ACI Worldwide, Inc.
Jul 27, 2017

ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended June 30, 2017

HIGHLIGHTS*

             *Adjusted for FX fluctuations

NAPLES, Fla., July 27, 2017 (GLOBE NEWSWIRE) --  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, 2017.  Results and comparisons discussed in the Q2 financial summary section of this press release exclude the impact of foreign currency fluctuations.

"Q2 was another strong quarter. We came in ahead of our expectations and made progress on several important initiatives," commented Phil Heasley, President and CEO, ACI Worldwide.  "Looking forward, we have large and transformational projects in the pipeline and they are progressing as expected.  We remain excited about our Universal Payments software and strategy and look forward to significant growth opportunities."

Q2 2017 FINANCIAL SUMMARY

New bookings were $137 million, which was up 11% compared to Q2 2016. Total bookings were $206 million, up 6% from last year's quarter.

Our 12-month backlog increased $18 million to $838 million and our 60-month backlog increased $24 million to $4.1 billion during the quarter. 

Revenue in Q2 was $241 million, up 10% from the same quarter last year.  Recurring revenue was $189 million, or 79% of total revenue.

Net Loss in Q2 was $30 million, impacted by a previously disclosed $48 million legal judgment.  Adjusted EBITDA in Q2 grew to $44 million, an increase of 105%, from $21 million in Q2 2016.  After adjusting for pass through interchange revenues of $46 million and $40 million in Q2 2017 and Q2 2016, respectively, net adjusted EBITDA margin in Q2 was 22% in 2017 versus 12% in Q2 of 2016.

ACI ended Q2 2017 with $95 million in cash on hand, up from $76 million at year end, and a debt balance of $705 million, which represents a decrease of $49 million from year end.  Cash flow from operating activities was $13 million in the quarter.  Adjusted operating free cash flow (OFCF) for the quarter was $2 million.

REITERATE GUIDANCE

In 2017, we expect to generate revenue in a range of $1.0 billion to $1.025 billion, which represents 2-5% organic growth.  Adjusted EBITDA is expected to be in a range of $250 million to $255 million, which excludes approximately $14 million in one-time integration related expenses for PAY.ON, the CFS divestiture, and data center and facilities consolidation, as well as the legal judgment.  We expect to generate between $210 million and $225 million of revenue in the third quarter.  We expect full year 2017 new bookings to grow in the upper single digit range. 

CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND OUTLOOK

Management will host a conference call at 8:30 am ET to discuss these results as well as 2017 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 52348890. 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. 2017. 

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:  

ACI is also presenting adjusted operating free cash flow, which is defined as net cash provided by operating activities, plus net after-tax payments associated with employee-related actions and facility closures, plus net after-tax payments associated with significant transaction-related expenses, and less capital expenditures plus European data center and cybersecurity 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 investing 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 also includes backlog estimates, which include all license, maintenance, and services (including SaaS and Platform) specified in executed contracts, as well as revenues 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 estimate represents expected revenues from existing customers using the following key assumptions:

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 revenues or that the actual revenues will be generated within the corresponding 60-month period.

Backlog should be considered in addition to, rather than as a substitute for, reported revenue and 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) progress on several important initiatives; (ii) expectations regarding large and transformational projects in the pipeline and belief that they are progressing; (iii) our excitement about our Universal Payments software and strategy; (iv) expectations regarding full-year revenue and adjusted EBITDA, and new bookings growth in 2017; and (v) expectations regarding revenue in the third quarter of 2017.

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 credit facility, 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, our strategy to migrate customers to our next generation products, ratable or deferred recognition of certain revenue associated with customer migrations and the maturity of certain of our 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, 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, the protection of our intellectual property in intellectual property litigation, 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, December 31,
   2017   2016 
ASSETS    
Current assets    
Cash and cash equivalents $  95,357  $  75,753 
Receivables, net of allowances of $3,468 and $3,873, respectively    195,154     268,162 
Recoverable income taxes    7,192     4,614 
Prepaid expenses    27,190     25,884 
Other current assets    20,584     33,578 
Total current assets    345,477     407,991 
     
Noncurrent assets    
Property and equipment, net    77,794     78,950 
Software, net    171,476     185,496 
Goodwill    915,184     909,691 
Intangible assets, net    198,192     203,634 
Deferred income taxes, net    111,843     77,479 
Other noncurrent assets    38,337     39,054 
TOTAL ASSETS $  1,858,303  $  1,902,295 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities    
Accounts payable $  36,050  $  42,873 
Employee compensation    44,220     47,804 
Current portion of long-term debt    17,774     90,323 
Deferred revenue    106,147     105,191 
Income taxes payable    5,135     11,334 
Other current liabilities    103,867     78,841 
Total current liabilities    313,193     376,366 
     
Noncurrent liabilities    
Deferred revenue    52,184     49,863 
Long-term debt    674,803     653,595 
Deferred income taxes, net    24,492     26,349 
Other noncurrent liabilities    35,731     41,205 
Total liabilities    1,100,403     1,147,378 
     
     
Stockholders' equity    
Preferred stock    -      -  
Common stock    702     702 
Additional paid-in capital    611,791     600,344 
Retained earnings    514,314     545,731 
Treasury stock    (289,927)    (297,760)
Accumulated other comprehensive loss    (78,980)    (94,100)
Total stockholders' equity    757,900     754,917 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                           $  1,858,303  $  1,902,295 
     


ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
  
    
 For the Three Months
Ended June 30,
  
  2017    2016   
      
Revenues     
Software as a service and platform as a service$  113,469  $  102,265    
License   54,180     33,510   
Maintenance   56,009     60,332   
Services   16,941     23,823   
Total revenues   240,599     219,930    
      
Operating expenses     
Cost of revenue (1)   120,357     115,384   
Research and development   34,969     46,421   
Selling and marketing   28,817     28,795   
General and administrative   72,527     34,520   
Depreciation and amortization   22,372     21,382   
Total operating expenses   279,042     246,502   
      
Operating loss   (38,443)    (26,572)  
      
Other income (expense)     
Interest expense   (10,664)    (9,715)  
Interest income   150     121   
Other   (1,766)    2,023   
Total other income (expense)   (12,280)    (7,571)  
      
Loss before income taxes   (50,723)    (34,143)  
Income tax benefit   (20,914)    (17,669)  
Net loss$  (29,809) $   (16,474)  
      
Loss per common share     
Basic$  (0.25) $  (0.14)  
Diluted$  (0.25) $  (0.14)   
      
Weighted average common shares outstanding     
Basic   117,149     115,480   
Diluted   117,149     115,480   
      
(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)
   
  For the Three Months
Ended June 30,
   2017  2016  
Cash flows from operating activities:     
Net loss $   (29,809) $  (16,474) 
Adjustments to reconcile net loss to net cash flows from operating activities:                                              
Depreciation    6,299     5,095  
Amortization    19,282     19,248  
Amortization of deferred debt issuance costs    1,026     1,248  
Deferred income taxes    (24,202)    (16,018) 
Stock-based compensation expense    8,343     13,307  
Other    (95)    (364) 
Changes in operating assets and liabilities, net of impact of acquisitions:     
Receivables    (13,469)    (5,289) 
Accounts payable    (240)    9,633  
Accrued employee compensation    8,161     8,910  
Current income taxes    (6,253)    (6,916) 
Deferred revenue    (8,208)    377  
Other current and noncurrent assets and liabilities    52,576     6,289  
Net cash flows from operating activities    13,411     19,046  
      
Cash flows from investing activities:     
Purchases of property and equipment    (5,243)    (13,590) 
Purchases of software and distribution rights    (8,587)    (3,618) 
Net cash flows from investing activities    (13,830)    (17,208 ) 
      
Cash flows from financing activities:     
Proceeds from issuance of common stock    748     801  
Proceeds from exercises of stock options    914     7,749  
Repurchase of restricted stock for tax withholdings    (1,615)    (1,406) 
Repurchases of common stock    -      (7,640) 
Repayment of revolving credit facility    -      (13,000) 
Repayment of term portion of credit agreement     (5,188)    (23,823) 
Payments on other debt and capital leases    (1,392)    (3,940) 
Net cash flows from financing activities    (6,533)    (41,259) 
      
Effect of exchange rate fluctuations on cash    2,565     (2,485) 
Net decrease in cash and cash equivalents    (4,387)    (41,906) 
Cash and cash equivalents, beginning of period    99,744     94,369  
Cash and cash equivalents, end of period $  95,357  $  52,463  
      


 ACI Worldwide, Inc. 
 Reconciliation of Selected GAAP Measures to Non-GAAP Measures 
     
 Reconciliation of Adjusted Operating Free Cash Flow  
 (millions)Quarter Ended June 30, 
   2017  2016  
 Net cash provided by operating activities$13.4 $18.4  
 Net after-tax payments associated with employee-related actions   1.3    2.0   
 Net after-tax payments associated with facility closures   0.2    -   
 Net after-tax payments associated with significant transaction related expenses   0.7    3.1  
 Less capital expenditures   (13.8) (17.2) 
 Plus capital expenditures for European datacenter and cyber security   -     6.8  
 Adjusted Operating Free Cash Flow$1.8  $13.1   
     
     
     
     
  Quarter Ended 
 Adjusted EBITDA (millions)June 30, 
   2017 2016  
 Net loss($29.8)($16.5) 
 Plus:   
 Income tax benefit   (20.9)   (17.7) 
 Net interest expense   10.5    9.6  
 Net other expense (income)   1.8    (2.0) 
 Depreciation expense   6.3    5.1  
 Amortization expense   19.3    19.3  
 Non-cash compensation expense   8.3    13.3  
 Adjusted EBITDA before significant transaction related expenses and legal judgment($ 4.5)$11.1   
 Legal judgment   46.7    -   
 Employee related actions   0.1     2.1  
 Facility closures   0.4    2.2  
 Significant transaction related expenses   1.1    3.9  
 Adjusted EBITDA$   43.8  $   19.3   
     
     
     
   Quarter Ended 
 Adjusted EBITDA excluding CFS impact (millions)June 30, 
   2017  2016   
 Total Adjusted EBITDA$43.8 $19.3  
 Retained indirect costs during TSA period   -     2.1  
 Total Adjusted EBITDA excluding CFS impact$   43.8  $    21.4   
     
     
   Quarter Ended  
 Recurring Revenue (millions)June 30
 
   20172016 
 Monthly SaaS and platform fees$113.5 $   102.3  
 Maintenance fees 56.0  60.3  
 Monthly license fees 19.5  18.3  
 Recurring Revenue$   180.9    $180.9   
       
       
For more information contact:

John Kraft, Vice President, Investor Relations & Strategic Analysis

ACI Worldwide

239-403-4627

john.kraft@aciworldwide.com

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Source: ACI WORLDWIDE CORP

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