Ladies and gentlemen, thank you for standing by. Welcome to the FIS Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Head of Corporate Finance and Investor Relations, Mr. Nathan Rozof. Please go ahead.

Good morning, and thank you for joining us today for the FIS second quarter 2020 earnings conference call. The call is being webcasted. Today's news release, corresponding presentation and webcast are available on our Web site at fisglobal.com. Gary Norcross, our Chairman, President and CEO, will discuss our quarter operating performance and business strategy, as well as the trends we are seeing with COVID-19. Woody Woodall, our Chief Financial Officer, will then review our financial results and the trends we are seeing within our segments. Turning to Slide 3, today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Please refer to the Safe Harbor language. Also, throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share. These are important financial performance measures for the company, but are not financial measures as defined by GAAP. Reconciliation of our non-GAAP information to the GAAP financial information are presented in an earnings release. With that, I'll turn the call over to Gary who will begin his remarks on Slide 5.

Thank you, Nate. Good morning and thank you for joining us today. The COVID-19 pandemic will be viewed as one of the most challenging times for our country and the world. However, I couldn’t be prouder of our response and the execution of our more than 55,000 employees in delivering a very strong quarter despite all the challenges. The pandemic has been a catalyst driving us to achieve outstanding results, all while maintaining our implementation, processing and product development commitments to our clients and prospects. This is very important given our strong multi-core sales success in converting these wins to revenues quickly as possible. COVID-19 has spurred changing consumer behaviors and reinforce the many benefits of automation, artificial intelligence and cloud native technologies, and a through omnichannel experience. Our conversations with clients who wish to adopt our next-generation suite of solutions are gaining momentum, and that continues to show through our strong quarterly sales results that we will discuss later. These trends and results drive our competence in the company's ability to accelerate growth. Turning to Slide 7. I’d like to discuss our strong second quarter. Our revenues grew 40% to almost $3 billion. This exceptional growth was achieved despite the impacts of this historic pandemic’s impact. Given shelter-in-place restrictions around the globe, revenue decreased 7% on an organic basis. While revenue faced headwinds, we expanded margins by 150 basis points as we continue to drive down our cost structures through the Worldpay integration initiatives as well as ongoing benefits from investments in technology and automation. We generated a $1.15 in EPS and over $650 million in free cash flow, reflecting the durability of our business model. Given the ongoing strength in our sales channel, our sole backlog increased 7% organically to $21 billion, giving us clear line of sight…

Thank you, Gary, and thank you all for joining us this morning. I’d like to thank our colleagues who have done exceptional work to empower our clients, giving back to our communities and support one another through a very difficult time. While the global pandemic has had a significant impact of our quarterly financials, our second quarter results exceeded our expectations across the board. I’ll begin with our financial results before transitioning to our merchant transaction trends, then I’ll finish with an update on our balance sheet, liquidity position and cash flows. This quarter demonstrated the durability of our business model as we continue to provide mission-critical technology to our clients. We remain confident in our long-term fundamentals, competitive position and overall investment thesis. Turning to Slide 14 for highlights and accomplishments in the quarter. On a consolidated basis, revenue decreased 7% organically, or 6% excluding corporate and other, exceeding our expectation from a few months ago. Organic growth is also inclusive of a 2 point headwind primarily associated with a shift in the U.S. tax filing deadline. Each of our segments performed better-than-expected, driven by strong execution and durability in banking and capital markets as well as improving consumer volumes in our merchant segment. While we remain in uncertain times, we firmly believe that FIS will be even stronger coming out of this pandemic as we leverage our global scale, robust cash flows and commitment to invest in innovation. Adjusted EBITDA increased to $1.2 billion during the quarter and our margins expanded 150 basis points to 39%, as high margin transaction volumes improved in May and June. We are reiterating our commitment to 300 million in annualized short-term cost savings in response to the pandemic. Our integration remains ahead of schedule as we see our ongoing traction in the…

Thanks, Woody. I want to conclude our prepared remarks with Slide 18 by stating our continued commitment to growth and innovation is unwavering. We’re focused on continuing to keep our colleagues safe, while simultaneously pushing forward to become the FinTech employer of choice. We truly cannot be successful if we don't maximize our talent. Inclusion and diversity is very important to me both personally and professionally, as well as it is to all of us here at FIS. Recent social unrest in the U.S. underscores the prevalence of systemic racism in our country and around the world. To that end, we recognize our responsibility to strive for sustained social change both domestically and globally. We are setting significant goals for our company, including to double the representation of Black and Latin mix leaders at FIS. We are also rolling out further programs to help our colleagues with the increasing problem related to student loan debt for incoming U.S. college program participants. For our clients, we will continue to deliver innovative solutions and support you during these difficult times. We will leverage our scale and global reach to provide best-in-class service and quality. For our communities, we are continuing to work on integrating environmental, social and governance factors into every aspect of our business. We recently launched our first-ever Global Sustainability report, which I encourage you to download from our Web site. As we maintain our commitment to ESG described in our report, I am proud of how we are operating our company with integrity and the highest ethics promoting diversity and inclusion and preserving our natural resources. Further, we will continue to contribute to our communities by donating both dollars and volunteer hours to organizations that support financial literacy and inclusion. We will invest $30 million in minority-owned FinTech startups and double our supplier spend with minority-owned businesses by 2023. Creating an environment that enables our colleagues, clients and communities to thrive demonstrates how we are leveraging our technology and innovation at scale to reinforce FIS global leadership position and to drive above market growth. This concludes our prepared remarks. Operator, please open the line for questions.

Thank you. [Operator Instructions]. Your first question comes from the line of Jason Kupferberg from Bank of America Merrill Lynch. Please go ahead.

Hi. Good morning, guys. Nice results here. I wanted to start with a top line-related question. You’ve now secured seven large next-gen core banking wins over the past three quarters. So wanted to see if you can help us roughly size how much revenue they could contribute in aggregate next year as they start to go live? And maybe as part of that, can you just comment on the 7% to 9% organic revenue growth target you guys had pre-COVID and your confidence level in that range as we move into 2021 and 2022?

Thanks, Jason. If you step back about a year ago, one of the things we talked about was banking being able to accelerate its revenue growth profile to get us into that 7% to 9% time zone of growth. I think these MBP wins and the timing of the revenue that will come on will certainly give us more confidence, if you will, and that being to drive into that 7% to 9% range in a pre-COVID world or a post-COVID world is where we are today. The revenue comes on with these MBP clients about a year after the signing. So as we’ve talked about in the last couple of quarters, we should start seeing some revenue very late in 2020 but really more of that revenue starting to flow into 2021. I don’t think we’re going to give a dollar amount of where those MBP revenues are at this point, but certainly gives us incremental confidence in being able to deliver 7% to 9% on a go-forward basis.

Yes. Let me just add a little color to that. When you look at the size in these contracts compared to our traditional core banking deals done across community banks, order of magnitude these are hands down very, very significant and large contracts compared to anything else you would do in core banking. The other thing that's important to know, not only have we signed seven as we described but keep in mind in the Modern Banking Platform wins, those are really deposits only at this point. So we have an opportunity as we launch their deposit portfolios and bring their deposit products online in this newer technology, then to move in to their lending portfolios and other areas of the traditional core bank. So we're real excited about this potential. Not only is – we’ve talked about for years penetrating the top 30 with really transformation on core, we’ve got an opportunity to grow these core relationships with successful launches on deposits. So it a really good indicator, as Woody said, to push that banking business above mid-single digits into a more upper single-digit kind of growth rate over time, and makes us very confident to the 7% and 9%, as we discussed earlier.

Terrific. Maybe just another question on the margin front. I know last quarter you gave us a guidepost for second quarter EBITDA margins. So wanted to see how we should think about Q3 margins on a year-over-year basis. I know it was kind of a sub period in last year’s Q3. And then maybe as part of that, I know last quarter you had said that full year EBITDA margins will increase year-over-year. So now that we’re halfway through the year, any thoughts on kind of magnitude of potential year-over-year improvement from a full year perspective?

Yes. I think as we go back a quarter, we try to give you guys some of the low watermark back in – where we thought we would be. Certainly have seen improving trends over that time as we tried to highlight in the prepared materials. If you think about the third quarter really and the fourth quarter, I would expect to see sequential margin expansion in both Q3 and Q4, Jason. I know the question’s coming, so I just thought I’d go ahead and just address it. We've also taken a look at consensus revenue for the third quarter and it’s reasonably in line with my expectations, even though we’re not a formal guide. With respect to margins, I think about margins for the third quarter. If you look back to 2019, margin was about 43%. We’ve got two tailwinds and one headwind going into the third quarter from a margin perspective. The first tailwind is about $90 million in operating expense synergies associated with the Worldpay acquisition. The second is a tailwind of about 100 million in those short-term cost actions that we've taken in response to the pandemic. And finally, we’ve got a headwind due to COVID impacting our transaction revenues which have close to a 90% contribution margin. And just as a reminder, as those revenues come back in a post-COVID world, we would anticipate them to return as similarly high contribution margins. So as you think about third quarter, that’s how we’re thinking about kind of the revenue outlook and the margin profile.

Okay. I appreciate all the color, guys. Thanks, again.

Thank you.

Your next question comes from the line of Darrin Peller from Wolfe Research. Please go ahead.

All right. Thanks, guys. Nice results.

Hi, Darrin.

Let me just ask. It was great to see the reacceleration on the banking segment and the capital markets segments to positive territory. Can you talk about the drivers that really, really inflected and what changed in this quarter versus last? I’m assuming a lot of that transactional revenue that hit you in March, April has gone back to positive or closer to positive category. And then when we talk about the digital transformation work we’re seeing and giving the pandemic, I guess, Gary, can you give us examples of where structurally you guys are coming out stronger because your products are meeting the incremental demand given the digital transformation needed across probably mostly in banking but maybe across the segments?

Yes. No, it’s really across all key areas, Darrin. It’s a great question. The banking business and the capital market business has both performed very well. We did see some return in our issuer transaction volumes just like you would expect as the acquiring volumes started increasing. So we see that flowing to our issuer cards. But honestly, the base business really performed because of all the investments we’ve made over the last four years in newer technology. And if you look at the success of the sales channel we highlighted today, we really had now two years of double-digit sales growth. And so what you’re really seeing is that sales growth coming on board 12 months later and starting to see good solid performance in the banking business and that’s going to continue to trend up. We’re seeing those sales come across our next-generation digital platforms, our next-generation Code Connect platforms which is when you hear people talking about open agile APIs or micro-services, Code Connect is our solution for that. We’ve been in market now for about four years with that. It really extends the openness of all of our banking systems and we’re seeing tremendous growth in that area. And then we’ve also seen very, very strong wins in core banking in the top 100, which is really a new trend that we’ve talked about that was being accelerated by the next generation of technology but now I think it’s being further accelerated by the pandemic. If you look over in capital markets, once again another really strong quarter by that team. We’ve made a lot of investment in product over the last several years and also in the technology platforms, the data center consolidation. And when we looked at product, we started building out a lot more robust digital enablement. We really started looking at solutions that go across the front, middle and back office. We also pushed hard several years ago into open APIs and micro-services. And as you look at that, now the market is starting to transform that. So we really think we’re just getting the advantage of a strategic pivot that we started four years ago and is ongoing of this rapid investment in next-generation technologies. And as the market’s breaking that direction, we’re seeing the benefit of that in the growth curve.

All right, that’s really helpful. A very quick follow up, just the e-comm business in merchant is always something that we honed in on a lot. I think it was 30%, right, the actual volume? Can you talk about the inbound new bookings you’re seeing just given it still seems like there’s only a handful of companies that could really handle cross-border e-comm. In this environment, I would expect that to be strong. Thanks, guys.

Yes. No, I absolutely agree with you. I think that was actually the crown jewel that came out of the Worldpay combination, we’ve been real excited. When you really look at global e-commerce and dealing with the complexity that comes from that, you really continue to see us being the kind of destination of choice in some of these large complex deals. And so very focused on pushing that strong demand. We had some nice wins already this year. As Woody highlighted, very strong growth in our existing clients, up 30% minus travel and airlines. It’s important to make sure we carve that out when you’re looking at really the underlying health of this business, and so very pleased at our position. I think Woody commented in his prepared remarks, we’re really leaning in to some of the next-generation capabilities there with Access Worldpay and also doing a number of other things around our processing platform. So we really feel great about our position in payments and in merchant specifically. You saw us highlight a number of other wins. And so post-COVID, this is really a good solid double-digit grower for FIS.

Great. Thanks, guys.

Thanks, Darrin.

Your next question comes from the line of David Togut from Evercore ISI. Please go ahead.

Thank you. Good morning, Gary and Woody.

Hi, David.

Hi, David.

Woody, you called out achieving your 400 million OpEx savings target on the Worldpay acquisition two years early by the end of this year. How are you thinking about that target beyond the end of this year or is that a number that can move up substantially or would you anticipate reinvesting the excess in the business?

Yes, that’s a great question, David. I think we’re always focused on continuing to drive margin expansion and look for efficiencies. I think looking back over both Gary and my career here at FIS, we’ve always had a focus on that and we’ll continue to have a focus on that. I will say, if we continue to see the amount of sales growth and delivery need that we’ll have to go make these implementations, we’ll continue to invest some of that savings back into the business to drive top line growth, David.

Yes. When you look, David – you looked at this quarter, we had 150 basis points of margin expansion, we actually invested heavily in our delivery capabilities because as you’re ramping on this kind of sales growth, it’s important that we’ve got the necessary staff to be able to deploy these complex solutions. So we want to make sure that we continue to balance it between innovation and driving modernization and transformation and also make sure that we continue to have margin expansion. But beyond the end of this year, there are a lot more levers that we have to continue to drive operating efficiencies, whether it’s increased automation using artificial intelligence which we’re doing a lot with today and really investing heavily there or whether you look at leveraging our COO organization and drive more in functional alignment to get more leverage and scale across some of our existing capabilities. But I’m very confident that you’ll continue to see margin expansion for years with FIS.

Understood. And then the capital market solutions business, you’ve talked in the last few quarter about transitioning that to a higher growth SaaS model, perhaps more mid-single-digit plus organic. How far along are you in that transition and when might we expect that higher growth rate to start coming through? It’s been very resilient certainly.

Yes, I’ll start, David. Our recurring revenue within the capital markets group has grown to a little over 70% now. We anticipate that to continue to grow as we see more and more staff sales versus license sales. Licenses were down in the quarter from the capital markets group. So I would anticipate starting to see that. You’re seen more resiliency in the growth rate right now in the capital markets group but I don’t anticipate starting to see some acceleration of that into 2021 and beyond.

Yes, I’ll just build on that. The team’s doing an excellent job of really leaning into the market and selling into the opportunities that we’re seeing with regards to SaaS. Every quarter, Woody would really look at it with regards to how many SaaS sales compared to license sales. And once again, this quarter was no different. We saw lot more SaaS sales come in than what we did on the license side. We’ve talked a lot about banking and they had double-digit sales success this quarter. Capital markets was equally very strong on sales. They had one large anonymous license fee last year. But when you really look at the fundamental underlying growth of the sales engine, it’s just a phenomenal quarter. And you saw the resiliency of it in its growth rate. So those two businesses are proving to be in very good shape at the right time in the market as you see the market breaking towards some of these new technologies. So I couldn’t be happier with what the teams are doing here.

Understood. Congrats on the strong results in a touch environment.

Thanks, David.

Thanks, David.

Your next question comes from the line of Tien-tsin Huang from JPMorgan. Please go ahead.

Hi. Thanks. Good morning. A lot of encouraging trends here. Just a follow up on some of the questions asked, just on the banking side. Who are you taking share from? How complex are these transitions going to be? And just thinking about the delivery cost of it, if there’s anything unusual to consider with so much in the backlog?

Yes. Look, it’s a great question. Our big competitors here are typically in-house developed software over decades augmented by typically some form of consulting or off-shoring firm is typically who we’re running into. As you would suspect, these are very complex implementations of this size. And one of the reasons why not only do we have compelling technology that really competes very well in the industry, really the only proven company that can do these kind of large scale complex transformations and with prove points over the years around the globe. So as Woody talked about, they run anywhere from 12 to 18 months. We’ve got some of our customers that were literally moving off technologies that were installed in the early '70s and we have some that are moving off technologies that were installed in the last 15 years. But there’s a lot of complexity in this. It takes a large program effort to manage through that. At this point, you would expect I’m very close to these implementations as well as the rest of our leaders in the company and every one of these implementations are in green status at this point. So we feel very good at how the teams are working together. These customers have not been – or these clients have not been through this kind of transformation in decades, so they’re very excited about the opportunity of what this is going to drive for them to help them compete in market. And so there’s a real sense of energy of not only getting these right but getting these installed on time. If anything, they’d love to see us pull them early. So we’re real pleased at where we are. As I mentioned with David, we’re certainly focused on investing in our implementation pipeline. We understand we don’t want our operating units to be the bottleneck for growth. So we’re making sure that we’re investing there to be able to accelerate and meet our implementation demand as the sales team brings these contracts into the company.

Yes, owning the tech and owning the deliveries should be an advantage, so got it. That’s helpful to hear. My follow up, if you don’t mind just a quick one --

Sure.

I’m just trying to understand. I know you’re a large debt processor with both sides; Worldpay and legacy FIS. Debit has been outperforming. We’ve been getting questions on how much of this is secular versus stimulus. So I figured I’d ask you for your thoughts on that? And maybe if overall you can remind us of your exposure to debt in any way? Thank you.

Yes. I’ll give you some color as we’ve messaged before and continue to message, we think our overall debit trends will max those that have been disclosed by a lot of groups in the marketplace. We continue to see growth there. I think the movement of cash out of the system more and more will continue to drive more debt transactions there, Tien-tsin. Don’t know that we disclosed the specific exposure on debit in the past, but we certainly are seeing incremental growth there and feel really good about we’re positioned there for the long term.

Yes. As we were talking about this yesterday, as you think about how much cash has actually come out of the global economy, we’re very bullish on all of our payment offerings. And as we think about how much does that naturally come back post-COVID, we think there’s a real opportunity to really see a significant jump to electronic, a lot of it moving to card not present, all of that paying significant benefits to us not only in the acquiring side but also back into the issuing side. So we’re very bullish on these businesses at the moment.

Agreed. Thanks for the update, guys.

Your next question comes from the line of Timothy Chiodo from Credit Suisse. Please go ahead.

Thanks. Thank you for taking the question. A little bit of a follow up there on the related matter, so just a broader update on the top 100 banks. I believe last fall, you mentioned about 30 of those had been penetrated in terms of outsourcing and clearly signed a good handful since then. When we think about that other two-thirds or so that’s remaining, you talked about some of them using sort of in-house developed software that’s been augmented over the years. But to what extent are some of those banks already FIS customers may be paying maintenance fees on something that was purchased on a license basis years ago and you might already have a little bit of a foothold or a relationship there? And then a quick follow up after related to the original Worldpay-Vantiv e-comm synergies.

Yes. It’s a great insightful question. We’ve got a number of those customers – a substantial number of those customers that are running in-house on our legacy technology or even outsourced on some of our legacy technology. And so it’s a real opportunity for us to cross-sell the Modern Banking Platform. Frankly, a lot of those customers are watching how a number of these top 30 institutions are going to transition and their success with the technology. But it really – not only do we have an opportunity to bring on our lending assets on top of Modern Banking Platform, but we have a huge amount of runway through the rest of the top 100 and frankly through the entire regional bank market. So just a lot of opportunity in the U.S. with this new technology. We also are seeing similar demands outside the U.S. But given all the movement right now in the U.S. markets, the sales teams are pretty focused there for now. But we think there is – as I’ve said in my prepared remarks, easily 10-plus-years of runway with this next-generation core banking transformation.

Great. That’s helpful color. Thank you. And the follow up is a quick one. I know you’re not formally providing updates on the prior Worldpay-Vantiv e-commerce synergies, but I believe the original target was roughly 100 million in run rate revs by the end of Q4 of this year and I just wanted to see if there were any comments or updates you could provide around that?

Honestly as we’ve integrated the company, it’s almost getting too complex to breakout synergies related to what deal or this deal. So we’ve really been just focusing on the go forward. Clearly, the Vantiv-Worldpay combination was very successful. And I think given our synergy results, you’re seeing the success come out of the FIS-Worldpay combination. But we’ve talked about this in the past on calls. We integrate these companies so tightly it gets difficult to actually track what is the synergy and what’s just operating execution and what’s sales execution at some point in time? And so really we kind of moved on beyond trying to track Vantiv-Worldpay and just really focused on the FIS-Worldpay going forward. But I feel great about where we are in synergies. Revenue side already being at 115 million is significant. You can go back on what our original estimation was which was just 100 million by the end of this year. Already at 115 million, we’ve got 60 million more in the implementation cycle with a really strong pipeline. So feel great about that execution. As Woody highlighted, we’ll have the operating expense side of this completely done at 400 million this year. So just a lot of really positive results coming out of the teams.

That’s all really great color. Thank you so much.

Thank you.

Your next question comes from the line of Dave Koning from Baird. Please go ahead.

Yes. Hi, guys. Thanks. Great job.

Thanks, Dave.

Thanks, Dave.

I guess my first question, just when we think about the gap between merchant – kind of core revenue decline in merchant of 19% and then some of the volume and transaction metrics that were maybe 10% or so give or take better than the revenue, which is because of the SMB, I get all that. But as volume and transaction trends get better, does that gap shrink? Meaning could we have a closer tie between revenue and some of those other metrics as things progress?

It certainly should, Dave. You’ve got some mix issues flowing, as you described there with the SMB versus, let’s call it, grocery and drug as an example. But as you see those volumes return, you should certainly see the associated convergence of the transaction trends on the revenues.

Okay. And do you get the full 6% back from the tax impact in Q2 or do you get the full 6% back in Q3?

We would certainly anticipate that, yes.

Okay. And then I guess my follow-up question, adjusted EBITDA on a pro forma basis I think was down almost 200 million year-over-year in Q2, revenues were down a little over 200 million. So they actually matched pretty closely even with the synergies coming in. Why didn’t EBITDA decline less than that just given the synergies?

Yes. The synergies are certainly flowing through as we talked about. I think you got the high contribution margin associated with the revenue themselves also impacting you there. And then we’ve tried to manage our costs as rapidly as we could in reaction to declining volumes, Dave. So the three of those together are really the impact.

Okay, great. Thank you. Great job.

The other thing, Dave, I’d just highlight too. Based on some of the results that we saw through the second quarter and based on some of our outlook, we actually re-put in some bonus adjustment back into our results and that may be the other component that you might be missing as you’re bridging there.

Your next question comes from the line of Matt O’Neill from Goldman Sachs. Please go ahead. Matthew O’Neill: Yes. Hi. Thank you guys for taking my question. A number have been asked and answered, however, I was curious at a higher level on the core banking side if as a result of the pandemic you guys are seeing a repositioning of investment dollars from your bank customers specifically around mobile and digital? It sounds like as a result of the double-digit sales trends in the quarter that that trend is likely underway, but I was just wondering if there’s any incremental color there sort of from the customer perspective? And then I had a quick follow up. Thank you.

Yes. We clearly are seeing that repositioning and you’ve seen strong double-digit sales growth for the last two years every quarter coming out of the banking group. And when we talk about sales growth, that’s new TCV. That’s not renewal. So that’s now – we don’t disclose that. We had very, very high retention rates. But really focusing on new business coming into FIS. And you’re exactly right that the banking industry and we talked about it on last quarter’s call, if you look at what’s happened, they continued to invest in digital over the years. The problem is given their legacy technology that’s underlying their digital framework, they just can’t move fast enough. They don’t have enough agility in deployment and they just can’t get their cost down because of this foundational issue. And so we’re now seeing people lean in heavily on Modern Banking Platform, they’re leaning in heavily into micro-services and they’re leaning into next-generation digital to take advantage of all of that, and just really seeing strong growth across the pipeline. And then when you augment all of that with a lot of back office services that banks are continuing to push on all about trying to just lower their total cost of ownership. So a lot of people have asked given the interest rate environment and given the pandemic, why aren’t we seeing spend decline? The reality is, most of our customers have just held on too long. And I think at this point, they realize they’re going to have to transform and spend their way out of this issue this have in order to be able to compete in the future. And so we’re certainly seeing the benefit of that through our sales success. Matthew O’Neill: Thanks. That makes a lot of sense. And then just as a follow up to the last question, I know this has been talked about a little bit. But just on the merchant yield, I was curious around how impactful the underlying mix of transactions kind of away from travel, for example, and presumably a shift more towards things like big box and grocery and things like that that are maybe lower yield. Is that underpinning some of the trends that we saw in the quarter?

That is certainly a component for the mix of the customer base and where the volumes come off and where they came back, that’s certainly a component of what’s going on with yield there. Matthew O’Neill: Okay. Thanks so much.

Your next question comes from the line of Ashwin Shirvaikar from Citi. Please go ahead.

Hi, guys. Hi, Gary. Hi, Woody.

Hi, Ashwin.

Hi. Solid results here. Congratulations to you and the team and good to hear from you.

Thank you.

So achieving your synergy goals two years in advance is impressive. A quick clarification there. Is that even though you’ve had obviously certain volume-related headwinds with EBITDA flow through? In other words, without that you will be taking up the number. And more broadly as you kind of learn to operate in this current environment, can you call out factors that you noticed or you said, why don’t we make this change permanent? So what might your cost structure look like next year? Can you talk about people, product development, real estate footprint, things like that?

Yes. I think if you think about what we did, we had more permanent long-term synergies that we’ve talked about at 700 plus, 400 of that operating by the end of the year. We also took about a $300 million set of actions that were more short-term in nature, Ashwin, in response to declining volumes. Can some of those be permanent? Probably so. We haven’t gotten through exactly where we’re at. Some of that will be permanent in terms of like short-term bonus, in terms of some of the travel that may return in the process. But we’re working through how much of that can we keep out of the cost structure permanently. That’s ongoing right now as we speak, very live in terms of facilities rationalization, in terms of other things that we think we can do and reduce our cost structure permanently and it will flow into 2021 as part of the longer term module expansion opportunities.

Yes. Some examples of that, Ashwin, you actually – you said in your question, we’re looking really hard at global real estate. We’re successfully operating from home today. We’re taking a real hard look on whether we even reopen those offices. We’re also looking at some of the basis of some of our travel that we had done historically and really taking a hard look at that. We’re also bringing a lot more leverage through our toolsets and technology, as I mentioned, and all of these things are good short-term levers but as Woody pointed out there will be a number of things that we don’t think we’ll spend in the reopen. And so that will then push into next year. We also have growing efficiencies around some of these large programs, multiyear programs we’ve been running. The NAP program is ramping up. Our data center consolidation program we’re wrapping up. So all of these things will also push into our margins next year as well.

Got it. Okay. And some pretty good sales announcements there. It seems like you might have cracked the code on how to sell or at least close deals in this remote environment. Can you talk broadly about how the bank spending environment is evolving? You kind of mentioned obviously some category changes that are receiving from a more digital, more mobile, less branch work obvious – kind of some of the puts and takes around how the offering is changing, on how the selling process is changing, a little more detail would be great?

Yes. We’re really seeing spend increase in the areas that we started focusing on about four years ago. So where are people spending? Let’s first start with where they’re not spending. They’re not spending for on-premise type deployments. They're not spending in legacy technology today. Those are areas they're not spending on, which is where traditionally they were spending in many instances over the last three, four, five years. What we’re seeing is that really high accelerated spend. How do we take advantage of the massive deployment of cloud technology that FIS has done over the last four years? It certainly raises their availability to any – to nothing the industry is seeing. Frankly lowers their overall total cost of ownership. So really taking advantage of our cloud investments has been very important. They’re leaning in hard on our open API frameworks and spending a lot of money in that area. One, it gives them flexibility to modernize their more componentized approach. So instead of trying to do something big bang, they’re going to focus on the individual components. That then leads into seeing a lot of spend around our next generation componentized architecture, whether it’s digital enablement. So as you think about our Digital One platform, that really is truly a new omnichannel platform where no matter where the interaction with the consumer or the business occurs, no matter what channel, it goes through a unique platform. So there is a consistency and literally someone can start in one channel and end the interaction in a totally different channel. And we’re seeing that not only in banking; we’re seeing the same thing in capital markets, frankly seeing the same thing over in our Merchant business as well. So you’re right. They’re definitely moving spend from the traditional legacy. They’re putting a lot of those solutions more in a maintenance mode and then really trying to move and spend in next-generation digital engagement.

That’s great. I might have missed whether you mentioned something on whether the pipeline increased.

Yes. The pipeline is very strong. We’re very pleased with what we’re seeing going on in our pipeline. It continues to grow. We traditionally have run our pipelines at about 2x of what we’re looking to generate in any given quarter in sales. And I would say our pipelines are running higher than that today. So we’re real pleased with where – not only our sales success, but the sales team is doing a very nice job of going out and building transaction momentum through pipeline. And obviously not everything in your pipeline closes. We’ve talked about that a lot over the years that I’ve been CEO. But we’re seeing very healthy activity in the pipeline as well, seeing a lot of deal flow coming in and going all the way through the decisions. So at this point in time, I think Q3 is shaping up to be another strong quarter in sales for us.

That’s great. Thank you.

And your final question today comes from the line of George Mihalos from Cowen. Please go ahead.

Hi. Congrats guys on very solid results and encouraging trends.

Thanks, George.

Thanks, George.

I just wanted to circle back to your commentary on volumes within the merchant segment, I think up 4% or so in June and getting better. Just a point of clarification, when we compare that to the networks, that would seem to just suggest an acceleration to kind of the high-single digits, 7%-ish range or something like that. Just want to make sure I’m thinking about that correctly. And then related to that, it sounds like e-comm clearly getting better, more momentum there. Are you continuing to see improvement though in the U.S. SMB channel or has that started to kind of flatten off in terms of improvements in July?

Yes, I’ll touch base on the volumes and sales. We continue to see and continue to message that we are seeing volumes and trends right in line with the networks, as they continue to drive information in the marketplace out by week, by month. We continue to be right on top of those trends overall. So I think that’s absolutely the case and we would continue to expect that, given the scale and size of the business and our exposure across the globe similar to the networks. On the e-comm side, could you repeat the question on the e-comm side? I couldn’t hear you exactly, George.

The e-comm side sounds like it’s showing additional momentum, but just curious about U.S. SMB. Is that continuing to improve as well or has that started to flatten out?

No. I think it would continue to improve as well as we go forward here. Demand for e-comm continues to be robust across the board. But I think that trend will continue for quite a long time, given the environment that we’re in.

Okay, great. And just a quick follow up as it relates to the e-comm side competitively. The demise of Wirecard in Germany, is that an opportunity for you guys or is that something that could be helpful from a new business win perspective?

Yes. As we look at it, we certainly – some of the customers that were utilizing or some of the merchants that were utilizing Wirecard, we see that as an opportunity for organic sales. We’ve already had some success in signing some of those customers and we’ll continue to focus on it. Obviously, they’ve got to clear our standards around risk tolerance and other things, but we see a really continued good sales opportunity across the board through our organic approaches with our go-to markets in the various markets.

Thanks, guys. Nice job.

Thank you. Thank you for joining us today and for your ongoing interest and investment in FIS. I would also like to thank our clients for the trust they place in us to keep their businesses up and running every day. I’d also like to send my sincerest thanks to our more than 55,000 employees worldwide who without their efforts, we could not accomplish these results. If you have any further questions that were not addressed on this call, then please contact our Investor Relations team. Thank you. Be safe and goodbye.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.