ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended March 31, 2018
HIGHLIGHTS
- New bookings up 142% over Q1 2017
-
60-month backlog increased to
$4.4 billion - ACI On Demand segment revenue up 6% over Q1 2017
- ACI On Demand adjusted net EBITDA margin up over 800 basis points over Q1 2017
- Reiterating full year 2018 guidance
“ACI had a solid quarter with bookings that grew significantly over Q1
of last year. Our On Demand segment continues to grow nicely and we are
starting to see the progression towards our long term revenue and
profitability targets,” commented
Q1 2018 FINANCIAL SUMMARY
New bookings were
Effective
Under ASC 606, revenue in Q1 2018 was
In Q1 2018, revenue from ACI’s On Demand segment grew 5% over last year,
on a reported basis. Under the comparative ASC 605 basis, ACI’s On
Demand segment grew 6%. ACI On Demand segment adjusted net EBITDA margin
increased over 800 basis points from last year, under the comparative
ASC 605 basis. Net EBITDA margins are adjusted for pass through
interchange revenues representing
ACI ended Q1 2018 with a 12-month backlog of
ACI ended Q1 2018 with
REITERATING GUIDANCE
The company expects the adoption of ASC 606 to impact the timing and amount of revenue recognition for its on-premise licensing arrangements. The company does not expect the adoption of ASC 606 to have a significant impact on its other revenue streams or cash flows from operations. The company has provided its full-year and second quarter outlook under both ASC 606 and ASC 605 in order to provide additional transparency. The company will continue to provide actual results under both ASC 606 and ASC 605 throughout 2018.
For the full year 2018 under ASC 606, the Company expects revenue to be
between
For the full year 2018 under ASC 605, the Company expects revenue to be
between
CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND OUTLOOK
Management will host a conference call at
About
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ACI, ACI Worldwide, ACI
Payment Systems, the ACI logo and all ACI product names are trademarks
or registered trademarks of
Product roadmaps are for informational purposes only and may not be incorporated into a contract or agreement. The development release and timing of future product releases remains at ACI’s sole discretion. ACI is providing the following information in accordance with ACI's standard product communication policies. Any resulting features, functionality, and enhancements or timing of release of such features, functionality, and enhancements are at the sole discretion of ACI and may be modified without notice. All product roadmap or other similar information does not represent a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision.
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, operating income.
ACI is also presenting adjusted operating free cash flow, which is defined as net cash provided by operating activities, net after-tax payments associated with employee-related actions and facility closures, and net after-tax payments associated with significant transaction-related expenses. 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 backlog includes estimates for SaaS and PaaS, license, maintenance, and services specified in executed contracts but excluded from contracted revenue that will be recognized in future periods, 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
- 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 revenues or that the actual revenues 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) our belief that we are starting to see the progression towards our long term revenue and profitability targets; (ii) our confidence in achieving our full year guidance; (iii) expectations regarding revenue, adjusted EBITDA, and new bookings growth in 2018; and (iv) expectations regarding revenue in the second quarter of 2018.
All of the foregoing forward-looking statements are expressly qualified
by the risk factors discussed in our filings with the
ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands, except share and per share amounts) |
||||||||||
March 31, | December 31, | |||||||||
2018 | 2017 | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 74,281 | $ | 69,710 | ||||||
Receivables, net of allowances of $4,001 and $4,799, respectively | 278,369 | 262,845 | ||||||||
Recoverable income taxes | 7,673 | 7,921 | ||||||||
Prepaid expenses | 29,961 | 23,219 | ||||||||
Other current assets | 29,010 | 58,126 | ||||||||
Total current assets | 419,294 | 421,821 | ||||||||
Noncurrent assets | ||||||||||
Accrued receivables, net | 187,133 | - | ||||||||
Property and equipment, net | 80,775 | 80,228 | ||||||||
Software, net | 150,653 | 155,386 | ||||||||
Goodwill | 909,691 | 909,691 | ||||||||
Intangible assets, net | 188,688 | 191,281 | ||||||||
Deferred income taxes, net | 22,109 | 66,749 | ||||||||
Other noncurrent assets | 56,826 | 36,483 | ||||||||
TOTAL ASSETS | $ | 2,015,169 | $ | 1,861,639 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 33,479 | $ | 34,718 | ||||||
Employee compensation | 34,350 | 48,933 | ||||||||
Current portion of long-term debt | 20,379 | 17,786 | ||||||||
Deferred revenue | 111,639 | 107,543 | ||||||||
Income taxes payable | 6,178 | 9,898 | ||||||||
Other current liabilities | 64,312 | 102,904 | ||||||||
Total current liabilities | 270,337 | 321,782 | ||||||||
Noncurrent liabilities | ||||||||||
Deferred revenue | 45,380 | 51,967 | ||||||||
Long-term debt | 658,861 | 667,943 | ||||||||
Deferred income taxes, net | 26,564 | 16,910 | ||||||||
Other noncurrent liabilities | 35,005 | 38,440 | ||||||||
Total liabilities | 1,036,147 | 1,097,042 | ||||||||
Stockholders' equity | ||||||||||
Preferred stock | - | - | ||||||||
Common stock | 702 | 702 | ||||||||
Additional paid-in capital | 616,913 | 610,345 | ||||||||
Retained earnings | 775,420 | 550,866 | ||||||||
Treasury stock | (342,316 | ) | (319,960 | ) | ||||||
Accumulated other comprehensive loss | (71,697 | ) | (77,356 | ) | ||||||
Total stockholders' equity | 979,022 | 764,597 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,015,169 | $ | 1,861,639 | ||||||
ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share amounts) |
||||||||||
For the Three Months Ended March 31, | ||||||||||
2018 | 2017 | |||||||||
Revenues | ||||||||||
Software as a service and platform as a service | $ | 104,280 | $ | 99,447 | ||||||
License | 28,046 | 59,381 | ||||||||
Maintenance | 56,659 | 54,471 | ||||||||
Services | 20,325 | 18,163 | ||||||||
Total revenues | 209,310 | 231,462 | ||||||||
Operating expenses | ||||||||||
Cost of revenue (1) | 107,336 | 108,543 | ||||||||
Research and development | 36,791 | 37,285 | ||||||||
Selling and marketing | 31,893 | 27,137 | ||||||||
General and administrative | 28,649 | 32,503 | ||||||||
Depreciation and amortization | 21,345 | 22,371 | ||||||||
Total operating expenses | 226,014 | 227,839 | ||||||||
Operating income (loss) | (16,704 | ) | 3,623 | |||||||
Other income (expense) | ||||||||||
Interest expense | (9,365 | ) | (10,160 | ) | ||||||
Interest income | 2,744 | 106 | ||||||||
Other, net | (55 | ) | 649 | |||||||
Total other income (expense) | (6,676 | ) | (9,405 | ) | ||||||
Loss before income taxes | (23,380 | ) | (5,782 | ) | ||||||
Income tax benefit | (3,952 | ) | (4,174 | ) | ||||||
Net loss | $ | (19,428 | ) | $ | (1,608 | ) | ||||
Loss per common share | ||||||||||
Basic | $ | (0.17 | ) | $ | (0.01 | ) | ||||
Diluted | $ | (0.17 | ) | $ | (0.01 | ) | ||||
Weighted average common shares outstanding | ||||||||||
Basic | 115,642 | 116,610 | ||||||||
Diluted | 115,642 | 116,610 |
(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 March 31, | ||||||||||
2018 | 2017 | |||||||||
Cash flows from operating activities: | ||||||||||
Net loss | $ | (19,428 | ) | $ | (1,608 | ) | ||||
Adjustments to reconcile net loss to net cash flows from operating activities: | ||||||||||
Depreciation | 5,926 | 6,274 | ||||||||
Amortization | 19,067 | 19,364 | ||||||||
Amortization of deferred debt issuance costs | 699 | 1,734 | ||||||||
Deferred income taxes | (4,827 | ) | (5,919 | ) | ||||||
Stock-based compensation expense | 6,362 | 6,297 | ||||||||
Other | (663 | ) | 538 | |||||||
Changes in operating assets and liabilities | ||||||||||
Receivables | 68,741 | 84,033 | ||||||||
Accounts payable | (2,611 | ) | (3,689 | ) | ||||||
Accrued employee compensation | (14,743 | ) | (12,421 | ) | ||||||
Current income taxes | (3,569 | ) | (3,339 | ) | ||||||
Deferred revenue | 11,326 | 9,049 | ||||||||
Other current and noncurrent assets and liabilities | (21,144 | ) | (14,627 | ) | ||||||
Net cash flows from operating activities | 45,136 | 85,686 | ||||||||
Cash flows from investing activities: | ||||||||||
Purchases of property and equipment | (5,937 | ) | (6,566 | ) | ||||||
Purchases of software and distribution rights | (6,652 | ) | (5,839 | ) | ||||||
Net cash flows from investing activities | (12,589 | ) | (12,405 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuance of common stock | 753 | 693 | ||||||||
Proceeds from exercises of stock options | 9,118 | 7,035 | ||||||||
Repurchase of restricted stock for tax withholdings | (914 | ) | (3,155 | ) | ||||||
Repurchases of common stock | (31,113 | ) | - | |||||||
Proceeds from revolving credit facility | 48,000 | 12,000 | ||||||||
Repayment of revolving credit facility | (50,000 | ) | (100,000 | ) | ||||||
Proceeds from term portion of credit agreement | - | 415,000 | ||||||||
Repayment of term portion of credit agreement | (5,187 | ) | (370,477 | ) | ||||||
Payment of debt issuance costs | - | (5,340 | ) | |||||||
Payments on other debt and capital leases | (352 | ) | (4,629 | ) | ||||||
Net cash flows from financing activities | (29,695 | ) | (48,873 | ) | ||||||
Effect of exchange rate fluctuations on cash | 1,719 | (417 | ) | |||||||
Net increase in cash and cash equivalents | 4,571 | 23,991 | ||||||||
Cash and cash equivalents, beginning of period | 69,710 | 75,753 | ||||||||
Cash and cash equivalents, end of period | $ | 74,281 | $ | 99,744 | ||||||
ACI Worldwide, Inc. |
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Adjusted EBITDA (millions) | Quarter Ended March 31, | ||||||||||||||
2018 | 2018 | 2017 | |||||||||||||
As Reported ASC 606 |
Under ASC 605 |
||||||||||||||
Net income | $ | (19.4 | ) | $ | (7.5 | ) | $ | (1.6 | ) | ||||||
Plus: | |||||||||||||||
Income tax expense | (4.0 | ) | (2.0 | ) | (4.2 | ) | |||||||||
Net interest expense | 6.6 | 9.2 | 10.0 | ||||||||||||
Net other expense (income) | 0.1 | 0.7 | (0.6 | ) | |||||||||||
Depreciation expense | 5.9 | 5.9 | 6.3 | ||||||||||||
Amortization expense | 19.1 | 19.1 | 19.3 | ||||||||||||
Non-cash compensation expense | 6.4 | 6.4 | 6.3 | ||||||||||||
Adjusted EBITDA before significant transaction related expenses | $ | 14.7 | $ | 31.8 | $ | 35.5 | |||||||||
Significant transaction related expenses | 4.3 | 4.3 | 6.1 | ||||||||||||
Adjusted EBITDA | $ | 19.0 | $ | 36.1 | $ | 41.6 | |||||||||
Segment Information (millions) | Quarter Ended March 31, | ||||||||||||||
2018 | 2018 | 2017 | |||||||||||||
Revenue | As Reported ASC 606 |
Under ASC 605 |
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ACI On Premise | $ | 105.0 | $ | 119.7 | $ | 131.9 | |||||||||
ACI On Demand | 104.3 | 105.2 | 99.6 | ||||||||||||
Total | $ | 209.3 | $ | 224.9 | $ | 231.5 | |||||||||
Segment Adjusted EBITDA | |||||||||||||||
ACI On Premise | $ | 38.9 | $ | 54.0 | $ | 68.4 | |||||||||
ACI On Demand | (4.2 | ) | (2.2 | ) | (7.0 | ) | |||||||||
Reconciliation of Adjusted Operating Free Cash Flow (millions) | Quarter Ended March 31, |
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2018 | 2017 | ||||||||||||||
Net cash flows provided by operating activities | $ | 45.1 | $ | 85.7 | |||||||||||
Net after-tax payments associated with significant transaction related expenses | 3.6 | 3.0 | |||||||||||||
Less capital expenditures | (12.6 | ) | (12.4 | ) | |||||||||||
Adjusted Operating Free Cash Flow | $ | 36.1 | $ | 76.3 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180510005207/en/
Source:
ACI Worldwide
John Kraft, 239-403-4627
Vice President,
Investor Relations & Strategic Analysis
john.kraft@aciworldwide.com