Q2 HIGHLIGHTS
- ACI total revenue up 27%
- Net income of $6 million, versus net loss of $15 million last
year
- ACI adjusted EBITDA up 80%
- Speedpay acquisition integration on track
- Reiterating 2019 and 2020 guidance
ACI Worldwide (NASDAQ: ACIW), a leading global provider of
real-time electronic payment and banking solutions, today announced
financial results for the quarter ended June 30, 2019.
“We are pleased with our results in Q2. ACI revenue increased
27%, or 6% excluding the Speedpay contribution. We continue to see
strong margin improvement in our On Demand segment which saw net
adjusted EBITDA margins of 18% compared to negative 5% last year,”
commented Phil Heasley, President and CEO, ACI Worldwide. “We are
also pleased with the integration and contribution of Speedpay and
we remain confident in our full year outlook.”
Q2 2019 FINANCIAL SUMMARY
In Q2 2019, total bookings were $301 million, up 52% from last
year. New bookings were $129 million, up slightly from Q2 last
year.
In Q2 2019, revenue was $298 million, up 27% from $235 million
in Q2 2018. Adjusting for the Speedpay contribution, Q2 revenue
grew 6% from last year. Recurring revenue increased 33% in the
quarter to $224 million, or 75% of total revenue, from $169
million, or 72% of total revenue last year. Net income in the
quarter was $6 million, versus a net loss of $15 million last year.
Adjusted EBITDA in Q2 was $55 million, up 80% from Q2 2018.
In Q2 2019, revenue from ACI’s On Demand segment was $173
million, up 52% from $114 million last year. Adjusting for the
Speedpay contribution, On Demand segment revenue grew 8% from last
year. On Demand segment net adjusted EBITDA margin improved to 18%
from negative 5% last year. On Demand segment net adjusted EBITDA
margins are adjusted for pass through interchange revenue of $78
million and $46 million, for Q2 2019 and Q2 2018, respectively.
ACI’s On Premise segment revenue was $125 million, up 3% from
$121 million last year. On Premise segment adjusted EBITDA margin
was 46% in Q2 2019 versus 45% in Q2 2018.
ACI ended Q2 2019 with a 12-month backlog of $1.1 billion and a
60-month backlog of $5.7 billion, up $328 million and $1.5 billion,
respectively. After adjusting for the Speedpay acquisition and
foreign currency fluctuations, our 12-month backlog increased $16
million and our 60-month backlog increased $29 million from Q1
2019.
Cash flows from operating activities in Q2 2019 were $14
million, versus $26 million in Q2 2018. Adjusted operating free
cash flow in Q2 2019 was $16 million, up from $13 million in Q2
2018. ACI ended Q2 2019 with $139 million in cash on hand and a
debt balance of $1.4 billion. The company has $176 million
remaining on its share repurchase authorization.
REITERATING GUIDANCE
We are reiterating our outlook for the full year 2019 and 2020.
We continue to expect 2019 total revenue to be between $1.315
billion and $1.345 billion and adjusted EBITDA to be in a range of
$360 million to $380 million, which excludes between $30 million
and $35 million in significant transaction related expenses. We
expect Q3 2019 revenue to be between $335 million and $345 million.
We continue to expect full-year 2019 new bookings growth to be in
the upper single digits to low double digits.
We continue to expect our 2020 adjusted EBITDA to be in a range
of $425 million to $445 million.
CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND
OUTLOOK
Management will host a conference call at 8:30 am ET today to
discuss these results, the Speedpay acquisition, as well as 2019
and 2020 guidance. Interested persons may access a real-time audio
broadcast of the teleconference at
http://investor.aciworldwide.com/ or use the following numbers for
dial-in participation: US/Canada: (866) 914-7436, international: +1
(817) 385-9117. Please provide your name, the conference name ACI
Worldwide, Inc. and conference code 8549868. There will be a replay
of the call available for two weeks on (855) 859-2056 for US/Canada
callers and +1 (404) 537-3406 for international participants.
About ACI Worldwide
ACI Worldwide, the Universal Payments (UP) company, powers
electronic payments for more than 5,100 organizations around the
world. More than 1,000 of the largest financial institutions and
intermediaries, as well as thousands of global merchants, rely on
ACI to execute $14 trillion each day in payments and securities. In
addition, myriad organizations utilize our electronic bill
presentment and payment services. Through our comprehensive suite
of software solutions delivered on customers’ premises or through
ACI’s private cloud, we provide real-time, immediate payments
capabilities and enable the industry’s most complete omni-channel
payments experience. To learn more about ACI, please visit
www.aciworldwide.com. You can also find us on Twitter
@ACI_Worldwide.
© Copyright ACI Worldwide, Inc. 2019.
ACI, ACI Worldwide, the ACI logo, ACI Universal Payments, UP,
the UP logo and all ACI product/solution names are trademarks or
registered trademarks of ACI Worldwide, Inc., or one of its
subsidiaries, in the United States, other countries or both. Other
parties' trademarks referenced are the property of their respective
owners.
To supplement our financial results presented on a GAAP basis,
we use the non-GAAP measures indicated in the tables, which exclude
significant transaction-related expenses, as well as other
significant non-cash expenses such as depreciation, amortization
and stock-based compensation, that we believe are helpful in
understanding our past financial performance and our future
results. The presentation of these non-GAAP financial measures
should be considered in addition to our GAAP results and are not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
GAAP. Management generally compensates for limitations in the use
of non-GAAP financial measures by relying on comparable GAAP
financial measures and providing investors with a reconciliation of
non-GAAP financial measures only in addition to and in conjunction
with results presented in accordance with GAAP. We believe that
these non-GAAP financial measures reflect an additional way to view
aspects of our operations that, when viewed with our GAAP results,
provide a more complete understanding of factors and trends
affecting our business. Certain non-GAAP measures include:
- Adjusted EBITDA: net income plus income tax expense (benefit),
net interest income (expense), net other income (expense),
depreciation, amortization and stock-based compensation, as well as
significant transaction-related expenses. Adjusted EBITDA should be
considered in addition to, rather than as a substitute for, net
income.
- Net Adjusted EBITDA Margin: Adjusted EBITDA divided by revenue
net of pass through interchange revenue. Net Adjusted EBITDA Margin
should be considered in addition to, rather than as a substitute
for, net income.
ACI is also presenting adjusted operating free cash flow, which
is defined as net cash provided by operating activities and net
after-tax payments associated with significant transaction-related
expenses, less capital expenditures. Adjusted operating free cash
flow is considered a non-GAAP financial measure as defined by SEC
Regulation G. We utilize this non-GAAP financial measure, and
believe it is useful to investors, as an indicator of cash flow
available for debt repayment and other investing activities, such
as capital investments and acquisitions. We utilize adjusted
operating free cash flow as a further indicator of operating
performance and for planning investment activities. Adjusted
operating free cash flow should be considered in addition to,
rather than as a substitute for, net cash provided by operating
activities. A limitation of adjusted operating free cash flow is
that it does not represent the total increase or decrease in the
cash balance for the period. This measure also does not exclude
mandatory debt service obligations and, therefore, does not
represent the residual cash flow available for discretionary
expenditures. We believe that adjusted operating free cash flow is
useful to investors to provide disclosures of our operating results
on the same basis as that used by our management.
ACI backlog includes estimates for SaaS and PaaS, license,
maintenance, and services revenue specified in executed contracts
but excluded from contracted revenue that will be recognized in
future periods, as well as revenue from assumed contract renewals
to the extent that we believe recognition of the related revenue
will occur within the corresponding backlog period. We have
historically included assumed renewals in backlog estimates based
upon automatic renewal provisions in the executed contract and our
historic experience with customer renewal rates.
Backlog is considered a non-GAAP financial measure as defined by
SEC Regulation G. Our 60-month backlog estimates are derived using
the following key assumptions:
- License arrangements are assumed to renew at the end of their
committed term or under the renewal option stated in the contract
at a rate consistent with historical experience. If the license
arrangement includes extended payment terms, the renewal estimate
is adjusted for the effects of a significant financing
component.
- Maintenance fees are assumed to exist for the duration of the
license term for those contracts in which the committed maintenance
term is less than the committed license term.
- SaaS and PaaS arrangements are assumed to renew at the end of
their committed term at a rate consistent with our historical
experiences.
- Foreign currency exchange rates are assumed to remain constant
over the 60-month backlog period for those contracts stated in
currencies other than the U.S. dollar.
- Our pricing policies and practices are assumed to remain
constant over the 60-month backlog period.
Estimates of future financial results are inherently unreliable.
Our backlog estimates require substantial judgment and are based on
a number of assumptions as described above. These assumptions may
turn out to be inaccurate or wrong, including, but not limited to,
reasons outside of management’s control. For example, our customers
may attempt to renegotiate or terminate their contracts for a
number of reasons, including mergers, changes in their financial
condition, or general changes in economic conditions in the
customer’s industry or geographic location, or we may experience
delays in the development or delivery of products or services
specified in customer contracts which may cause the actual renewal
rates and amounts to differ from historical experiences. Changes in
foreign currency exchange rates may also impact the amount of
revenue actually recognized in future periods. Accordingly, there
can be no assurance that contracts included in backlog estimates
will actually generate the specified revenue or that the actual
revenue will be generated within the corresponding 60-month
period.
Backlog estimates should be considered in addition to, rather
than as a substitute for, reported revenue and contracted but not
recognized revenue (including deferred revenue).
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements based on
current expectations that involve a number of risks and
uncertainties. Generally, forward-looking statements do not relate
strictly to historical or current facts and may include words or
phrases such as “believes,” “will,” “expects,” “anticipates,”
“intends,” and words and phrases of similar impact. The
forward-looking statements are made pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of
1995.
Forward-looking statements in this press release include, but
are not limited to, statements regarding: (i) expectations
regarding Speedpay integration and contribution; (ii) confidence in
our full year outlook; (iii) expectations regarding revenue,
adjusted EBITDA, and new bookings growth in 2019; (iv) expectations
regarding revenue in Q3 2019; and (v) expectations regarding our
2020 adjusted EBITDA target.
All of the foregoing forward-looking statements are expressly
qualified by the risk factors discussed in our filings with the
Securities and Exchange Commission. Such factors include, but are
not limited to, increased competition, the success of our Universal
Payments strategy, demand for our products, restrictions and other
financial covenants in our debt agreements, consolidations and
failures in the financial services industry, customer reluctance to
switch to a new vendor, the accuracy of management’s backlog
estimates, the maturity of certain products, failure to obtain
renewals of customer contracts or to obtain such renewals on
favorable terms, delay or cancellation of customer projects or
inaccurate project completion estimates, volatility and disruption
of the capital and credit markets and adverse changes in the global
economy, our existing levels of debt, impairment of our goodwill or
intangible assets, litigation, future acquisitions, strategic
partnerships and investments, integration of and achieving benefits
from the Speedpay acquisition, the complexity of our products and
services and the risk that they may contain hidden defects or be
subjected to security breaches or viruses, compliance of our
products with applicable legislation, governmental regulations and
industry standards, our ability to protect customer information
from security breaches or attacks, our compliance with privacy
regulations, our ability to adequately defend our intellectual
property, exposure to credit or operating risks arising from
certain payment funding methods, the cyclical nature of our revenue
and earnings and the accuracy of forecasts due to the concentration
of revenue-generating activity during the final weeks of each
quarter, business interruptions or failure of our information
technology and communication systems, our offshore software
development activities, risks from operating internationally,
including fluctuations in currency exchange rates, exposure to
unknown tax liabilities, volatility in our stock price, and
potential claims associated with our sale and transition of our CFS
assets and liabilities. For a detailed discussion of these risk
factors, parties that are relying on the forward-looking statements
should review our filings with the Securities and Exchange
Commission, including our most recently filed Annual Report on Form
10-K and our Quarterly Reports on Form 10-Q.
ACI WORLDWIDE, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and
in thousands, except share and per share amounts)
June 30,2019 December 31,2018 ASSETS
Current assets Cash and cash equivalents
$
139,396
$
148,502
Receivables, net of allowances
286,393
348,182
Settlement assets
613,290
32,256
Prepaid expenses
30,645
23,277
Other current assets
52,259
14,260
Total current assets
1,121,983
566,477
Noncurrent assets Accrued receivables, net
177,513
189,010
Property and equipment, net
70,805
72,729
Operating lease right-of-use assets
62,316
—
Software, net
246,314
137,228
Goodwill
1,279,472
909,691
Intangible assets, net
374,908
168,127
Deferred income taxes, net
63,569
27,048
Other noncurrent assets
53,440
52,145
TOTAL ASSETS
$
3,450,320
$
2,122,455
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable
$
46,975
$
39,602
Settlement liabilities
589,742
31,605
Employee compensation
38,976
38,115
Current portion of long-term debt
34,089
20,767
Deferred revenue
79,311
104,843
Other current liabilities
81,156
61,688
Total current liabilities
870,249
296,620
Noncurrent liabilities Deferred revenue
59,122
51,292
Long-term debt
1,352,096
650,989
Deferred income taxes, net
23,243
31,715
Operating lease liabilities
50,550
—
Other noncurrent liabilities
42,483
43,608
Total liabilities
2,397,743
1,074,224
Commitments and contingencies
Stockholders’ equity Preferred
stock
—
—
Common stock
702
702
Additional paid-in capital
650,797
632,235
Retained earnings
843,530
863,768
Treasury stock
(349,426
)
(355,857
)
Accumulated other comprehensive loss
(93,026
)
(92,617
)
Total stockholders’ equity
1,052,577
1,048,231
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
3,450,320
$
2,122,455
ACI WORLDWIDE, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months EndedJune 30, Six Months EndedJune
30,
2019
2018
2019
2018
Revenues Software as a service and platform as a service
$
172,499
$
113,600
$
281,056
$
217,880
License
52,541
45,555
73,619
73,601
Maintenance
51,922
55,048
107,033
111,707
Services
20,656
20,792
41,765
41,117
Total revenues
297,618
234,995
503,473
444,305
Operating expenses Cost of revenue (1)
155,240
116,261
270,181
223,597
Research and development
39,235
37,862
75,429
74,653
Selling and marketing
32,962
33,160
62,392
65,053
General and administrative
49,319
28,837
80,836
57,486
Depreciation and amortization
26,744
21,033
48,610
42,378
Total operating expenses
303,500
237,153
537,448
463,167
Operating loss
(5,882
)
(2,158
)
(33,975
)
(18,862
)
Other income (expense) Interest expense
(15,323
)
(9,717
)
(26,937
)
(19,082
)
Interest income
2,997
2,742
6,030
5,486
Other, net
1,402
(1,677
)
(510
)
(1,732
)
Total other income (expense)
(10,924
)
(8,652
)
(21,417
)
(15,328
)
Loss before income taxes
(16,806
)
(10,810
)
(55,392
)
(34,190
)
Income tax expense (benefit)
(22,531
)
3,764
(35,154
)
(188
)
Net income (loss)
$
5,725
$
(14,574
)
$
(20,238
)
$
(34,002
)
Income (loss) per common share Basic
$
0.05
$
(0.13
)
$
(0.17
)
$
(0.29
)
Diluted
$
0.05
$
(0.13
)
$
(0.17
)
$
(0.29
)
Weighted average common shares outstanding Basic
116,586
115,548
116,287
115,595
Diluted
118,786
115,548
116,287
115,595
(1) The cost of revenue excludes charges for depreciation but
includes amortization of purchased and developed software for
resale.
ACI WORLDWIDE, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Three Months EndedJune 30, Six Months EndedJune
30,
2019
2018
2019
2018
Cash flows from operating activities: Net income (loss)
$
5,725
$
(14,574
)
$
(20,238
)
$
(34,002
)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities: Depreciation
5,930
5,949
11,831
11,875
Amortization
23,848
18,402
42,799
37,469
Amortization of operating lease right-of-use assets
3,646
—
7,029
—
Amortization of deferred debt issuance costs
930
746
1,683
1,445
Deferred income taxes
(23,917
)
1,783
(41,331
)
(3,044
)
Stock-based compensation expense
14,372
7,705
20,957
14,067
Other
959
415
1,533
(248
)
Changes in operating assets and liabilities, net of impact of
acquisitions Receivables
(5,953
)
(1,052
)
88,596
67,689
Accounts payable
11,591
(1,047
)
1,294
(3,658
)
Accrued employee compensation
7,435
8,938
(1,163
)
(5,805
)
Current income taxes
(4,593
)
(3,674
)
(5,634
)
(7,243
)
Deferred revenue
(13,854
)
(1,184
)
(17,981
)
10,142
Other current and noncurrent assets and liabilities
(11,681
)
3,568
(32,510
)
(17,576
)
Net cash flows from operating activities
14,438
25,975
56,865
71,111
Cash flows from investing activities: Purchases of property and
equipment
(4,665
)
(5,171
)
(9,915
)
(11,108
)
Purchases of software and distribution rights
(6,722
)
(10,124
)
(11,300
)
(16,776
)
Acquisition of businesses, net of cash acquired
(758,546
)
—
(758,546
)
—
Other
—
(1,467
)
—
(1,467
)
Net cash flows from investing activities
(769,933
)
(16,762
)
(779,761
)
(29,351
)
Cash flows from financing activities: Proceeds from issuance of
common stock
922
811
1,753
1,564
Proceeds from exercises of stock options
959
5,788
5,816
14,906
Repurchase of restricted share awards and restricted share units
for tax withholdings
(185
)
(1,674
)
(2,809
)
(2,588
)
Repurchases of common stock
—
(23,414
)
(631
)
(54,527
)
Proceeds from revolving credit facility
250,000
37,000
250,000
85,000
Repayment of revolving credit facility
(15,000
)
(34,000
)
(15,000
)
(84,000
)
Proceeds from term portion of credit agreement
500,000
—
500,000
—
Repayment of term portion of credit agreement
(3,487
)
(5,188
)
(9,424
)
(10,375
)
Payments for debt issuance costs
(12,830
)
—
(12,830
)
—
Payments on other debt
(363
)
(1,198
)
(2,220
)
(1,550
)
Net cash flows from financing activities
720,016
(21,875
)
714,655
(51,570
)
Effect of exchange rate fluctuations on cash
(1,298
)
(2,586
)
(865
)
(867
)
Net decrease in cash and cash equivalents
(36,777
)
(15,248
)
(9,106
)
(10,677
)
Cash and cash equivalents, beginning of period
176,173
74,281
148,502
69,710
Cash and cash equivalents, end of period
$
139,396
$
59,033
$
139,396
$
59,033
Adjusted EBITDA
(millions) Quarter Ended June 30,
2019
2018
Net Income (Loss)
$
5.7
$
(14.6)
Plus: Income tax (benefit) expense
(22.5)
3.8
Net interest expense
12.3
7.0
Net other (income) expense
(1.4)
1.7
Depreciation expense
5.9
5.9
Amortization expense
23.9
18.4
Non-cash compensation expense
14.4
7.7
Adjusted EBITDA before significant transaction-related
expenses
$
38.3
$
29.9
Significant transaction-related expenses
16.6
0.6
Adjusted EBITDA
$
54.9
$
30.5
Segment Information
(millions) Quarter Ended June 30,
2019
2018
Revenue ACI On Premise
$
125.1
$
121.4
ACI On Demand
172.5
113.6
Total
$
297.6
$
235.0
Segment Adjusted EBITDA ACI On Premise
$
57.1
$
54.8
ACI On Demand
17.3
(3.4)
Reconciliation of Adjusted
Operating Free Cash Flow (millions) Quarter Ended June
30,
2019
2018
Net cash flows from operating activities
$
14.4
$
26.0
Net after-tax payments associated with significant
transaction-related expenses
12.5
2.2
Less: capital expenditures
(11.4)
(15.3)
Adjusted Operating Free Cash Flow
$
15.5
$
12.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190808005201/en/
John Kraft, Vice President, Investor Relations & Strategic
Analysis ACI Worldwide 239-403-4627 john.kraft@aciworldwide.com
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