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Date

Friday, May 8, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Stephanie Ferris
• Chief Financial Officer — James Kehoe

Takeaways

• Revenue growth -- Pro forma revenue up 6.5% with both Banking Solutions and Capital Markets exceeding the high end of their outlook ranges.
• Adjusted EBITDA margin -- Margin expanded by 87 basis points to 39.6% due to positive mix and cost optimization, outperforming a guidance range of 35-55 basis points expansion.
• Adjusted EPS -- Reached $1.36, marking 12.4% year-over-year growth.
• Free cash flow -- Totaled $474 million, growing 111% and capturing 23% of the 2026 full-year target ($2.1 billion).
• Recurring annual contract value (ACV) -- Increased by 24%, with Banking ACV up 13% and Capital Markets ACV up 45%.
• Money Movement Hub ACV -- Tripled year over year, showing continued demand from regional and community banks.
• Lending and digital ACV -- Lending ACV climbed 63%; digital ACV rose 25% year over year.
• Banking Solutions segment -- Segment revenue increased 7.7% pro forma, with banking up 10% (boosted by licenses) and payments up 5.9%.
• Banking segment recurring revenue -- Accounted for 85% of segment total, growing 5.2%.
• Banking nonrecurring revenue -- Jumped 58%, driven by new distribution agreements with two technology partners.
• Banking Solutions EBITDA -- Rose 15% pro forma, with a 240 basis point margin increase.
• Capital Markets segment -- Revenue up 2.9% pro forma, including a 125 basis point benefit from an early license sale.
• Capital Markets recurring revenue -- Expanded 3.6%; performance affected by a 130 basis point decline from softer lending tied to macro volatility.
• Capital Markets segment EBITDA -- Grew 7.9%, with margin rising 160 basis points to 51.6%.
• Debt and capital return -- Total debt stood at $21 billion (leverage ratio 3.6x), with $260 million returned to shareholders, mainly by dividends.
• Anthropic partnership -- "A first of its kind in financial services" with a collaborative arrangement focused on co-built financial crimes AI agents, with Fidelity National Information Services (FIS +0.94%) owning the agent, regulated infrastructure, and bank distribution rights.
• Agent commercialization guidance -- CEO Ferris said, "nothing is contemplated in our guide in 2026" for the Anthropic agents, with revenue expected to take shape in 2027 as agents are deployed.
• Margin and cash flow outlook -- Full-year guidance reaffirmed for 5.1%-5.7% pro forma revenue growth, 95-110 basis points of margin expansion, and adjusted EPS growth of 8%-10%.
• Long-term free cash flow target -- CFO Kehoe reaffirmed the expectation to more than double free cash flow to over $3 billion by 2028, with $1 billion incremental growth projected between 2026 and 2028.
• TSYS synergies -- Cost synergies of $30 million-$40 million expected in 2026; first quarter delivered $1 million, with flow-through anticipated mainly in the second half of the year.
• Revenue synergies from TSYS -- $125 million targeted long term, with $45 million goal for 2028; minimal impact forecast for 2026 results.
• Pricing power -- Pricing described as stable within contracts and client negotiations.
• Project Keystone and Lyriq -- Five U.S. banks joined Fidelity National Information Services' digital asset/tokenized deposit network; industry demand cited as "stunning" since announcement.
• Banking segment customer concentration -- 75% of total revenue now attributed to Banking Solutions.
• Second quarter outlook -- Pro forma revenue projected to grow 4.9%-5.5%; Banking to grow 5.5%-6%, Capital Markets expected at 3%-4%; EPS guide of 7%-10% growth, with EBITDA margins up around 170 basis points sequentially.

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Risks

• Capital Markets lending headwind -- Recurring revenue was "negatively impacted" by lending softness due to macro volatility, decreasing recurring growth by about 130 basis points; this headwind is expected to continue and is factored into the full-year outlook.
• Banking nonrecurring revenue sustainability -- CEO Ferris stated, "I do think it will create a grow-over for next year," indicating outsized nonrecurring revenue from new distribution deals may pressure comparables in 2027.

Summary

Fidelity National Information Services (FIS +0.94%) reported strong sequential and year-over-year gains in every core financial metric, with both Banking Solutions and Capital Markets segments surpassing their stated outlook. The company unveiled an exclusive partnership with Anthropic, introducing a co-built financial crimes AI agent that Fidelity National Information Services fully owns and will launch in the back half of 2026, with no associated revenues included in current year guidance. Free cash flow performance was notably ahead of the typical seasonality, accounting for 23% of the annual target just in the first quarter, while both divisional and consolidated margins benefited from favorable revenue mix and disciplined cost actions. Executives emphasized the durability of recurring ACV growth and the acceleration potential in payments, digital, and lending verticals, supported by record demand reflected in recent performance indicators.

• The recently announced Project Keystone and Lyriq initiatives have led to a rapid influx of interest from U.S. banks seeking tokenized deposit and digital currency capabilities on a regulated network operated solely by Fidelity National Information Services.
• James Kehoe highlighted that the company is "on track" to nearly double free cash flow by 2028, with anticipated deleveraging enabling higher shareholder capital returns in the future.
• Management stated pricing remains stable, and emphasized that the growth strategy is centered on expanding product adoption and recurring revenue, not pricing increases.
• TSYS integration is proceeding as planned, with cost synergies weighted toward the second half of 2026 and revenue synergy realization expected primarily in 2027 and 2028 due to the long sales cycles in large bank contracts.

Industry glossary

• ACV (Annual Contract Value): Contracted recurring revenue earned annually from customer agreements, used as a leading indicator of future revenue growth.
• Tokenized deposit: Digital representation of client deposits on a blockchain or distributed ledger, used for payment and settlement within a regulated bank network.
• LLM (Large Language Model): Advanced AI model (such as Anthropic's Claude) underpinning automated agents for applications like financial crime detection.
• Project Keystone: Fidelity National Information Services' collaborative bank-owned network supporting regulated digital asset and tokenized deposit flows for U.S. financial institutions.
• Lyriq: Fidelity National Information Services' proprietary digital asset platform, deployed to enable tokenized deposit and digital currency transactions for banks globally.

Full Conference Call Transcript

Stephanie Ferris: Good morning and thank you for joining us. Q1 was a strong quarter for FIS, not just in terms of our financial performance, but in terms of what the performance signals about the trajectory of our business. We outperformed across every financial metric. Revenue is strong, margins expanded, free cash flow more than doubled, and our commercial momentum, particularly on new ACV, reached new levels. Earlier this week, we hosted our annual client conference focused on community and regional banks with over 4,000 attendees. There, we announced an industry-shaping agreement with Anthropic, a first of its kind in financial services, which will usher in an entirely new era of modern banking.

We also unveiled a number of new solutions, including our new data and AI platform, our new digital asset platform, Lyriq, and Project Keystone, our new tokenized deposit bank-owned network that includes 5 U.S. banks. The common thread across all this progress is that today's innovation runs through FIS, not around us. From the world's leading financial institutions to the most advanced AI firms and the future of digital currency, they are all running through FIS. I told you last quarter that FIS is better positioned today than it has ever been before, and we are excited to be leading the next era of modern banking.

Now let me walk you through the strategic highlights of the quarter, and then James will take you through the financials in detail. Turning to Slide 5. I'll start with the headline. We delivered 6.5% pro forma revenue growth above expectations. Adjusted EBITDA margin came in at 39.6%, with margin expansion of 87 basis points driven by favorable mix and cost savings. Adjusted EPS of $1.36 represents 12.4% growth year-over-year. And the metric that stands out most, free cash flow of $474 million, up 111% versus the prior year. Turning to Slide 6. Equally impressive, our recurring ACV growth of 24% year-over-year is signaling strong commercial momentum. The pipeline is converting and the market is validating our strategy.

Banking recurring ACV increased 13%, with capital markets up 45%. Across some of our key growth vectors, Money Movement Hub ACV tripled as we continue to see strong demand from regional community banks. Lending grew 63% and digital ACV was up 25%. ACV is a leading indicator of our future revenue. We started 2025 focusing on our commercial excellence in high-growth verticals like digital. And by the end of the year, we had scaled that momentum across the entire enterprise. And what you're seeing in our first quarter of 2026 will translate into durable, predictable revenue growth and margin expansion in the quarters ahead. Turning next to Slide 7.

I'm proud of our team for their execution and in particular what our commercial wins foreshadow for the future. But what gets me really excited is something that has defined FIS since the beginning and defines us still. Innovation in financial services doesn't just happen in this industry. It runs through FIS. For more than 50 years, through every market cycle, every technology shift, every moment of disruption, FIS has been where financial innovation takes hold. That was true when we built the infrastructure that runs the modern bank and it's true today. The most important innovations in financial technology right now, AI, digital currency, data, are all running through FIS. That's not a coincidence.

This is why AI leaders like Anthropic choose to collaborate with us. We sit on 73 billion annual payment transactions across approximately 1.1 billion accounts on file. And now the FIS data and AI platform brings those datasets together as fuel for a real-time AI-native future. Last week, we announced Project Keystone, a first-of-its-kind digital asset collaborative bank network with digital currency flowing through us. Why us? Because we are trusted based on a decades-long track record, because of our rich system of record data, because of a bank-grade compliance network built over decades. And now we have built a trust-by-design agentic architecture for what comes next.

Unlike horizontal data platforms, FIS brings the regulated infrastructure, system of record data and compliance architecture that makes AI deployable in banking today. That is a durable advantage. It is our modern competitive moat. Turning to Slide 8 for highlights of our Anthropic agreement. What makes this different from a vendor relationship is what it will deliver: co-built financial crimes agent for financial institutions, combining Anthropic's frontier AI capabilities with FIS' scale, data and regulatory expertise, with the engineering knowledge transferring to FIS to build the agents that come next.

This is a deeply collaborative model with Anthropic's forward-deployed engineers embedded alongside ours to design and build this agent from the ground up and enable us to scale them across our platform. FIS provides the foundation through our data, governance and infrastructure, ensuring AI operates safely and effectively in a regulated environment through our trust-by-design architecture philosophy. To be clear, FIS owns the agent and the regulated infrastructure, everything that is deployed to the bank. Anthropic provides the underlying LLM model. Client delivery remains fully owned and protected by us. Our strategy reflects a shared recognition that scaling across financial services requires deep regulatory expertise and bank-grade infrastructure alongside advanced AI models.

Our first agent focuses on financial crimes, one of the most urgent and costly challenges for banks today, with an estimated $2 trillion in illicit funds moving through the global financial system, creating a $35 billion to $40 billion spend across the industry. BMO and Amalgamated Bank are our design partners for this first agent. The co-built agent will automate the evidence gathering and analysis, reducing investigation time from days to minutes. Our goals are to significantly reduce cost per case and decrease low-value manual work. Investigators remain in control with the agent, enhancing decision-making rather than replacing it. This human-in-the-loop design is essential to trust in regulated banking environments.

This is the beginning of a broader road map of purpose-built agents across the banking life cycle, spanning credit decisioning, deposit retention, customer onboarding and fraud prevention available to our clients through a single governed data and AI platform. Turning to Slide 9. This collaboration is also a concrete example of our broader orchestrated intelligence architecture where AI, data and regulated infrastructure work together at scale to deliver real regulated outcomes for financial institutions. Orchestrated intelligence is how we describe the way FIS brings AI to life in banking as a coordinated architecture where models, data, governance and workflow operate together in a way no single technology provider can replicate alone. The word orchestrated is intentional.

Anyone can deploy an AI model. What's hard and what FIS uniquely provides is the orchestration layer, connecting Frontier AI to system of record data, routing it through bank-grade compliance infrastructure and delivering it through the trusted relationships we have with financial institutions and regulators around the world. Our financial crimes investigation agents are our first proof point and operate end-to-end across the full financial crimes life cycle. It plans, decides and acts in alignment with regulatory requirements and governance frameworks. This same architecture and the same orchestration is what will power every agent that follows across credit, fraud, onboarding and beyond, regardless of the LLM model used.

The orchestration across the AI model in a regulated industry is the difference between trust and risk, ensuring every decision is transparent, compliant and auditable and ensures planning, decisioning and action are consistently informed by bank-grade controls. This is defining a new category of participation in financial services and is shaping the next era of modern banking. And FIS is the platform it runs through. We own it and we distribute it. Turning to Slide 10. To close my remarks, Q1 was a strong quarter on every dimension. Revenue was strong, margins expanded, free cash flow more than doubled and commercial momentum continues to build. More importantly, the strategic narrative is connecting to today's generational moment.

AI, data and digital currency, the key market trends run through FIS. I'd like to thank our colleagues around the world who wake up every day to help us advance the way the world pays, banks and invests. I am confident in our full year outlook, and I'm confident in the trajectory of this business. With that, I'll turn it over to James for the financial details.

James Kehoe: Thank you, Stephanie, and good morning. We had a great start to the year, exceeding our outlook across all metrics with notable success on margins and cash flow. Revenue grew 6.5% on a pro forma basis with both segments coming in above the high end of the outlook range. Pro forma EBITDA grew 9.4% with margins up 87 basis points year-on-year, ahead of our outlook of 35 to 55 basis points. The margin expansion was driven by positive mix across both segments and continued strong execution against cost optimization programs. Adjusted EPS increased 12.4% to $1.36. Free cash flow more than doubled to $474 million, reflecting the strong EBITDA performance and disciplined management of working capital and capital expenditures.

This puts us in a great position. The first quarter is typically the lowest point for cash flow. Historically accounting for only 13% or 14% of the full year. This first quarter result already delivers 23% of the full year guide of $2.1 billion. Total debt was $21 billion with a leverage ratio of 3.6x, and we returned $260 million to shareholders, primarily through dividends. Turning now to our segment results starting on Slide 13. Banking Solutions delivered another strong set of results, building on the momentum we saw in 2025. Pro forma revenue increased 7.7%, with banking advancing 10% and payments growing 5.9%.

Recurring revenue grew 5.2%, in line with our expectations, and now accounts for 85% of segment revenue. Nonrecurring revenue grew 58%, led by strong license activity as we signed new distribution agreements with two leading technology partners. On a pro forma basis, EBITDA advanced 15% with margins expanding 240 basis points, led by favorable mix and continued cost savings. Overall, a strong start to the year for Banking Solutions as we continue to execute strongly against our commercial excellence initiatives. Turning now to Capital Markets on Slide 14. Capital Markets revenue increased 2.9% coming in above the top end of our outlook, thanks to a 125 basis point timing benefit from a license sale that closed earlier than expected.

Absent the favorable timing impact, revenue was broadly in line with our expectations. As discussed on our last earnings call, the first quarter revenue profile includes a 5 percentage point license renewal headwind due to an exceptionally strong performance in the prior year. Recurring revenue increased 3.6% in the quarter, reflecting some softness in lending related to macro volatility, and this negatively impacted recurring growth by approximately 130 basis points. While we view these lending impacts as transitory, we do expect some continued softness and have factored that into our outlook.

The first quarter will be the low point for recurring growth as we project a rising contribution from previously closed new sales over the remainder of 2026 and into 2027. Additionally, we intend to continue to prioritize recurring sales and deemphasize episodic licenses and this will also accelerate recurring revenue growth. Nonrecurring revenue grew 2.8% and professional services declined by 1%. Capital Markets EBITDA advanced 7.9% with margin expansion of 160 basis points to 51.6%. Similar to banking, the strong margin gains were fueled by favorable mix and cost savings. Turning now to Slide 15 for an update on our full year outlook. We are reiterating our full year outlook across all key metrics.

We continue to target pro forma revenue growth of 5.1% to 5.7%, with banking at 5% to 5.5% and capital markets at 5.5% to 6.5%. Banking, which now accounts for 75% of total revenue, is currently tracking closer to the upper end of its full year range, with strong momentum across key growth verticals such as digital banking and our network and money movement businesses. Capital Markets is tracking closer to the lower end of our full year revenue guide as we assume a more conservative outlook for lending activity over the course of the year.

As you have seen, we had a strong start on margins, and we are on track to deliver pro forma margin expansion of 95 to 110 basis points and this will drive adjusted EPS growth of 8% to 10%. Lastly, we doubled free cash flow in the first quarter, and we have good visibility into the remainder of the year. We are confident in the full year cash flow target of $2.1 billion. And now let me remind you of our longer-term cash flow goals on Slide 16. We expect free cash flow to double by 2028 to more than $3 billion.

Our strong start to the year continues the journey we have been on since last year with trailing 12-month free cash flow already approaching $1.9 billion. We also anticipate strong cash flow growth in the second quarter, positioning us nicely to meet or exceed our full year target. Importantly, looking beyond 2026, we are confident in delivering more than $3 billion by 2028, and continuing to grow cash flow at a multiple of earnings growth. We anticipate adding an additional $1 billion of free cash flow over the 2 years from 2026 to 2028, and the building blocks are clear: growth in EBITDA dollars and a significant reduction in onetime integration and transformation expenses.

As you have seen, we are executing strongly against our cash flow targets as our focus on commercial excellence, profitable growth and cash optimization continue to bear fruit. This will allow us to delever closer to our 2.8x leverage target, at which point we intend to meaningfully increase capital returns to shareholders. Turning now to our second quarter outlook on Slide 17. Both adjusted revenue and adjusted EBITDA will grow by more than 30% year-on-year, with EBITDA margins increasing by around 170 basis points. Pro forma revenue growth is projected at 4.9% to 5.5%. Banking is projected to grow 5.5% to 6% and Capital Markets at 3% to 4% growth.

As I mentioned earlier, Capital Markets includes a 125 basis point impact from license timing and around 50 basis points from softer lending volumes. Capital Markets recurring revenue growth will outpace adjusted revenue growth. Underlying demand is strong, with first quarter recurring ACV sales up 45%, building on 34% growth in the previous quarter. This positions us for accelerating revenue growth going forward. EBITDA growth will continue to outpace revenue growth as we drive favorable product mix and execute against our cost management programs. We anticipate margin expansion of 75 to 110 basis points, with margin expansion across both operating segments. Adjusted EPS is expected to grow 7% to 10% for the quarter, primarily driven by EBITDA growth.

In summary, we had a good start to the year across all financial targets. Pro forma revenue increased 6.5% with both segments ahead of expectations. Margin expansion was healthy, and we are on track for 95 to 110 basis points of expansion for the year. Finally, we delivered excellent cash flow results, and we are confident in our full year target. With that, operator, could you please open the line for questions?

Operator: [Operator Instructions] Our first question comes from [ Levaris ] with Mizuho.

Dan Dolev: It's actually Dan Dolev from Mizuho. Stephanie, guys, really, really strong results. Congrats from our side. I have a question and a quick follow-up. So on the Anthropic deal, is there anything that makes this partnership unique? People want to know why you partnered with them. And then it seems that there is some concern in the market that AI players can use these types of arrangements to enter new market and then longer term try to disintermediate the existing players. How do you think about that? And then I have a quick follow-up.

Stephanie Ferris: Yes. Thanks, Dan. Appreciate it. So we're really, really excited about this partnership. It's unique in a couple of ways. First of all, we didn't just sign a contract with Anthropic where we're going to use Claude Code. I mean that wouldn't be exciting. What's exciting here is that Anthropic came to us because after working with the largest financial institutions in the world, what they quickly figured out is that you have to have deep, trusted expertise, regulatory compliance capabilities. It's not just a matter of taking data and repurposing it for process flows.

So what we're excited about with respect to this partnership is they're putting their forward-deployed engineers with our engineers and our deep SMEs around each of our agents, so taking financial crimes first. As you can imagine, in terms of creating a financial crimes agent, it has a lot of regulatory and compliance systems and processes that you have to comply exactly with. So they're putting their forward-deployed engineers with our teams. We are building together alongside our first 2 banking partners and we're going to build up a set of agents which we're very excited about. In terms of can they use our -- this capability and then go disintermediate us, absolutely not. So these are our agents.

They are owned by us. Anthropic gets paid based on the token usage of the agents. We own all of the IP and we own the distribution. So think about them -- I mean, they're unique because of their fantastic LLM models, but think of them like a cloud provider. A cloud provider can't get into the significant capabilities here. So we don't see that being a risk at all, and Anthropic would tell you as well, in order for them to get into these highly complex and regulated industries, they need a partner like us to do it. So I'll turn it back to you, Dan, for your second question.

Dan Dolev: So my second question, Stephanie, is, is there any revenue contribution from the engagement contemplated in your outlook? And when do you expect that to start? When do you expect the agent to be in the market? Congrats.

Stephanie Ferris: Yes. Thank you. So as we said in my prepared remarks, we would expect this agent and then other agents to be in the market in the back half of 2026. As you can imagine, this is a really, really complicated space and has to be tested quite deeply so that it gets the exact answers correct from a compliance and regulatory standpoint. So nothing is contemplated in our guide in 2026. We would expect to see revenue come forward as we deploy those agents into the market in '26, but we'd expect to see revenue really take shape in 2027. So nothing in the guide currently.

Operator: Our next question comes from Ramsey El-Assal with Cantor Fitzgerald.

Ramsey El-Assal: Congratulations on a good quarter. I wanted to ask about the Capital Markets recurring revenue being pressured a bit by macro volatility in lending. Could you give us more color there? Is it on the securities finance side, on the corporate and commercial side? What, more precisely, is the nature of that pressure?

Stephanie Ferris: Yes, so it's in the loan syndication part of the market. We talked about this last year. Unfortunately, with these macro things happening, we are seeing people shy away from the lending activity that they would normally be doing in the public markets. And so we took the -- obviously, it was impacted in the first quarter and we expect it to be impacted in the second quarter. Specifically, debt issuances are down. You can look at that across the market. Given this little bit of volatility, we just leaned into it and for conservative purposes assumed that it would continue through the remainder of the year.

We wanted to be conservative here and kind of take the volatility out of it, but it is in debt issuances, Ramsey.

James Kehoe: Just one thing to point out is the ACV is very strong. You'll have seen in Stephanie's presentation. The recurring ACVs sold in the first quarter in the lending business is up 60%. And similarly, it was up 60% in the fourth quarter. So it's not a software or a product problem. It truly is just a temporary slowdown in the market.

Ramsey El-Assal: A quick follow-up. Visa announced that their subsidiary Pismo signed some core business with Wells Fargo. I was just curious if you're seeing any changes related to Pismo in the competitive environment or you're expecting any new competitive dynamics to emerge from that and kind of not entry but more active role in the U.S. market that Pismo is playing.

Stephanie Ferris: Yes, we were glad to see that finally come out because I think there's been a lot of swirl around that. A couple of things, Wells Fargo, absolutely no impact. We don't do consumer credit card processing there. We do commercial credit processing there. We don't do their core. And I think you probably heard from one of my competitors, Pismo isn't a core. It's a ledgering capability. So as you think about very large banks as they do core modernization, they're looking for ledgering, but we don't think it significantly changes the overall core market. It isn't a full end-to-end core.

In terms of -- so for Pismo in terms of core banking, I don't see them materially moving anything in the market. With respect to Wells, we have absolutely no impact on that. And so the last thing I'd say on Pismo obviously they've expanded or they brought it to market in terms of credit and debit. We feel really good about the total issuing capabilities there. We are the largest credit card processor in the U.S. And are happy to report that we have greater than 35% of our total issuing contracts have been renewed out through 2029. So even anything happening with Pismo in the credit world, we feel really good about our competitive positioning.

So are hopeful that some of this underlying concern around Pismo starts to die away now.

Operator: Our next question comes from Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang: Stephanie, I'd love to hear a little bit more if you could share from your client conference, specifically what clients are telling you on the TSYS acquisition, the competitive positioning there and the client demand for your 3 platforms? And also, on the bank budget side, what are you hearing? Are budgets fully funded? Is there some paralysis given all the AI momentum and discovery and pilots, et cetera? Just what's happening on the budget front?

Stephanie Ferris: Yes. Well, thank you for asking. It was a fantastic conference. I -- this is my fourth year as the CEO in the conference, and I think it's our best. What I would say is the banking industry is really strong. The fundamentals -- and I talk about a generational moment in banking right now. The fundamentals of banking are strong. They're all very healthy in terms of liquidity and capital. Regulatory is falling away. They're very focused on either growing organically or through M&A. And as you know, Tien-Tsin, we tend to be the beneficiaries of that. So I would say the underlying market is strong, which means the technology budgets are really strong.

And so the feedback we are getting is the announcements we made are exactly where they're looking to spend money. So they're spending money in digital because, obviously, we're all continuing to interact with them in a digital way. They're spending money on payments and they're really looking for how they're going to be able to compete in a digital currency way. So our Money Movement Hub is resonating. You can see that with the sales. They're just off the charts. Our tokenized deposits, Lyriq, the Project Keystone announcement was very excited. We had people saying just sign us up on that. So the payment space for them is really hot.

And then the other thing I would say is AI. So you can do AI if you're a very large financial institution, you can afford to partner up with Anthropic and take on that cost. When you get much below there, and this is why we're very excited about our partnership, and it's not much below there, you actually can't afford to spend all your money on this technology. And so they are looking -- and you're looking for us to help you really think about how do you deploy it in a regulated way? How is it auditable? How is it traceable?

How do they make sure they can do it to take out the cost, but also how are they think -- what are regulators thinking about what they're going to do with it? So demand is really strong. The market here is strong. We're excited about being solely focused in this market, not just in the U.S., but globally. And as we talked about from a community bank standpoint, and I'll take the opportunity to just make the statement clearly, this is our regional community bank conference. It's very strong. We are not receding from this market. It is a very key market for us and it continues to be the majority of our core wins come from this cohort.

We are very excited about our Horizon core that's best-in-class here that we continue to win on. So I would say very, very positive, Tien-Tsin. Thanks for the question.

Tien-Tsin Huang: That's a good complete answer. And maybe pulling on something you mentioned in the response and also to what you said to Dan's question, this concept of the banks wanting to own the agents themselves. Stephanie, are you suggesting -- and I think it's an interesting point, is the line on insourcing versus outsourcing the agent going to be similar to the threshold you see for larger banks choosing to outsource their core account processing? Is that one way to think about this ownership of the agent, if you will?

Stephanie Ferris: No, banks are looking for us to develop the agents and deploy for them. They're not looking to own agents themselves. I mean even the large banks would be very happy, and we've talked to them about the financial crimes agent because where they would like to spend time on their AI is their own internal processes where we don't make any sense to help them.

But when you think about where we land inside these banks, whether you're big or small, all of our systems that you have to use and then how everything has to be regulatory and compliant, there's really no benefit for a bank to own their own financial crimes agent if it's going to be the exact same as everybody else's, which it is, because there's no difference and no value prop to filing a SAR between a big bank or a medium-sized bank. So I don't see a view where banks want to own their own agents at all.

In fact, they're very excited about us kind of taking -- getting after a lot of these costs because they're using multiple of our systems to tackle a lot of these processes and workflows that have deep regulatory capabilities in them. So they're very happy to leverage our agents. It's faster to market for them, cheaper, et cetera.

Operator: Our next question comes from Darrin Peller with Wolfe Research.

Darrin Peller: If you could just touch on the latest on the synergies and cross-sell potential and really how it's going in terms of seeing opportunities with your customers for TSYS and issuer processing more broadly between what you already have on the debit side and the credit opportunities you could bring. So just an update there would be great and really what's embedded in the outlook now in terms of synergies, just remind us again.

Stephanie Ferris: Yes. So maybe I'll take the customer side and I'll let James remind everybody on where we are on synergies and the outlook. As we talked about when we closed this transaction, I think everybody including all of our customers felt like it was a really good fit. TSYS being inside merchant acquirer didn't make much sense for them. And so they're very happy for it to be underneath our umbrella. And we are actively in conversations in terms of the value of not just debit and credit together but also core.

And in fact, one of the key use cases we've launched with the First Bank of Puerto Rico that we talked about is a commercial or consumer credit card line increase where what's uniquely different is we can now take their TSYS data plus their core data, put it together and create a very rich experience where they can actively increase credit line increases to customers which drives a lot more revenue for them, which they couldn't do before. So we're getting a lot of interest and people are very excited. That being said, as you know, these are very large banks and sales cycles here take a bit of time.

And so we are actively engaged with all of them and we look forward to reporting on revenue synergies in the future. I think we had always said we thought it would be in '27 and '28 as those take hold. These are just very large customers with long contract cycles. I'll turn it over to James in terms of what we have in the outlook with respect to cost synergies.

James Kehoe: Yes. The long-term goals you're aware of $125 million on cost synergies, and we said that in 2026 we would deliver somewhere between $30 million and $40 million. The first quarter, it was kind of $1 million, so it was insignificant. So we will start formal reporting in the second quarter as we expect this synergy flow-through to be mostly in the second half. And then on the revenue synergies, $125 million as well, longer term, $45 million by 2028. This year we basically said it'd be a minimal impact on the income statement of the current year. And none of the guidance has changed at this stage.

Darrin Peller: Understood. James, if I look at the results, the numbers, I mean, it looks like you had better nonrecurring on a license deal and a little bit maybe of the lower end on capital markets trending now as you talked about. I guess I'm just curious on a more of a recurring revenue basis, what are the puts and takes? Is there anything that's providing upside to your initial thought for the year putting aside the license sale and just how the business is trending versus your initial expectations from a guide standpoint?

James Kehoe: I think what excites us -- and I'll maybe answer a slightly different question. I think I draw attention to the ACV, the Q1 ACV, which was up 24%. And you'll recall that Q4 was up 20% as well. And the composition is remarkably similar. You got banking in both quarters up 13% and Capital Markets up 34% in last year and 45% in Q1. So the demand is clearly there. That's what we're really excited about. And then within this, the quality of the demand, we're selling much more of the payments business and big skew to that. Lending is very strong. Digital is strong. So the growth vectors are driving this number.

So what we're looking forward to is accelerating growth. I think you're going to see it most on the Capital Markets business. It was a little light in the first quarter because of the lending business slowdown. It will accelerate in the second quarter, and we will exit the year with strong momentum on recurring on the capital markets business. So I think what -- the thing we didn't like so far was just this lending thing. The rest of the business is doing remarkably well and with remarkable consistency, and that's what I would say about the banking business. And we're spending a lot of time on the quality of the recurring.

The pipelines are pretty strong going into -- you've gone into Q2 as well. So the outlook for ACV in Q2 is good as well. So that's all we're -- that's -- I'm not saying it's really a change, but it's really encouraging us and giving us confidence on the long-term recurring trajectory of the business.

Operator: Our next question comes from Will Nance with Goldman Sachs.

William Nance: I wanted to circle back to Project Keystone. I was wondering if you could spend a little bit of time talking about the outlook for that initiative. When we think about the banks and the ongoing discussion between the banking industry and the crypto industry around stablecoins, one concern seems to be around systemic risk in deposit bases from competing factors. So how do you think about the value of tokenized deposits relative to stablecoins? And how does Project Keystone kind of insulate the banking industry or kind of address the banking industry's concerns? I have a follow-up.

Stephanie Ferris: Yes. Thanks, Will. So I think, look, the banking industry appreciates and wants to lean into digital assets and capabilities. I don't think you're seeing them trying to block them, and they're actually pretty excited that they're able to participate in it. I think the challenge for them has been where the real use cases are. And so when you think about Project Keystone, what we're hearing from banks is, look, we know we need to be in and have stablecoin capabilities.

We don't see a humongous demand from clients in terms of specific use cases, but what we're focused on here with them is really bringing them together around tokenized deposits as the first use case, which steps them into digital asset capabilities. And it's a use case that the banks care about. It is an actual use case for them that makes a ton of sense. We have a digital asset platform, Lyriq, that is tried and true and tested outside of the U.S., and we've tested it inside the U.S.

So we're excited about this capability, and we think bringing these banks together to start just on this tokenized deposit use case first and creating this network for them and on their behalf is pretty exciting because it's an actual use case that they want to work on and that will create value for them. Where it goes from there in terms of how to think about stablecoins, et cetera, this is a great step for them in that direction.

And I think you see -- you can see with the 5 U.S. banks, and boy, the demand we've had after we announced it is pretty stunning, you can see that they're very excited about getting on board with digital currencies. They know they need to do it, and they want to make sure they do it in a regulated and compliant way and they know they need network capabilities. And from an FIS standpoint, we're not interested in competing with our customers. We never said FIS was going to issue a stablecoin and compete.

And so this is perfect for us in terms of we can provide the digital asset platform and then help build out the tokenized deposit capabilities. And this is an enablement factor, again, where innovation's running through FIS versus around us.

William Nance: And then if I could just follow up on the banking revenues, more numerical question. On the nonrecurring revenues that you called out new distributor relationships, could you just maybe double-click on how that -- how you expect that to continue going forward? Is that sustainable? Does this create a grow-over issue next year? And just the general outlook given how strong the nonrecurring revenues within banking have been over the last several quarters?

Stephanie Ferris: Yes. Yes. Yes. So you've heard me talk about buy, build and partner. You've heard me talk about how important I think we are as a franchise player with a marquee set of clients, global technology or scale technology. And so you've been seeing us partner whereby we'll bring great products into our distribution where partners can sell into our base, their products. At the same time, we are starting to activate partnerships where we're activating resellers to be able to sell our products. Again, because we have best-in-class products, we have a great distribution channel, but we can always use more sales force around the world.

And so we partnered up with 2 in particular, and they are going to be out selling some of our key products to future customers like digital, for example, like money movement, et cetera, and it goes across banking and capital markets. So you saw us have a pretty big nonrecurring revenue number there. I do think it will create a grow-over for next year, but that's not the purpose of the partnerships. It's really we sold them the capability so that they can now distribute our products and we expect to see revenue come through in '27 and '28 as they become distribution partners of ours.

James Kehoe: Recurring revenue come through.

Stephanie Ferris: Yes. Recurring revenue should come through as they sell our products around the world and help us distribute. Hope that helps, Will.

Operator: Our next question comes from Rayna Kumar with Oppenheimer.

Rayna Kumar: Nice results here. I just want to go back to the competitive environment for a second. Any like observations, any changes that you've seen this quarter versus previous quarters? And like specifically, are you seeing more than usual RFPs? And secondarily, are you noticing any additional competition outside of the top 3 market share leaders?

Stephanie Ferris: So I think that what I would say broadly is, first, this is an industry where there's certainly -- there's more than 3 players. I know there's a top 3, but there's enough room for all of us to compete and win. What I would say around the competitive environment is it's competitive. It continues to be very competitive. I think -- as you would expect, I think there was a lot of excitement that there would be a ton of core activity coming out of one of my competitors' announcements. I think that, as you would expect, core is pretty sticky. It's painful to change your core.

And so there is an opportunity -- always an opportunity for people to retain core. At the same time, I do think that the market broadly, besides competitive, is looking at digital capabilities, money movement capabilities, lending capabilities, and those are things that you can't -- that are core agnostic. And so when you think about where banks are trying to spend money and where they're trying to make sure that they can grow their customer base, it's less around the core because they're focused on, ultimately, digital sales and service. How do they stay relevant in a digital currency world?

And so that's where -- that's why we've been focused on high-growth verticals, and those tend to be core agnostic. So I think the -- I guess, the long and short of it, Rayna, is the competitive environment is competitive. I'm not sure I'm seeing any new increased competitors or competition. I think that the kind of the usual suspects are around. I don't see a broad-based new competitor, but we're always on the lookout. Hope that helps.

Operator: Our next question comes from Jason Kupferberg with Wells Fargo.

Jason Kupferberg: Nice to see these numbers. I wanted to just start circling back on Anthropic. If you can talk a little bit more about the go-to-market strategy and maybe some of the economics behind the partnership. I know you said Anthropic is getting paid for token usage, but is FIS paying Anthropic at all for access to their engineers or any of the knowledge transfer involved? And any color on how many resources, how many people both companies are committing to the partnership?

Stephanie Ferris: Yes. I think, look, we have a very exciting enterprise agreement with Anthropic. The thing that's -- just like many others, the thing that's very unique about this is us jointly where they're contributing their forward-deployed engineers with us to build agents. So that's what makes it unique and very exciting. I think as you think about, like I said, ultimately, the build of these agents, they are FIS' agents as we deploy them. We will price them like all agents are priced. We have to work that out still.

But the value to Anthropic of the agreement and the capabilities is really obviously to get more financial institutions using the agent and using their LLM and ultimately taking on the value of their LLM through tokens. So I don't know that there's -- Jason, much more I can say than that, but that's how to think about it.

Jason Kupferberg: Understood. Understood. And then just looking within Banking Solutions, James, appreciate the disclosure of the subsegments, we had banking growing 10%, and we had payments growing 6% pro forma in the quarter. How should we be thinking about those relative growth rates as we proceed through the balance of the year?

James Kehoe: Yes. I think I'd maybe look at it slightly differently. The banking business had an overproportionate benefit from those licenses that we spoke about, so those long-term distribution agreements. So the 10% is probably overly boosted by that relative to the result in the payments business. I think the best way to think about this is both businesses are growing on the full year roughly the same amount, especially on recurring. But what I would say is, in general, the payments business will grow faster on recurring, probably by 1 point, at least 1 point.

So as you look out on this business, I would say that the structure of the business and the markets they operate in, they'll both be reasonably close to the full year banking guide, but payments longer term will outpace the banking business, especially on the recurring.

Stephanie Ferris: And the reason why that's important as you think about quality, we've been emphasizing a couple of things here across all the businesses. One, we are leaning into recurring revenue. That's really, really important in terms of the health of the business going forward. We're also leaning into, as we said, the higher-growth verticals where we see real organic growth as well as very high margins. And that's all resulting in revenue and product mix, which gives us a lot of confidence as you think about our margin expectations. We're very happy with the margins in Q1. You can see we're committed throughout the rest of the year. I know there's been a debate around our ability to get there.

This -- it's really important that we lean in and continue to drive recurring revenue growth in these high-growth verticals because that's what gives us the confidence in terms of durable revenue but also durable margin expansion. And so we're really excited about where we're seeing everything deliver.

Operator: Our next question comes from Andrew Schmidt with KeyBanc.

Andrew Schmidt: Broader question, just on AI in terms of organizational structure, productivity. Obviously, I've heard a lot of announcements from others in terms of faster product development, organizational structure changes, things like that. Curious how you think about this and the opportunity to sort of accelerate product velocity and streamline processes, things like that.

Stephanie Ferris: Yes, Andrew, thanks for the question. I would say we're very consistent with what you're hearing from others. So -- and we talked a bit about this before, but we implemented Copilot last year and are continuing to see a significant amount of productivity lifts in our engineering organization, we're really using that to continue to fuel new product development. We have been spending a bunch of time internally as well in our own client contact center and how do we think about, first and foremost, creating and delivering a better client experience, but also getting after productivity and workflows that are our own internal process workflows and how to drive operational improvements out of that.

I would say we -- in terms of the inside of the firm, are pretty consistent with what you're hearing from others. We are planning the forward-deployed engineers that we're getting from Anthropic where we learn shoulder to shoulder. Not only will we be using those learnings for new agents and new product development, we'll also be using those learnings and putting them into our back office.

So I'm very excited to see how we can take a trained FDE group now leaning into what Anthropic is going to teach us and not only accelerate agents, but also how do we accelerate internally making sure that we're focused on not just productivity and cost, but how do we create better outcomes for our clients either in technology or in our client organizations.

Andrew Schmidt: That's super helpful. Good point about the Anthropic relationship benefiting the FIS org as well. If I could ask about just the bank M&A environment. Obviously, you saw some elevated activity last year into this year. What are you seeing this year? Is it consistent? Has it slowed at all given everything that's going on? Just curious about implications for conversions later this year into next.

Stephanie Ferris: Yes, I would say it's consistent. It has not slowed. We're continuing to see elevated M&A. We're seeing bigger deal sizes in M&A. We're seeing a lot of our customers sort into I want to be bought and I want to be -- I want to buy or I want to be bought, which is great. That's becoming very clear. I would expect to see more just like everybody. I don't have any inside information, but M&A continues to be a tailwind for this industry and it will continue to be a tailwind for us.

Operator: Our next question comes from Bryan Bergin with TD Cowen.

Bryan Bergin: Wanted to ask on banking here. So strong demand is clear. Can you comment on whether -- this is giving you incremental pricing power across your solution side? It sounds like competition is consistent, but just curious if the solid backdrop and kind of your commercial excellence programs are enabling any added uplift in pricing and any ability to kind of unpack that in the ACV growth?

Stephanie Ferris: Yes. I would say pricing is stable. So I wouldn't say it's up or down. I would say our pricing power continues to be stable. I think our strategy is really around adding products. So as we think about the total value of a customer and if there does need to be any pricing up or pricing down, we really focus on trying to add digital or payments or Money Movement Hub or lending or will now be adding agents. So I would say overall pricing is stable.

Bryan Bergin: Okay. And on the guidance, so can you help just from like a 1Q to 2Q pro forma bridge and just the key puts and takes that flow through on each segment as far as recurring growth expectations for next quarter? And really then just the confidence of that second half uptick as you go through the balance of the year. It sounds like you're being conservative on the capital markets but just want to thought on that.

James Kehoe: Yes, we typically don't guide to recurring, but I would say that the 3% to 4% we've guided to in Capital Markets in the second quarter, that does include, again, it's a license shift into the first quarter plus some headwind of about 50 basis points coming from the slowdown in lending. So we think the business is generally on track. I would say that the recurring will be growing faster than that. So call it -- it's a mid-single-digit kind of number on recurring. So kind of getting back to what it was doing prior to the first quarter. And then on banking, I would just say the recurring is more of the same.

So we did a solid 5% recurring in the first quarter. I think it's going to be in that kind of region. So I think you'll see both businesses in the second quarter on a 5-ish kind of number.

Operator: And our final question comes from Timothy Chiodo with UBS.

Timothy Chiodo: Stephanie, you mentioned earlier on this call that switching costs that it's one of the hallmarks of this industry, right? The customers are very sticky. So I was wondering if we could talk a little bit about more of an industry topic that's coming up, which is the potential for AI to reduce that stickiness. And I was wondering if that's something you might view as either a risk or an opportunity in terms of if AI were able to make the transition from one core to another either quicker or less effort or less risk for any of the banks that would be considering such a move.

Stephanie Ferris: Yes, it's a great question, Tim. I mean, I think a couple things. One, we've already used AI to make the conversion from one core to another go faster. So I would say that's one place. The actual -- once you've decided to change your core, I do think the ability to move cores, we can go faster, which is fantastic. That's very exciting for a lot of our banks that are acquiring other banks. Haven't yet seen an actual AI-enabled full core that a bank could use. So do I think that ultimately around the edges are there places that I'm seeing right now where core switching costs could be less? I think it could go faster right now.

That's what I'm seeing. But I think the cost of switching the core is the level of complexity inside a bank. And remember, when you talk about a core -- so we're primarily talking -- let's just talk about regional and community banks. You have to switch your core, your debit card processing, your card production, your print and mail, your money movement capabilities. If you're down market, you're changing out your ledger. So it's a pretty fully integrated suite. So I think the question becomes, and we should all be on the lookout is, what does a completely AI-enabled core look like?

And again, remember, some of the biggest challenge and the biggest moat in core, specifically, in particular in the U.S., is the level of regulation you have to have to operate a core end-to-end inside, not just the federal regulations, but also all the state regulations. And that's what's kind of kept the competitive moat to the cores and made it painful for switching. I'm not going to sit on the call and tell you that I don't think there's places where AI could make the switching cost less. Like I said, I think we can implement faster. I don't see a full takedown though of like, oh, AI has come and all of a sudden, the cost is gone.

I just -- I don't see how that actually plays out, but we're always on the lookout.

Timothy Chiodo: I think it's a really helpful answer, especially the points around the debit and the print and sort of all the other downstream impacts. If you don't mind, a quick last one here is just a little -- a couple of little modeling numbers related items. So last year, in Q3, you guys called out in your slide deck that there were some pricing benefits that kicked in, and that's not something that you typically call out as a discrete driver of growth. We talk about pricing on these calls, but it was called out in Q3 of last year, so fair to say whatever that pricing was will benefit for 4 quarters.

Would you expect to see some more pricing to kind of offset the lapping of that come in, in the second half?

Stephanie Ferris: No, I don't. I don't. I actually don't even remember what pricing we called out, but it's -- pricing is stable, as I've talked about. I wouldn't expect to see any dips or anything like that. We're feeling really good about the consistency and like James said, especially of the recurring.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.