ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended June 30, 2014
HIGHLIGHTS
-
SNET bookings of
$150 million , up 16% from Q2 last year -
Non-GAAP revenue of
$255 million , up 23% from Q2 last year -
Operating free cash flow of
$28 million , up 29% from Q2 last year -
Non-GAAP operating income of
$31 million , up 76% from Q2 last year -
Adjusted EBITDA of
$56 million , up 46% from Q2 last year - Reiterating organic 2014 financial guidance
"ACI had a strong second quarter, driven by continued market interest in
our Universal Payments solutions and solid execution company wide,"
commented
FINANCIAL SUMMARY
Financial Results for Q2
Non-GAAP revenue in Q2 was
New sales bookings, net of term extensions (SNET) increased 16% compared
to the prior year quarter, or 14% excluding the contribution from
Official Payments. Our 12-month backlog increased by
Non-GAAP operating income was
Q2 GAAP net income was
We ended the second quarter with
Reiterating Guidance
Excluding contribution from the pending acquisition of Retail Decisions
(ReD), we continue to expect to generate non-GAAP revenue in a range of
About
To supplement our financial results presented on a GAAP basis, we use
the non-GAAP measures indicated in the tables, which exclude certain
business combination accounting entries related to the acquisitions of
S1 Corporation and
- Non-GAAP revenue: revenue plus deferred revenue that would have been recognized in the normal course of business by S1 and Online Resources if not for GAAP purchase accounting requirements. Non-GAAP revenue should be considered in addition to, rather than as a substitute for, revenue.
- Non-GAAP operating income: operating income (loss) plus deferred revenue that would have been recognized in the normal course of business by S1 and Online Resources if not for GAAP purchase accounting requirements and significant transaction-related expenses. Non-GAAP operating income should be considered in addition to, rather than as a substitute for, operating income (loss).
- Adjusted EBITDA: net income (loss) plus income tax expense (benefit), net interest income (expense), net other income (expense), depreciation, amortization and non-cash compensation, as well as deferred revenue that would have been recognized in the normal course of business by S1 and Online Resources if not for GAAP purchase accounting requirements and significant transaction related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, operating income (loss).
ACI is also presenting 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, net after-tax payments associated with significant transaction-related costs, net after-tax payments associated with IBM IT outsourcing transition and termination, and less capital expenditures. 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 operating free cash flow as a further indicator of operating performance and for planning investing activities. 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 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 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 software license fees, maintenance fees and services 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
- 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.
- License, facilities management, and software hosting arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences.
- Non-recurring license arrangements are assumed to renew as recurring revenue streams.
- 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 for 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) interest in our Universal Payments solutions; (ii) expectations regarding the acquisition of Retail Decisions; (iii) optimism regarding the remainder of 2014 and beyond; (iv) expectations regarding revenue, adjusted EBITDA, and sales, net of term guidance in 2014; (v) expectations regarding Q3 2014 revenue; and (vi) expectations relating to the timing of the close of Retail Decisions and the revenue and EBITDA contributions during the remainder of 2014.
All of the foregoing forward-looking statements are expressly qualified
by the risk factors discussed in our filings with the
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands, except share and per share amounts) |
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2014 | 2013 | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 54,982 | $ | 95,059 | ||||||
Receivables, net of allowances of |
206,901 | 203,575 | ||||||||
Deferred income taxes, net | 74,247 | 47,593 | ||||||||
Recoverable income taxes | 3,009 | 2,258 | ||||||||
Prepaid expenses | 21,580 | 22,549 | ||||||||
Other current assets | 29,884 | 65,328 | ||||||||
Total current assets | 390,603 | 436,362 | ||||||||
Property and equipment, net | 54,731 | 57,347 | ||||||||
Software, net | 191,465 | 191,468 | ||||||||
Goodwill | 668,566 | 669,217 | ||||||||
Intangible assets, net | 224,505 | 237,693 | ||||||||
Deferred income taxes, net | 41,740 | 48,852 | ||||||||
Other noncurrent assets | 42,594 | 40,912 | ||||||||
TOTAL ASSETS | $ | 1,614,204 | $ | 1,681,851 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 41,235 | $ | 43,658 | ||||||
Employee compensation | 36,665 | 35,623 | ||||||||
Current portion of long-term debt | 59,141 | 47,313 | ||||||||
Deferred revenue | 141,388 | 122,045 | ||||||||
Income taxes payable | 2,625 | 1,192 | ||||||||
Deferred income taxes, net | 691 | 753 | ||||||||
Other current liabilities | 55,639 | 95,016 | ||||||||
Total current liabilities | 337,384 | 345,600 | ||||||||
Noncurrent liabilities | ||||||||||
Deferred revenue | 48,229 | 45,656 | ||||||||
Long-term debt | 693,500 | 708,070 | ||||||||
Deferred income taxes, net | 10,078 | 11,000 | ||||||||
Other noncurrent liabilities | 22,347 | 27,831 | ||||||||
Total liabilities | 1,111,538 | 1,138,157 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders' equity | ||||||||||
Preferred stock; |
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and outstanding at |
- | - | ||||||||
Common stock; |
||||||||||
shares issued at |
698 | 698 | ||||||||
Additional paid-in capital | 547,201 | 542,697 | ||||||||
Retained earnings | 269,317 | 263,855 | ||||||||
Treasury stock, at cost, 25,736,694 and 23,255,421 shares at |
(300,454 | ) | (240,241 | ) | ||||||
Accumulated other comprehensive loss | (14,096 | ) | (23,315 | ) | ||||||
Total stockholders' equity | 502,666 | 543,694 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,614,204 | $ | 1,681,851 | ||||||
|
Note: All references to share amounts have been retroactively adjusted
to reflect the
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share amounts) |
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For the Three Months Ended |
For the Six Months Ended |
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2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
Revenues | ||||||||||||||||||||||
License | $ | 61,377 | $ | 53,714 | $ | 97,079 | $ | 95,070 | ||||||||||||||
Maintenance | 62,309 | 57,830 | 124,808 | 116,464 | ||||||||||||||||||
Services | 24,991 | 26,964 | 47,579 | 50,893 | ||||||||||||||||||
Hosting | 106,131 | 67,322 | 206,815 | 105,400 | ||||||||||||||||||
Total revenues | 254,808 | 205,830 | 476,281 | 367,827 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||
Cost of license (1) | 6,897 | 6,169 | 12,633 | 12,087 | ||||||||||||||||||
Cost of maintenance, services and hosting (1) | 112,595 | 82,573 | 220,482 | 144,444 | ||||||||||||||||||
Research and development | 38,876 | 38,391 | 76,332 | 75,540 | ||||||||||||||||||
Selling and marketing | 28,007 | 27,538 | 55,916 | 52,612 | ||||||||||||||||||
General and administrative | 24,682 | 26,147 | 49,798 | 51,184 | ||||||||||||||||||
Depreciation and amortization | 17,010 | 13,490 | 34,088 | 24,447 | ||||||||||||||||||
Total operating expenses | 228,067 | 194,308 | 449,249 | 360,314 | ||||||||||||||||||
Operating income | 26,741 | 11,522 | 27,032 | 7,513 | ||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||
Interest expense | (9,329 | ) | (6,053 | ) | (18,504 | ) | (9,950 | ) | ||||||||||||||
Interest income | 135 | 211 | 334 | 342 | ||||||||||||||||||
Other, net | (3,901 | ) | (1,519 | ) | (4,958 | ) | 1,646 | |||||||||||||||
Total other income (expense) | (13,095 | ) | (7,361 | ) | (23,128 | ) | (7,962 | ) | ||||||||||||||
Income (loss) before income taxes | 13,646 | 4,161 | 3,904 | (449 | ) | |||||||||||||||||
Income tax expense (benefit) | 2,409 | 2,280 | (1,558 | ) | (164 | ) | ||||||||||||||||
Net income (loss) | $ | 11,237 | $ | 1,881 | $ | 5,462 | $ | (285 | ) | |||||||||||||
Income (loss) per common share | ||||||||||||||||||||||
Basic | $ | 0.10 | $ | 0.02 | $ | 0.05 | $ | (0.00 | ) | |||||||||||||
Diluted | $ | 0.10 | $ | 0.02 | $ | 0.05 | $ | (0.00 | ) | |||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||
Basic | 113,907 | 119,505 | 114,663 | 118,781 | ||||||||||||||||||
Diluted | 115,977 | 121,502 | 116,812 | 118,781 | ||||||||||||||||||
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(1) The cost of software license fees excludes charges for depreciation but includes amortization of purchased and developed software for resale. The cost of maintenance, services and hosting fees excludes charges for depreciation.
Note: All references to share and per share amounts have been
retroactively adjusted to reflect the
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands) |
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For the Three Months Ended |
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2014 | 2013 | ||||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ | 11,237 | $ | 1,881 | |||||||||
Adjustments to reconcile net income to net cash flows from operating activities: | |||||||||||||
Depreciation | 5,234 | 4,200 | |||||||||||
Amortization | 15,309 | 12,720 | |||||||||||
Amortization of deferred debt issuance costs | 1,332 | 1,556 | |||||||||||
Deferred income taxes | (857 | ) | (680 | ) | |||||||||
Stock-based compensation expense | 4,416 | 3,774 | |||||||||||
Excess tax benefit of stock options exercised | (312 | ) | (373 | ) | |||||||||
Other | 734 | 3,992 | |||||||||||
Changes in operating assets and liabilities, net of impact of acquisitions: | |||||||||||||
Receivables | (6,156 | ) | (8,643 | ) | |||||||||
Accounts payable | (1,723 | ) | (1,516 | ) | |||||||||
Accrued employee compensation | 4,239 | 4,269 | |||||||||||
Current income taxes | (1,438 | ) | (498 | ) | |||||||||
Deferred revenue | (6,559 | ) | 5,799 | ||||||||||
Other current and noncurrent assets and liabilities | 7,610 | (3,777 | ) | ||||||||||
Net cash flows from operating activities | 33,066 | 22,704 | |||||||||||
Cash flows from investing activities: | |||||||||||||
Purchases of property and equipment | (4,091 | ) | (2,809 | ) | |||||||||
Purchases of software and distribution rights | (3,411 | ) | (1,814 | ) | |||||||||
Other | (1,500 | ) | - | ||||||||||
Net cash flows from investing activities | (9,002 | ) | (4,623 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||
Proceeds from issuance of common stock | 686 | 463 | |||||||||||
Proceeds from exercises of stock options | 1,230 | 1,719 | |||||||||||
Excess tax benefit of stock options exercised | 312 | 373 | |||||||||||
Repurchases of common stock | - | (12,068 | ) | ||||||||||
Repurchase of restricted stock and performance shares for tax withholdings | (30 | ) | (54 | ) | |||||||||
Proceeds from revolving credit facility | 10,000 | - | |||||||||||
Repayment of revolving credit facility | (27,000 | ) | - | ||||||||||
Repayment of term portion of credit agreement | (8,871 | ) | (9,375 | ) | |||||||||
Payments on other debt and capital leases | (6,305 | ) | (3,379 | ) | |||||||||
Payment for debt issuance costs | - | (264 | ) | ||||||||||
Distribution to noncontrolling interest | (1,391 | ) | - | ||||||||||
Net cash flows from financing activities | (31,369 | ) | (22,585 | ) | |||||||||
Effect of exchange rate fluctuations on cash | 3,351 | (239 | ) | ||||||||||
Net decrease in cash and cash equivalents | (3,954 | ) | (4,743 | ) | |||||||||
Cash and cash equivalents, beginning of period | 58,936 | 112,484 | |||||||||||
Cash and cash equivalents, end of period | $ | 54,982 | $ | 107,741 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands) |
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For the Six Months Ended |
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2014 | 2013 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income (loss) | $ | 5,462 | $ | (285 | ) | |||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||||||
Depreciation | 10,558 | 7,964 | ||||||||
Amortization | 30,591 | 23,142 | ||||||||
Amortization of deferred debt issuance costs | 2,680 | 2,516 | ||||||||
Deferred income taxes | (12,134 | ) | (6,776 | ) | ||||||
Stock-based compensation expense | 9,188 | 7,724 | ||||||||
Excess tax benefit of stock options exercised | (4,382 | ) | (1,681 | ) | ||||||
Other | 671 | 2,035 | ||||||||
Changes in operating assets and liabilities, net of impact of acquisitions: | ||||||||||
Receivables | (9,279 | ) | 22,028 | |||||||
Accounts payable | (3,203 | ) | (10,731 | ) | ||||||
Accrued employee compensation | 659 | (8,012 | ) | |||||||
Current income taxes | 4,728 | 3,780 | ||||||||
Deferred revenue | 20,337 | 21,737 | ||||||||
Other current and noncurrent assets and liabilities | (7,553 | ) | (5,810 | ) | ||||||
Net cash flows from operating activities | 48,323 | 57,631 | ||||||||
Cash flows from investing activities: | ||||||||||
Purchases of property and equipment | (8,319 | ) | (9,050 | ) | ||||||
Purchases of software and distribution rights | (6,991 | ) | (4,578 | ) | ||||||
Acquisition of businesses, net of cash acquired | - | (264,202 | ) | |||||||
Other | (1,500 | ) | - | |||||||
Net cash flows from investing activities | (16,810 | ) | (277,830 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuance of common stock | 1,338 | 938 | ||||||||
Proceeds from exercises of stock options | 4,117 | 5,583 | ||||||||
Excess tax benefit of stock options exercised | 4,382 | 1,681 | ||||||||
Repurchases of common stock | (70,000 | ) | (12,068 | ) | ||||||
Repurchase of restricted stock and performance shares for tax withholdings | (4,533 | ) | (5,574 | ) | ||||||
Proceeds from term portion of credit agreement | - | 300,000 | ||||||||
Proceeds from revolving credit facility | 50,000 | - | ||||||||
Repayment of revolving credit facility | (35,000 | ) | - | |||||||
Repayment of term portion of credit agreement | (17,742 | ) | (13,125 | ) | ||||||
Payments on other debt and capital leases | (6,687 | ) | (11,717 | ) | ||||||
Payment for debt issuance costs | (163 | ) | (9,536 | ) | ||||||
Distribution to noncontrolling interest | (1,391 | ) | - | |||||||
Net cash flows from financing activities | (75,679 | ) | 256,182 | |||||||
Effect of exchange rate fluctuations on cash | 4,089 | (4,571 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (40,077 | ) | 31,412 | |||||||
Cash and cash equivalents, beginning of period | 95,059 | 76,329 | ||||||||
Cash and cash equivalents, end of period | $ | 54,982 | $ | 107,741 |
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Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1) | |||||||||||||||||||||||||||||||||||
(unaudited and in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED |
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2014 | 2014 | 2013 | 2013 | ||||||||||||||||||||||||||||||||
Selected Non-GAAP Financial Data | GAAP | Adj | Non-GAAP | GAAP | Adj | Non-GAAP | $ Diff | % Diff | |||||||||||||||||||||||||||
Total revenues (2) | $ | 254,808 | $ | 459 | $ | 255,267 | $ | 205,830 | $ | 2,001 | $ | 207,831 | $ | 47,436 | 23 | % | |||||||||||||||||||
Total expenses (3) | 228,067 | (3,502 | ) | 224,565 | 194,308 | (3,922 | ) | 190,386 | 34,179 | 18 | % | ||||||||||||||||||||||||
Operating income (loss) | 26,741 | 3,961 | 30,702 | 11,522 | 5,923 | 17,445 | 13,257 | 76 | % | ||||||||||||||||||||||||||
Income (Loss) before income taxes | 13,646 | 3,961 | 17,607 | 4,161 | 5,923 | 10,084 | 7,523 | 75 | % | ||||||||||||||||||||||||||
Income tax expense (benefit) (4) | 2,409 | 1,386 | 3,795 | 2,280 | 2,073 | 4,353 | (558 | ) | -13 | % | |||||||||||||||||||||||||
Net income (loss) | $ | 11,237 | $ | 2,575 | $ | 13,812 | $ | 1,881 | $ | 3,850 | $ | 5,731 | $ | 8,081 | 141 | % | |||||||||||||||||||
Depreciation | 5,234 | - | 5,234 | 4,200 | - | 4,200 | 1,034 | 25 | % | ||||||||||||||||||||||||||
Amortization - acquisition related intangibles | 5,803 | - | 5,803 | 4,803 | - | 4,803 | 1,000 | 21 | % | ||||||||||||||||||||||||||
Amortization - acquisition related software | 5,125 | - | 5,125 | 4,507 | - | 4,507 | 618 | 14 | % | ||||||||||||||||||||||||||
Amortization - other | 4,381 | - | 4,381 | 3,410 | - | 3,410 | 971 | 29 | % | ||||||||||||||||||||||||||
Stock-based compensation (5) | 4,416 | - | 4,416 | 3,774 | - | 3,774 | 642 | 17 | % | ||||||||||||||||||||||||||
Adjusted EBITDA | $ | 51,700 | $ | 3,961 | $ | 55,661 | $ | 32,216 | $ | 5,923 | $ | 38,139 | $ | 17,522 | 46 | % | |||||||||||||||||||
Earnings per share information | |||||||||||||||||||||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||||||||||||||
Basic (5) | 113,907 | 113,907 | 113,907 | 119,505 | 119,505 | 119,505 | |||||||||||||||||||||||||||||
Diluted (5) | 115,977 | 115,977 | 115,977 | 121,502 | 121,502 | 121,502 | |||||||||||||||||||||||||||||
Earnings per share | |||||||||||||||||||||||||||||||||||
Basic (5) | $ | 0.10 | $ | 0.02 | $ | 0.12 | $ | 0.02 | $ | 0.03 | $ | 0.05 | $ | 0.07 | 153 | % | |||||||||||||||||||
Diluted (5) | $ | 0.10 | $ | 0.02 | $ | 0.12 | $ | 0.02 | $ | 0.03 | $ | 0.05 | $ | 0.07 | 152 | % |
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
(2) Adjustment for ORCC deferred revenue that would have been recognized in the normal course of business but was not recognized due to GAAP purchase accounting requirements.
(3) Expense for significant transaction related transactions, including,
(4) Adjustments tax effected at 35%.
(5) All references to share and per share amounts have been
retroactively adjusted to reflect the
Quarter Ended |
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Reconciliation of Operating Free Cash Flow (millions) | 2014 | 2013 | ||||||||
Net cash provided by operating activities | $ | 33.1 | $ | 22.7 | ||||||
Payments associated with acquired opening balance sheet liabilities | 0.3 | - | ||||||||
Net after-tax payments associated with employee-related actions (4) | 0.9 | 2.1 | ||||||||
Net after-tax payments associated with lease terminations (4) | 0.2 | 0.2 | ||||||||
Net after-tax payments associated with significant transaction related expenses (4) | 1.2 | 1.4 | ||||||||
Less capital expenditures | (7.5 | ) | (4.6 | ) | ||||||
Operating Free Cash Flow | $ | 28.2 | $ | 21.8 |
Vice President,
Investor Relations & Strategic Analysis
john.kraft@aciworldwide.com
Source:
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