount of revenue in 2022? Or would you encourage people to think of it as being longer dated?

Well, I think we've got multiple phases to roll that out. As I said, we just dropped the first code release of that. We'll have a number of sprints around lending coming throughout 2021 and into 2022. But yes, I think you'll start seeing revenue being driven through the lending side in 2022, absolutely.

Okay. Got it. The -- I think the dollar value of your pipeline in banking was up 40% as of the end of 2020. So I'm just wondering how much of that is kind of new MBP opportunities versus cross-sell to some of the existing MBP customers?

Yes. A lot of that -- as I just described a minute ago, a lot of that would be new share gains in the MBP world. I mean, right now, what we're really seeing is not our existing clients wanting to take MBP as much as brand-new, greenfield type conversions of people either launching a new service within their bank or just competitive takeaways from other customers. We will see over time us also cross-sell that to our existing client base. And obviously, as you mentioned earlier, our lending modules will be a huge cross-sell to our existing deposit MBP customers, but that will also continue to help us cross-sell in some of our existing customers. But you're right, the banking pipeline was up a little over 40%. As I shared earlier, our banking backlog was up 8%. So think of that as, obviously, fully contracted revenue just waiting on onboarding, which is a great lending indicator of growth in the next 12 months for the business. You've got -- but you got the pipeline up 40% and then you've got these really large, what we consider, mega deals that we like to describe, that's up more than 70%. So really good demand for our new capabilities. And the sales team is doing a really nice job of leaning in on that as well and just finding those opportunities and building them out and closing them.

So based on all of the backlog growth, the pipeline growth in banking, I mean, it seems like it would be pretty reasonable to assume that the kind of revenue growth you're forecasting in 2021, this mid- to high single digit kind of range, certainly that that's sustainable into 2022? Is that fair?

Yes. I think, honestly, we feel very good about what's going on in banking. We feel good about the sales success. We feel good about the growing backlog. We feel good about the pipeline. I do think that our investments have accelerated this growth curve into that mid- to high single digit growth outlook, and we talked about. And I think that should continue into 2022. Obviously, we'll all continue to watch the backlog, which will point to sales success quarter in and quarter out. But I feel really good about the demand for our capabilities and where we're positioned in the market, especially coming out of the pandemic as -- with that as a backdrop.

Right. Right. We also get asked a lot about whether the traditional financial institutions, they're facing an elevated level of risk from neobanks. So what's your perspective on that? Do you think that, that ultimately has some kind of impact on your core banking business? I mean do you engage with the neobanks at all? Is that actually an opportunity for you as opposed to some of your traditional customers feeling headwinds from those next-gen competitors?

Yes. No, we absolutely -- I mean the quick hand, we absolutely do serve the neobanks. We see that as a great market opportunity and continue to expand our total addressable market. I do think that if financial institutions aren't careful, they can be impacted by some of these disruptors, but that's one of the things that's driving the demand for these newer technologies I just described as, obviously, they are going to compete. And we're seeing our -- seeing not only our financial institutions compete, but we're also seeing increased demand from these start-ups and from neobanks to take advantage of some of our capabilities. So for us, we're really vertical or customer agnostic. I mean for us, we want to make sure that -- we think we've got the best technology in the industry, the best solutions in the industry. And the sales team does a nice job of leaning into those various clients and prospects across the industry and make sure they can take advantage of those capabilities, neobanks just being one of them. I mean, we talked earlier about all the cross-sell success we've had, just even into the merchant portfolio, given the Worldpay combination. So we don't let classification, slower sales force or our focus, and we've seen good success there.

Okay. So in capital markets, you've been going through a transition from more of the license model to a SaaS-based revenue model. And obviously, that's given you some, I'd say, increased visibility on the revenue performance of that segment. So can we just get an update on what percentage of capital markets revenue is now licensed versus SaaS based? And maybe how you see that evolving over the next year?

Yes. This is something I would just -- I couldn't be prouder of the team and what they've accomplished here. I'll remind everybody that when we actually did the SunGard acquisition, the recurring revenue in that business was in the low 60%. We now increased that to the low 70%, and that's a direct relationship to really the SaaS-based revenue. So as you look, we've seen this transition before in banking, good grief, almost 15 years ago. And as we talked about the balance here, is for the sales team to continue to fill the hole in license fees every year, because you've got to resell that but also have the discipline to lean in on SaaS deployments on that model. Now you get a little bit of a push/pull here, where you've got some of our -- even our license customers who want to take it into a SaaS deployment. And so we've got to balance that. But we've seen a real nice increase in our reoccurring revenue business in capital markets. I would expect, and we've talked a lot about this, over the next 3 years, you're going to continue to see that grow from the low 70s to the low 80s, and it will look very analogous to banking at that point in time. You'll see a really high reoccurring revenue all through SaaS deployment. And you'll also see further acceleration of that revenue growth once you get this natural headwind normalize. But this is a business that really has been structurally transformed since we bought it. The investment we've made in solutions, migrating it from a product sales team to really a solution sales team, fully deploying through SaaS deployment, this has been a really exciting thing to watch as the business has really transformed capital markets and what it is today.

What do you guys typically see in terms of the impact of changes just in the interest rate environment as it relates to spending intentions and actions of your banking and capital markets customers? Because I think last year and the year before, like ultra-low rate environment. I think a lot of people were skeptical about the kind of bookings FIS could achieve in that environment, yet they were great. Now, obviously, we're seeing rates move higher. Does that actually have an impact on pipeline, backlog spending?

You know, it really does. I mean, we have very little exposure to interest rate sensitivity on the really broad scale. I think what you're really seeing, Jason, is a lot of institutions have held on too long to their legacy technologies. They -- especially in the capital market side, I just mentioned a minute ago, but in capital markets, you would see a different product for the front, the middle, the back office. You would see a lot of in-house build. You'd see a lot of things that customers thought were best in breed, and they would cobble it together. And what you're really seeing is a need to drive efficiencies into the capital markets, no different than what we've seen in the retail banking. And so then what you're seeing is they have to turn to a company like FIS that has the breadth of capability that we can make that investment and really pull a solution together that can really handle both the front, middle and back office together. They have to launch it in our private cloud at a lower cost of ownership than what they can deliver and really drive their cost out. And I think that's what's attributed to demand. It's really been the investment we've made in our technology over the years and our focus and ability to deploy that much more efficiently than our customers can. And so we really haven't seen -- as you shared, we had a great year last year in a very low rate environment. We certainly have a lot of demand in our capital markets. Once again, seeing nice pipeline growth there and really good performance out of the sales force over the last several years.

I wanted to ask a margin question as well. I know you guys are looking for 250 to 300 bps, call it, of year-over-year improvement. 45% adjusted EBITDA margin is the guidance for the year. And certainly, the incremental margins in merchant are extraordinarily high, 80% or so, I believe. So I mean, hypothetically, if you deliver merchant revenues, let's say, at the high end of your mid- to high teens guide, would that imply the potential for some upside to the 45% margins in that [indiscernible].

Yes. Once again, I don't think we're prepared to update or guide at this point in time. But what I would tell you is our margins, we feel very comfortable in delivering on that 45% margin. We feel very comfortable over the next several years to see a very consistent 50 to 100 basis points of margin expansion on the base business. You highlighted exactly right. I mean, not only our merchant or banking business or capital markets, the contribution margins especially in our SaaS deployments, those incremental contribution margins are very high. So we're very confident we can continue with our current investment levels. Clearly, we're investing heavily in product, deploying new products, continuing driving and pivoting our revenue more to a higher and higher growth curve. And we feel very comfortable we can do that all while contributing to very nice margin expansion. It's not only this year, but in the coming -- in the years to come as well.

You've obviously been executing quite well against the original revenue and cost synergy plans on Worldpay. You've outlined the expectations exiting this year. But just as people [indiscernible] 2021, is there still the opportunity for incremental synergies? You've obviously accelerated what you initially forecast. But should we be thinking about the potential for there to even have more done as we look out to 2022?

Well, yes. I mean, the quick answer is -- if the question is, do we see a further opportunity to expand margins in the coming years through operating efficiencies and continue to see accelerated revenue growth through the cross-sells, the answer is yes. There is a point where it starts getting difficult to call that synergies related to the integration and more just ongoing synergies with automation, artificial intelligence, deployment, et cetera. And so we do have a number of initiatives, but I'll remind everybody, when we entered this, we talked about $400 million of operating expense takeout. We've already exceeded that number. We're now guiding to $500 million for the year. So we're excited about that opportunity. So that's good acceleration. We talked about $500 million in revenue synergies. We've updated that to $550 million. And as I shared earlier, last year, we exited the year at $200 million. And this year, we feel comfortable, we'll exit this year with more than $400 million of revenue synergies. So really from an integration standpoint, there's really no metric that you can't point to, to say this is really the best combination or the best integration we've ever done as a company. Of course, the operating expense side doesn't tout all the interest savings that we've highlighted. And obviously, that's significant on top of that. But the fundamentals of putting the 2 companies together really has exceeded our expectations at this point. We're well ahead of process. But we're certainly not done. As I shared with you, we're very comfortable. You'll see anywhere from 50 to 100 bps or more margin expansion each and every year, beginning in 2022. There's a lot of things that we're focused on. As you look at some of these newer technologies rolling out, especially with artificial intelligence and driving automation and our internal processes and how we deliver our solutions, and even how we implement our solutions. I mentioned earlier, our focus on speed to revenue in the implementation cycle and lowering that implementation time line down. So I think there's a lot of opportunities here that you'll continue to see us, but that's really going to be just us continuing to operate the business in the manner that we have historically done. I mean, we consider ourselves great operators at FIS and -- the whole team is, and we're always very focused on what's the next opportunity for -- to be more efficient. And so that will continue.

I'm going to wrap up where I started, which is kind of a follow-up on capital deployment. I mean, despite the huge buyback authorization, does the company still have a latent interest or appetite, if the right opportunity came along, for even large scale M&A?

I think mergers and acquisitions will always be a part of our strategy. But the one thing I would suggest to you as part of our strategy, we really have 4 pillars that encompass that. And what I would tell you is for us to do M&A, we've got to find a new product or new capability that fits an existing market we serve or an adjacent market. It's got to make financial sense. And frankly, as you guys have seen, the market is pricey right now. But -- so it's going to make strategic sense. It's got to make financial sense. Timing has to work for us to pull these things off. And then obviously, cultures have to align and all those things. But if we could find those scenarios, we would absolutely consider further M&A. I think in the short term, given where our share price is, you'll see us leaning more heavily toward share buybacks. But as we think about our strategy, it's not a strategy for the next 90 days or 180 days or next year. We think of our strategy very long term. And M&A in -- for FIS will continue to play a major role, long term in our strategy.

All right. Terrific. I know we're out of time. Great to see you as always, Gary, Nate.

Thank you.

Appreciate it. And for the audience, our next and last session of the day is at 2:00 with MoneyLion. So thanks, everyone. Take care.

Thank you.

Thank you.