UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 8, 2008 (May 8, 2008)

 

ACI WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

0-25346

 

47-0772104

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

120 Broadway, Suite 3350
New York, New York 10271

(Address of principal executive offices)  (Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (646) 348-6700

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02. Results of Operation and Financial Condition.

 

On May 8, 2008, ACI Worldwide, Inc. (“the Company”) issued a press release announcing its financial results for the three months ended March 31, 2008. A copy of this press release is attached hereto as Exhibit 99.1.

 

The foregoing information (including the exhibits hereto) is being furnished under “Item 2.02- Results of Operations and Financial Condition” and Item 7.01- Regulation FD Disclosure.”   Such information (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

The filing of this report and the furnishing of this information pursuant to Items 2.02 and 7.01 do not mean that such information is material or that disclosure of such information is required.

 

Item 7.01. Regulation FD Disclosure.

 

See “Item 2.02- Results of Operations and Financial Condition” above.

 

Item 9.01.   Financial Statements and Exhibits.

 

99.1               Press Release dated May 8, 2008

 

99.2               Investor presentation materials dated May 8, 2008

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

ACI WORLDWIDE, INC.

 

 

 

 

 

/s/ Scott W. Behrens

 

Scott W. Behrens, Vice President, Corporate Controller and Chief Accounting Officer

 

Date:  May 8, 2008

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

99.1

 

Press Release dated May 8, 2008

99.2

 

Investor presentation materials dated May 8, 2008

 

 

4


Exhibit 99.1

 

ACI Worldwide, Inc.
120 Broadway - Suite 3350
New York, NY 10271
646.348.6700
FAX 212.479.4000

 




News Release

 

 

 

Investors contact:

 

Media contact:

Tamar Gerber

 

Jim Maxwell

Vice President, Investor Relations

 

Manager, Public Relations

646.348.6706

 

402.390.8906

 

ACI Worldwide, Inc. Reports Financial

Results for the Quarter Ended March 31, 2008

 

OPERATING HIGHLIGHTS

 

·                  Recurring revenue up $4.1 million, or 8%, year over year

 

·                  Generated $11 million sequential rise in 12-month backlog, indicating that a larger number of contracts will be moving into current period GAAP earnings over the next 12 months

 

·                  Large sales completed in both EMEA and Asia Pacific regions; large Thai banking customer purchased multiple wholesale products in an IBM System p environment

 

 

 

Quarter Ended

 

 

 

March 31,
2008

 

Better / (Worse)
March 31, 2007

 

Better / (Worse)
March  31, 2007

 

Operating Free Cash Flow
($ Mil)

 

$

45.3

 

$

27.0

 

147

%

60 month
Backlog ($ Bil)

 

$

1.397

 

$

0.120

 

9

%

 

 

 

 

 

 

 

 

Revenues
($ Mil)

 

$

92.6

 

$

2.7

 

3

%

 

(NEW YORK — May 8, 2008) —   ACI Worldwide, Inc. (NASDAQ:ACIW), a leading international provider of software for electronic payment systems, today announced financial results for the period ending March 31, 2008.  We will hold a conference call on May 8, 2008, at 8.30 a.m. EDT to discuss this information.  Interested persons may also access a real-time audio broadcast of the teleconference at www.aciworldwide.com/investors.

 



 

“The first quarter witnessed a renewed investment in product development and in services personnel to manage both the migration of customers to our latest BASE24TM offering as well as the implementation of the record new accounts we booked in prior quarters. We also saw the rate of increase of overall deferred revenue slow down, which would indicate that more of our deferred revenue is converting into current period GAAP earnings. The business itself reflected a steady and typical first quarter performance with a moderated pace of new sales after a healthy fourth quarter,” said Chief Executive Officer Philip Heasley.

 

Notable new business during the quarter included:

 

·                  EMEA: Added new BASE24-epsTM customer locations in Romania and Kyrgystan. Products selected across the region include BASE24TM combinations, the ACI Money Transfer System, and application infrastructure tools.

 

·                  Asia:  Bank and credit card customers added wholesale products including ACI Enterprise Banker, ACI Payments File Manager, Proactive Risk Manager, Trade Manager,  NET24 XPNET  and File Connect

 

·                  Thailand: Kasikorn Bank purchased a global payment hub comprised of multiple products in an IBM environment

 

·                  Ireland: Existing bank customer purchased a sizable term extension that will book ratably over life of contract

 

·                  United States: A large supermarket chain purchased BASE24TM and Golden Gate.

 

·                  Italy: A banking customer added BASE24-pos and Simulation Services for Enterprise Testing

 

·                  6 new customers signed, including new users of ACI Enterprise Banker, BASE24-epsTM and Proactive Risk Manager

 

·                  16 new applications added to existing customer relationships ranging from ACI Retail Commerce Server and Proactive Risk Manager for Enterprise Services to Simulation Services for Enterprise Testing

 



 

FINANCIAL SUMMARY

 

Operating Free Cash Flow

 

Operating free cash flow for the quarter was $45.3 million compared to $18.3 million for the March 2007 quarter. The rise in our operating free cash flow was due to the receipt of payments under the terms of the alliance agreement with IBM Corporation in the March 2008 quarter as compared to the same quarter in the year prior. Net operating free cash flow provided by operating activities was $9.1 million excluding a net IBM alliance payment of $36.2 million. The year-over-year variance in operating free cash flow of $9.2 million was comprised primarily of the addition of $6.0 million of services headcount in the geographic channels as well as $2.2 million rise in distributor commissions and professional fees paid in the quarter.

 

Sales

 

Sales bookings in the quarter totaled $63.8 million compared to $125.5 million in the March 2007 quarter. The contraction in year-over-year sales is a consequence primarily of two sales types that totaled $56.6 million of the variance: term extensions, which accounted for $28.9 million, and new accounts/new applications sales, which accounted for a further $27.7 million reduction over the prior period.  The two sales groups contracted due to different factors. The term extension reduction is a function of the timing of renewals of five-year contracts while the prior-year period saw the booking of much larger deals that had commensurately higher product sales components. In the combined new accounts/new applications category we sold smaller deals in the current period; this year our top five sales amounted to $9.3 million in contrast to the prior year quarter in which we sold $30.2 million of products. The contraction is due to the complexity of new multi-product deals, slower than usual customer approval processes, and our new focus on selling products in conjunction with IBM.

 

Backlog

 

As of March 31, 2008, our estimated 60-month backlog was $1.397 billion compared to $1.380 billion at December 31, 2007, and $1.277 billion as of March 31, 2007. The sequential growth of $17 million in our 60-month backlog was comprised primarily of EMEA growth due to positive foreign exchange translation of approximately $12 million as well as higher sales bookings in the British Isles and Italy. As of March 31, 2008, our 12-month backlog was $347 million, as compared to $336 million for the quarter ended December 31, 2007, and $307 million for the

 



 

quarter ended March 31, 2007. The 12-month backlog was positively impacted by $3 million of foreign exchange gain as well as a large transaction moving into the near-term period.

 

Revenues

 

Revenue was $92.6 million in the quarter ended March 31, 2008, an increment of $2.7 million or 3% over the prior-year period revenue of $89.9 million.  The increase was largely attributable to a rise of $1.6 million in maintenance fees in the March 2008 quarter as compared to the March 2007 quarter. Our March 2008 GAAP revenue derived principally from our backlog; 89% derived from 12-month backlog whereas only 11% of the revenue was provided by current-period sales. Our monthly recurring revenue figure in the quarter of $56.3 million, a rise of $4.1 million over the prior-year quarter, also underscores the growth of the ratable and renewing portion of our business and a lessening of the significance of non-recurring license fee revenue.

 

Sequentially, our deferred revenue increased by $12.9 million compared to a sequential increase of $20.8 million in the March 2007 quarter while our year-over-year deferred revenue rose by $33.9 million.  The rise in sequential short-term deferred revenue from $115.5 million to $135.4 million signifies that some of our backlog is beginning to move closer to GAAP revenue recognition.

 

Operating Expenses

 

Operating expenses were $93.1 million in the March 2008 quarter compared to $89.7 million in the March 2007 quarter, an increase of $3.4 million or 4%. Excluding the prior-year quarter’s non-recurring expenses of $5.9 million incurred in conjunction with our historic stock options review in 2007, operating expenses grew by $9.3 million as a result of the following variances: a rise of $4.6 million in services personnel and related costs, $2.2 million rise in distributorship commissions related to mix of sales as well as external professional fees, $0.5 million investment in our retail on-demand product, $0.9 other general and administrative costs, and $1.1 million in acquisition expenses specific to Stratasoft and Visual Web.

 



 

Other Income and Expense

 

Other expense for the quarter was $1.0 million, compared to other expense of $0.9 million in the March 2007 quarter. The increase in other expense in the quarter resulted from the reduction of cash and cash equivalents due to funding of our share repurchase program, which also impacted interest income received, and from interest expense paid on the outstanding credit facility. The $3.7 million FAS 133 non-cash loss on our interest rate swaps was offset by a gain of $3.7 million on foreign exchange.

 

Taxes

 

Income tax expense in the quarter was $2.0 million due to losses in tax jurisdictions for which we received no tax benefit offset by income in tax jurisdictions in which we accrued tax expense. Furthermore, as mentioned in previous quarters, the company continues to incur a fixed amortization charge of $0.6 million per quarter related to the transfer of intellectual property outside the United States.

 

Net Income (Loss) and Diluted Earnings Per Share

 

Net loss for the quarter was $3.5 million, compared to net loss of $0.4 million during the same period last year.

 

Earnings (loss) per share for the quarter ended March 2008 was $(0.10) per diluted share compared to $(0.01) per diluted share during the same period last year. The year-over-year quarterly change is primarily due to the following factors: positive variance of $0.10 due to lack of historic stock option review fees in 2008, $0.07 variance driven by foreign currency gain in the March 2008 quarter versus a loss in prior year and $0.04 rise in organic revenue, offset by a negative variance of $0.15 in organic operating expenses, $0.07 in a non-cash loss on our interest rate swaps and $0.07 due to the 2008 tax expense.

 

Weighted Average Shares Outstanding

 

Total weighted average shares outstanding were 35.2 million for the quarter ended March 31, 2008 as compared to 37.2 million shares outstanding as of March 31, 2007. During the quarter, we repurchased 1,639,755 shares at an average price of $18.33 in the quarter.

 

-End-

 



 

Table 1: Reconciliation of Operating Free Cash Flow

 

 

 

Quarter Ended March 31,

 

(millions)

 

2008

 

2007

 

Net cash provided by operating activities

 

$

46.5

 

$

16.3

 

One-time items:

 

 

 

 

 

Net after-tax cash payments associated with early termination of Watford facility lease

 

0.6

 

0

 

Net after-tax cash payments associated with stock option cash settlement

 

0.0

 

2.7

 

Net after-tax cash payments associated with Restructuring and Other Emp. Related Actions

 

0.5

 

0.7

 

Less capital expenditures

 

(2.6

)

(1.4

)

Less alliance technical enablement expenditures

 

(0.9

)

0.0

 

Net proceeds from alliance agreement

 

1.2

 

0.0

 

Operating Free Cash Flow

 

$

45.3

 

$

18.3

 

 

 

 

 

 

 

Net ACI organic cash flows

 

9.1

 

18.3

 

Net IBM proceeds & enablement cash flows

 

36.2

 

0.0

 

Operating Free Cash Flow

 

$

45.3

 

$

18.3

 

 

 

Table 2: Backlog 60- Month (millions)

 

 

 

Quarter Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2008

 

2007

 

2007

 

Americas

 

$

724

 

$

733

 

$

692

 

EMEA

 

522

 

504

 

457

 

Asia/Pacific

 

151

 

143

 

128

 

Backlog 60-Month

 

$

1,397

 

$

1,380

 

$

1,277

 

 

 

 

 

 

 

 

 

ACI Deferred Revenue

 

156

 

143

 

122

 

ACI Other

 

1,241

 

1,237

 

1,155

 

Backlog 60-Month

 

$

1,397

 

$

1,380

 

$

1,277

 

 



 

Table 3: Revenues by Channel (millions)

 

 

 

Quarter Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

Revenues:

 

 

 

 

 

United States

 

$

32.7

 

$

39.2

 

Americas International

 

11.3

 

13.4

 

Americas

 

$

44.0

 

$

52.6

 

EMEA

 

37.3

 

28.7

 

Asia/Pacific

 

11.3

 

8.6

 

Revenues

 

$

92.6

 

$

89.9

 

 

 

Table 4: Monthly Recurring Revenue

 

 

 

Quarter Ended

 

 

 

March 31,

 

(millions)

 

2008

 

2007

 

 

 

 

 

 

 

Monthly license fees

 

$

16.8

 

$

15.2

 

Maintenance fees

 

31.5

 

29.9

 

Processing Services

 

8.0

 

7.1

 

Monthly Recurring Revenue

 

$

56.3

 

$

52.2

 

 

 

Table 5: Deferred Revenue

 

 

 

Quarter Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

(millions)

 

2008

 

2007

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

$

1.9

 

$

2.0

 

$

0.7

 

$

0.0

 

ACI Organic

 

133.5

 

113.5

 

95.7

 

78.5

 

Short Term Deferred Revenue

 

$

135.4

 

$

115.5

 

$

96.4

 

$

78.5

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

$

0.0

 

$

0.0

 

$

0.0

 

$

0.0

 

ACI Organic

 

20.3

 

27.3

 

25.3

 

22.4

 

Long Term Deferred Revenue

 

$

20.3

 

$

27.3

 

$

25.3

 

$

22.4

 

 

 

 

 

 

 

 

 

 

 

Total Deferred Revenue

 

$

155.7

 

$

142.8

 

$

121.7

 

$

100.9

 

 



 

Table 6: Deferred Expenses

 

 

 

Quarter Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

(millions)

 

2008

 

2007

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

$

0.1

 

$

0.1

 

$

0.0

 

$

0.0

 

ACI Organic

 

12.3

 

11.3

 

5.9

 

5.9

 

Total Deferred Expenses

 

$

12.4

 

$

11.4

 

$

5.9

 

$

5.9

 

 

 

Table 7: Organic versus Acquisition Comparisons (millions)

 

 

 

Year over Year
Increase/Decrease
in Revenue

 

Year over Year
Increase/Decrease
in Op. Expenses

 

Dec-Mar y-o-y
Quarterly
Movement in
Deferred Revenue

 

Dec-Mar y-o-y
Quarterly
Movement in
Deferred Expense

 

2007 Quarter

 

$

89.9

 

$

89.7

 

$

20.8

 

$

(0.0

)

 

 

 

 

 

 

 

 

 

 

Organic

 

$

1.9

 

$

8.1

 

$

(7.1

)

1.0

 

Acquisitions

 

0.8

 

1.2

 

(0.8

)

0.0

 

Stock Options (Prof. Fees & Vested Shares)

 

 

(5.9

)

 

 

Net Change

 

$

2.7

 

$

3.4

 

$

(7.9

)

$

1.0

 

 

 

 

 

 

 

 

 

 

 

2008 Quarter

 

$

92.6

 

$

93.1

 

$

12.9

 

$

1.0

 

 



 

Table 8: Acquisition Intangibles & Software, Non-cash equity based compensation and non-recurring items

 

 

 

Quarter Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

(millions)

 

EPS Impact

 

$ in Millions
(Net of Tax)

 

EPS Impact

 

$ in Millions
(Net of Tax)

 

Non-recurring items

 

 

 

 

 

 

 

 

 

 

 

Stock options (Prof. Fees & Vested Shares)

 

$

0.00

 

$

0.0

 

$

0.10

 

$

3.9

 

 

 

 

 

 

 

 

 

 

 

Non-recurring items

 

$

0.00

 

$

0.0

 

$

0.10

 

$

3.9

 

Amortization of acquisition-related intangibles & software

 

0.05

 

1.9

 

0.05

 

1.8

 

Non-cash equity-based compensation

 

0.05

 

1.7

 

0.03

 

1.1

 

Total:

 

$

0.10

 

$

3.6

 

$

0.18

 

$

6.8

 

 


* Tax Effected at 35%

 

Table 9: Other Income (Expense)

 

 

 

Quarter Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

(millions)

 

2008

 

2007

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

0.6

 

$

0.8

 

$

1.0

 

$

0.9

 

Interest Expense

 

(1.4

)

(1.4

)

(1.6

)

(1.5

)

FX Gain / Loss

 

3.7

 

1.9

 

(0.3

)

(0.6

)

SFAS 133

 

(3.7

)

(2.5

)

0.0

 

0.0

 

Other

 

(0.2

)

0.2

 

(0.0

)

0.3

 

Total Other Income (Expense)

 

$

(1.0

)

$

(1.0

)

$

(0.9

)

$

(0.9

)

 



 

About ACI Worldwide, Inc.

 

ACI Worldwide is a leading provider of electronic payments software and services to major banks, retailers and processors around the world.  The company’s solutions enable online payment processing, online banking, fraud prevention and detection, and back office services such as settlement, account management, card management and dispute processing.  ACI solutions provide market-leading levels of reliability, manageability and scale to over 800 customers in 88 countries.  Visit ACI Worldwide at www.aciworldwide.com.

 

Non GAAP Financial Measures

 

This press release includes operating free cash flow and backlog estimates. ACI is presenting these non-GAAP guidance measures to provide more transparency to its earnings, focusing on operating free cash flow and backlog.

 

ACI is presenting operating free cash flow, which is defined as net cash provided (used) by operating activities, excluding cash payments associated with the cash settlement of stock options, cash payments associated with one-time employee related actions, less capital expenditures and plus or minus net proceeds from IBM.  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 is considered a non-GAAP financial measure as defined by SEC Regulation G.  Operating free cash flow should be considered in addition to, rather than as a substitute for, net cash provided (used) 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.  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 of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, loss from operations and net loss per share calculated in accordance with GAAP.  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. We also believe that this measure can assist investors in comparing our performance to that of other companies on a consistent basis without regard to certain items, which do not directly affect our ongoing cash flow.

 

ACI also includes backlog estimates which are 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 SEC Regulation G.  Our 60-month backlog estimate represents expected revenues from existing customers using the following key assumptions:

 

·                  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 and facilities management 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.

 

The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

 



 

Forward-Looking Statements

 

This presentation 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”,  “looks forward to,” 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 presentation include, but are not limited to, statements regarding the:

 

·                  Expectations related to the reduced rate of increase in our overall deferred revenue and our belief that this indicates that we are converting a greater amount of deferred revenue into current period GAAP earnings;

·                  Our ability to successfully sell complex multi-product deals and engage in joint marketing efforts with IBM and the impact of such efforts on our sales;

·                  Expectations related to the growth of the ratable and renewing portion of our business and the lessening significance of non-recurring license fee revenue; and

·                  Expectations related to the timing for the conversion of portions of our backlog to GAAP revenue based on the increase in our sequential short-term deferred revenue.

 

Any or all of the forward-looking statements may turn out to be wrong. They can be affected by the judgments and estimates underlying such assumptions or by known or unknown risks and uncertainties. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed or implied in any forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements after the date of this presentation.

 

All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission. 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 Form 10-K filed on January 30, 2008 and our Form 10-Q filed on February 19, 2008, both as amended by our Form 10-K/A and Form 10-Q/A, respectively, filed on March 4, 2008, and specifically the sections entitled “Factors That May Affect Our Future Results or the Market Price of Our Common Stock.”

 

The risks identified in our filings with the Securities and Exchange Commission include:

 

·                  Risks associated with the restatement of our financial statements;

 

·                  Risks associated with our performance which could be materially adversely affected by a general economic downturn or  lessening demand in the software sector;

 

·                  Risks associated with our ability to successfully and effectively compete in a highly competitive and rapidly changing industry;

 

·                  Risks inherent in making an estimate of our backlogs which may not be accurate and may not generate the predicted revenue;

 

·                  Risks associated with tax positions taken by us which require substantial judgment and with which taxing authorities may not agree;

 

·                  Risks associated with consolidation in the financial services industry which may adversely impact the number of customers and our revenues in the future;

 



 

·                  Risks associated with our stock price which may be volatile;

 

·                  Risks associated with conducting international operations;

 

·                  Risks regarding one of our most strategic products, BASE24-eps,  which may prove to be unsuccessful in the marketplace;

 

·                  Risks associated with our future profitability which depends on demand for our products; lower demand in the future could adversely affect our business;

 

·                  Risks associated with the complexity of our software products and the risk that our software products may contain undetected errors or other defects which could damage our reputation with customers, decrease profitability, and expose us to liability;

 

·                  Risks associated with the IBM alliance, including our and/or IBM’s ability to perform under the terms of that alliance and customer receptiveness to the alliance

 

·                  Risks associated with future acquisitions and investments which could materially adversely affect us;

 

·                  Risks associated with our ability to protect our intellectual property and technology and that we may be subject to increasing litigation over our intellectual property rights;

 

·                  Risks associated with litigation that could materially adversely affect our business financial condition and/or results of operations;

 

·                  Risks associated with our offshore software development activities which may be unsuccessful and may put our  intellectual property at risk;

 

·                  Risks associated with security breaches or computer viruses which could disrupt delivery of services and damage our reputation;

 

·                  Risks associated with our ability to comply with governmental regulations and industry standards to which are customers  are subject which may result in a loss of customers or decreased revenue;

 

·                  Risks associated with our ability to comply with privacy regulations imposed on providers of services to financial institutions;

 

·                  Risks associated with system failures which could delay the provision of products and services and damage our reputation with our customers;

 

·                  Risks associated with our restructuring plan which may not achieve expected efficiencies;

 

·                  Risks associated with material weaknesses in our internal control over financial reporting;

 

·                  Risks associated with the impact of economic changes on our customers in the banking and financial services industries including the current mortgage crisis which could reduce the demand for our products and services; and

 

·                  Risks associated with the our recent outsourcing agreement with IBM which may not achieve the level of savings that we anticipate and involves many changes in systems and personnel which increases operational and control risk during transition, including, without limitation, the risks described in our Current report on Form 8-K filed March 19, 2008.

 

·                  Risks associated with our announcement of the maturity of certain legacy retail payment products may result in decreased customer investment in our products and our strategy to migrate customers to our next generation products may be unsuccessful which may adversely impact our business and financial condition.

 



 

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

2007

 

2006

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

108,667

 

$

97,011

 

$

95,963

 

$

89,900

 

Billed receivables

 

88,203

 

87,932

 

75,068

 

65,402

 

Accrued receivables

 

8,927

 

11,132

 

11,332

 

13,593

 

Deferred income taxes, net

 

5,827

 

5,374

 

4,575

 

2,441

 

Recoverable income taxes

 

4,337

 

6,033

 

5,825

 

 

Prepaid expenses

 

10,231

 

9,803

 

8,487

 

8,010

 

Other current assets

 

11,078

 

8,399

 

9,180

 

12,353

 

Total current assets

 

237,270

 

225,684

 

210,430

 

191,699

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

19,282

 

19,503

 

18,869

 

18,899

 

Software, net

 

30,960

 

31,430

 

32,760

 

32,990

 

Goodwill

 

209,952

 

206,770

 

201,360

 

193,927

 

Other intangible assets, net

 

36,964

 

38,088

 

41,050

 

41,338

 

Deferred income taxes, net

 

33,940

 

31,283

 

16,126

 

17,517

 

Other assets

 

16,347

 

17,700

 

12,791

 

13,106

 

TOTAL ASSETS

 

$

584,715

 

$

570,458

 

$

533,386

 

$

509,476

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,911

 

$

16,351

 

$

10,806

 

$

12,465

 

Accrued employee compensation

 

21,150

 

22,659

 

21,447

 

17,242

 

Deferred revenue

 

135,398

 

115,519

 

96,402

 

78,497

 

Income taxes payable

 

 

 

 

 

Alliance agreement liability

 

7,552

 

9,331

 

 

 

Accrued and other current liabilities

 

21,119

 

22,992

 

16,761

 

16,737

 

Total current liabilities

 

198,130

 

186,852

 

145,416

 

124,941

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

20,258

 

27,253

 

25,343

 

22,414

 

Note payable under credit facility

 

75,000

 

75,000

 

75,000

 

75,000

 

Deferred income taxes, net

 

3,012

 

3,245

 

 

 

Alliance agreement noncurrent liability

 

38,259

 

 

 

 

Other noncurrent liabilities

 

37,635

 

37,069

 

16,721

 

16,755

 

Total liabilities

 

372,294

 

329,419

 

262,480

 

239,110

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

Common stock

 

204

 

204

 

204

 

204

 

Common stock warrants

 

24,003

 

24,003

 

 

 

Treasury stock

 

(161,995

)

(140,320

)

(97,768

)

(97,768

)

Additional paid-in capital

 

306,143

 

311,108

 

309,445

 

309,086

 

Retained earnings

 

44,426

 

47,886

 

64,564

 

64,978

 

Accumulated other comprehensive loss

 

(360

)

(1,842

)

(5,539

)

(6,134

)

Total stockholders’ equity

 

212,421

 

241,039

 

270,906

 

270,366

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

584,715

 

$

570,458

 

$

533,386

 

$

509,476

 

 



 

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

Software license fees

 

$

39,098

 

$

38,524

 

Maintenance fees

 

31,473

 

29,901

 

Services

 

22,020

 

21,523

 

Total revenues

 

92,591

 

89,948

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

Cost of software license fees

 

12,491

 

11,193

 

Cost of maintenance and services

 

28,629

 

23,351

 

Research and development

 

12,553

 

12,041

 

Selling and marketing

 

16,750

 

16,799

 

General and administrative

 

22,680

 

26,353

 

Total expenses

 

93,103

 

89,737

 

 

 

 

 

 

 

Operating income (loss)

 

(512

)

211

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

593

 

1,014

 

Interest expense

 

(1,366

)

(1,597

)

Other, net

 

(190

)

(337

)

Total other income (expense)

 

(963

)

(920

)

 

 

 

 

 

 

Loss before income taxes

 

(1,475

)

(709

)

Income tax expense (benefit)

 

1,985

 

(295

)

Net loss

 

$

(3,460

)

$

(414

)

 

 

 

 

 

 

Loss per share information

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

35,165

 

37,162

 

Diluted

 

35,165

 

37,162

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

Basic

 

$

(0.10

)

$

(0.01

)

Diluted

 

$

(0.10

)

$

(0.01

)

 



 

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

 

 

For the Three Months Ended March 31,

 

 

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(3,460

)

$

(414

)

Adjustments to reconcile net loss to net cash flows from operating activities

 

 

 

 

 

Depreciation

 

1,576

 

1,460

 

Amortization

 

3,809

 

3,622

 

Tax expense of intellectual property shift

 

590

 

478

 

Amortization of debt financing costs

 

84

 

84

 

Gain on reversal of asset retirement obligation

 

(949

)

 

Loss on disposal of assets

 

218

 

9

 

Change in fair value of interest rate swaps

 

3,689

 

 

Deferred income taxes

 

(3,003

)

(1,825

)

Stock-based compensation expense

 

2,552

 

1,664

 

Tax benefit of stock options exercised and cash settled

 

40

 

740

 

Changes in operating assets and liabilities, net of impact of acquisitions:

 

 

 

 

 

Billed and accrued receivables, net

 

3,215

 

(5,806

)

Other current assets

 

(2,700

)

520

 

Other assets

 

668

 

(168

)

Accounts payable

 

(3,793

)

(2,473

)

Accrued employee compensation

 

(1,825

)

2,040

 

Proceeds from alliance agreement

 

36,087

 

 

Accrued liabilities

 

(4,264

)

1

 

Current income taxes

 

1,536

 

(3,340

)

Deferred revenue

 

12,400

 

19,693

 

Other current and noncurrent liabilities

 

54

 

(17

)

Net cash flows from operating activities

 

46,524

 

16,268

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(1,465

)

(1,004

)

Purchases of software and distribution rights

 

(1,127

)

(340

)

Alliance technical enablement expenditures

 

(943

)

 

Acquisition of businesses, net of cash acquired

 

(13

)

(8,165

)

Proceeds from alliance agreement

 

1,246

 

 

Net cash flows from investing activities

 

(2,302

)

(9,509

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock

 

639

 

 

Proceeds from exercises of stock options

 

382

 

 

Excess tax benefit of stock options exercised

 

28

 

 

Purchases of common stock

 

(30,064

)

 

Payments on debt and capital leases

 

(791

)

(472

)

Net cash flows from financing activities

 

(29,806

)

(472

)

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash

 

(2,760

)

(224

)

Net increase in cash and cash equivalents

 

11,656

 

6,063

 

Cash and cash equivalents, beginning of period

 

97,011

 

89,900

 

Cash and cash equivalents, end of period

 

$

108,667

 

$

95,963

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Income taxes paid, net

 

$

3,407

 

$

3,571

 

 


Exhibit 99.2

 

GRAPHIC

March 31, 2008 Quarterly Results May 8, 2008

 


GRAPHIC

2 This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward-looking statements and risk factors is set forth at the end of this presentation. The Company assumes no obligation to update any forward-looking statement in this presentation. Private Securities Litigation Reform Act of 1995 Safe Harbor For Forward-Looking Statements

 


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3 • Richard Launder, President, Global Operations • Mark Vipond, President, Global Product • Scott Behrens, Principal Financial Officer • Q&A: Phil Heasley, Richard Launder, Scott Behrens and Mark Vipond Agenda

 


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4 Richard Launder, President, Global Operations Business Operations Review

 


5 Q1 2008 Sales Results Qtr. Ended March 08 Qtr. Ended March 07 % Growth or Decline New Account 1,311 20,333 -94% New Application 9,621 18,296 -47% Add-On Business 38,101 43,193 -12% Term Extension 14,781 43,660 -66% Total Sales 63,813 125,480 -49% • Q1 2008 following a record year end sales quarter. • Performance versus prior year quarter variance: – Visual Web product sales maximized by ACI global distribution network resulting in contribution of $6 million incremental sales – New Customer bookings slowed as we revisited potential clients in context of IBM alliance – Timing of Term Extensions and New Accounts • Anticipate considerably stronger Q2 2008 sales • Expect the trend of current period GAAP revenue from sales to continue in teen conversion rates throughout the year Product Qtr. Ended March 08 Qtr. Ended March 07 % Growth or Decline Retail Payments 31,669 51,152 -38% Application Services 2,323 6,920 -66% Risk Management 1,073 3,286 -67% Wholesale Payment 13,967 20,463 -32% Total Sales (net of Term Ext.) 49,032 81,821 -40%

 


6 Q1 2008 Channel Sales Results Qtr. Ended March 08 Qtr. Ended March 07 % Growth or Decline Americas 16,907 35,649 -53% EMEA 19,623 41,071 -52% Asia-Pacific 12,503 5,100 145% Total Sales (net of Term Ext.) 49,032 81,821 -40% Channel Performance: • Asia-Pacific ... growth due to Visual Web sales + large deals in Thailand & Korea • EMEA ... Term extensions exceeding $2 million in value for 4 large customers in ’07 vs. 1 large customer in ‘08; $11 million variance in services sales driven by the timing of 3 large deals • Americas ... Term extensions exceeding $2 million in value for 2 large customers in ’07 vs. zero large customer in ‘08; $11 million variance driven by 2 large deals (1 wholesale, 1 retail payments) not recurring in the current quarter Qtr. Ended March 08 Qtr. Ended March 07 % Growth or Decline Americas 2,325 15,056 -85% EMEA 10,926 23,704 -54% Asia-Pacific 1,530 4,901 -69% Term Extension Sales 14,781 43,660 -66% Channel Qtr. Ended March 08 Qtr. Ended March 07 % Growth or Decline Americas 19,232 50,705 -62% EMEA 30,549 64,775 -53% Asia-Pacific 14,032 10,001 40% Total Sales 63,813 125,480 -49% Sales (net of Term Extensions) Term Extension Sales Total Sales

 


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7 IBM Alliance Performance • Deals – Signed Kasikorn bank on System p – A very large deal was signed with Sermepa, a large national switch in Spain. • selected BASE24-eps on System z, signed in May and will be recognized as Q2 sale • Sales Operations – Completed joint account planning for Priority 1 accounts – Completed joint sales training for IBM and ACI sales teams – ACI is deploying Salesforce.com and fine tuning sales process – Delivered the “Sunset” message to all payment engine customers • Scrubbing the sales pipeline – Performed joint account reviews in 37 countries to prioritize targets – Executive calling plan created for “Top 50” Alliance targets – Several large System z deals in the FY08 pipeline

 


GRAPHIC

8 Mark Vipond, President, Global Product Business Operations Review

 


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9 ACI Customers by Geography/Product Q1 2008 Product Customers Payment Engines Retail Banking Wholesale Banking Banking United States 64 93 24 45 56 1 Canada/Latin America 55 2 21 11 33 0 EMEA 144 6 65 57 91 3 Asia/Pacific 82 14 27 28 72 1 Retail United States 60 0 2 3 23 0 Canada/Latin America 22 0 0 1 4 0 EMEA 7 0 0 0 3 0 Asia/Pacific 4 0 0 0 1 0 Other Industries United States 5 0 0 2 55 1 Canada/Latin America 6 0 1 2 8 0 EMEA 10 0 4 5 26 1 Asia/Pacific 3 0 0 2 17 0 Worldwide Total United States 129 93 26 50 134 2 Canada/Latin America 83 2 22 14 45 0 EMEA 161 6 69 62 120 4 Asia/Pacific 89 14 27 30 90 1 TOTAL 462 115 144 156 389 7 Risk Mgmt. Payments Mgmt. Application Infrastructure Services- Only Customers

 


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10 ACI Customers by Region, Industry and Solution Set – March 31, 2008 • ACI customers use an average of 2.7 products. • 12 new customers added in March quarter. • 2 new countries added in the quarter – Romania (from a client perspective) and Kyrgyzstan. • Customers in 88 countries. • Total of 808 ACI customers. • Total of 2,189 products deployed.

 


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11 Solution Updates - Q1 2008 • Retail Payment Solutions – Maturity announcements of legacy Retail Payment Products on March 24, 2008. – BASE24-eps customer migration planning has begun. – System z enablement progress. • Wholesale Payment Solutions – Improving sales/market opportunities – in all regions. – “Hub” investments compliment existing payments function. – ACI On-demand leverage of IBM data center operations. • Risk Management Solutions – Enterprise Risk potential and investment. – New version of Automated Case Management solution. – Real-time rules and scoring of transactions.

 


GRAPHIC

12 Focus Areas – Next 12 Months • IBM optimization, enablement and market success. • Continued progress with services revenue and margins. • Migration planning for Retail Payment customers. • Wholesale Payment Solution strategies and investment. • Customer satisfaction. • Enhancing the ACI brand.

 


GRAPHIC

Financials Review Scott Behrens, Principal Financial Officer

 


14 Key Takeaways from the Quarter . Sales down sequentially by $68 million following a record sales quarter in December 2007 . OFCF of $45.3 million in the quarter versus $18.3 million in March 2007 quarter Includes $36.2 million (net of $1.1 million of expenditures) from IBM; Ex-IBM OFCF of $9.1 million (net of $1.1 million of expenditures) . Sequential 12-month backlog growth of $11 million $3 million of the increase due to foreign exchange plus projects moving into the 12 month view . Revenue growth of 3% at $92.6 million in the current quarter versus $89.9 million in March 2007 quarter . Growth of $4.1 million in monthly recurring revenues

 


15 Takeaways from the Quarter (cont) . Overall rate of deferred revenue growth is slowing . Short term deferred revenue grew to $135 million compared to December quarter at $116 million . Expenses up $9.3 million year over year ($3.4 million increase + last year included a $5.9 million impact of historic stock options review) primarily due to • $4.6 million primarily in services personnel plus related costs • $2.2 million increase in distributorship costs and pro-fees • $0.5 million increase in Retail On-Demand investments • $1.1 million in Stratasoft and Visual Web expenses • Other expense was neutrally impacted by non- cash loss of $3.7 million on the mark to market of the interest rate swap offset by favorable FX gain of $3.7 million

 


GRAPHIC

16 Backlog is a Significant Contributor to current period Revenue • Shift in product mix combined with higher recurring revenue as well as decreased sales of short term products led to greater reliance on backlog in Q1 2008 – Fewer Application Services (tools) sales – those products mature into current period GAAP revenue faster than other sales – Shift is consistent with our aim to sell multi-product application solutions – Slowing sales also reflected outreach to customers who are ‘in pipeline’ to inform them of the benefits of the IBM alliance Qtr. Ended March 2008 Qtr. Ended March 2007 % Growth / Decline Revenue from Backlog 82,810 71,470 16% Revenue from Sales 9,781 18,478 -47% Total Revenue 92,591 89,948 3% % from Backlog 89% 77% % from Sales 11% 20%

 


17 Cash Margin Q1 2008 Cash Margin • OFCF was negatively impacted ~$6 million by services and related deferred expenses as well as the remaining $3.3 million variance y-o-y was driven by external professional fees, investment in Retail On-Demand and distributor commissions • IBM-related investments contributed $36.2 million in Q1 2008 and $9.3 million in Q4 2008 while the alliance also served as a use of cash CY CY CY Q1 2008 2005 2006 2007 Only OFCF 45.9 39.3 52.8 45.3 Revenue 317.7 356.1 374.2 92.6 Inc (Dec) in Deferred Revenue 0.3 0.7 41.9 12.9 (Inc) Dec in Acct Receivables (5.7) (13.3) (20.1) 1.9 Rev + Chg. In DR and AR 312.3 343.5 396.0 107.4 CASH MARGIN(a) 14.7% 11.4% 13.3% 42.2% (a) Denominator: Revenue + Chg. In DR and AR

 


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18 IBM Outsourcing • IBM to handle all internal IT- mainframe, servers, hardware and end user services • ACI retains its security policy management and ondemand business operations • 7 year term; ACI expects to pay $116 million to IBM over the life of deal • Up to $8 million GAAP expense to be incurred in 2008 • We expect capex savings in 2008 compared to our earlier guidance

 


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19 • March 2008 quarter- – 1,639,755 shares repurchase at an average price of $18.33 • Total shares repurchased since program inception in 2005 – 6,049,484 at average price of $25.46 • $56 million remaining on buyback authorization Q1 2008 share repurchases amount to 27% of overall buyback since program inception

 


GRAPHIC

Appendix

 


21 Operating Free Cash Flow ($millions) 18.3 9.1 Net ACI Organic Cash Flows $18.3 $45.3 Operating Free Cash Flow 0.0 36.2 Net IBM proceeds and enablement cash flows (0.9) Less alliance Technical enablement expenditures 2.7 0.0 Net after-tax cash payments associated with stock option cash settlement 0.0 1.2 Net Proceeds from IBM agreement 0.7 0.5 Net after-tax cash payments associated with restructuring and other employee-related actions $18.3 $45.3 Operating Free Cash Flow (1.4) (2.6) Less capital expenditures 0.0 0.6 Net after-tax cash payments associated with termination of Watford facility lease Selected non-recurring items: $ 16.3 $46.5 Net cash provided by operating activities* 2007 2008 Quarter Ended March 31, *OFCF is defined as net cash provided (used) by operating activities, excluding cash payments associated with the cash settlement of stock options, cash payments associated with one-time employee related actions, less capital expenditures and plus or minus net proceeds from IBM.

 


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22 60-Month Backlog ($ millions) $1,277 $1,380 $1,397 Backlog 60-Month 1,155 1,237 1,241 ACI Other 122 143 156 ACI Deferred Revenue $1,277 $1,380 $1,397 Backlog 60-Month 128 143 151 Asia/Pacific 457 504 522 EMEA $692 $733 $724 Americas 2007 2007 2008 March 31, December 31, March 31, Quarter Ended

 


GRAPHIC

23 Revenues by Channel ($ millions) $89.9 $92.6 Revenues 8.6 11.3 Asia/Pacific 28.7 37.3 EMEA $52.6 $44.0 Americas 13.4 11.3 Americas International $39.2 $32.7 United States Revenues: 2007 2008 Quarter Ended March 31,

 


GRAPHIC

24 Monthly Recurring Revenue ($ millions) $52.2 $56.3 Monthly Recurring Revenue 7.1 8.0 Processing Services 29.9 31.5 Maintenance fees $15.2 $16.8 Monthly license fees 2007 2008 Quarter Ended March 31,

 

 

 


25 Deferred Revenue ($ millions) Quarter Ended March 31, December 31, March 31, December 31, 2008 2007 2007 2006 Acquisitions $1.9 $2.0 $0.7 $0.0 ACI Organic 133.5 113.5 95.7 $78.5 Short Term Deferred Revenue $135.4 $115.5 $96.4 $78.5 Acquisitions $0.0 $0.0 $0.0 $0.0 ACI Organic 20.3 27.3 25.3 $22.4 Long Term Deferred Revenue 20.3 27.3 25.3 $22.4 Total Deferred Revenue $155.7 $142.8 $121.7 $100.9

 


GRAPHIC

26 Deferred Expenses ($ millions) $5.9 $5.9 $11.4 $12.4 Total Deferred Expenses 5.9 5.9 $11.3 12.3 ACI Organic $0.0 $0.0 $0.1 $0.1 Acquisitions 2006 2007 2007 2008 December 31, March 31, December 31, March 31, Quarter Ended

 


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27 Organic vs. Acquired Business Performance ($ millions) -- -- (5.9) -- Stock Options Prof Fees $1.0 $12.9 $93.1 $92.6 2008 Quarter $1.0 ($7.9) $3.4 $2.7 Net Change 0.0 (0.8) 1.2 0.8 Acquisitions 1.0 ($7.1) $8.1 $1.9 Organic ($0.0) $20.8 $89.7 $89.9 2007 Quarter Dec-March y-o-y Quarterly Movement in Deferred Expense Dec-March y-o-y Quarterly Movement in Deferred Revenue Year over Year Increase/Decrease in Op. Expenses Year over Year Increase/Decrease in Revenue

 


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28 Non-Cash Compensation, Acquisition Intangibles and Non-Recurring Items * Tax Effected at 35% $6.8 $0.18 $3.6 $0.10 Total: 1.1 0.03 1.7 0.05 Non-cash equity-based compensation 1.8 0.05 1.9 0.05 Amortization of acquisition-related intangibles and software $3.9 $0.10 $0.0 $0.00 Non-recurring items $3.9 $0.10 $0.0 $0.00 Stock options review $ in Millions EPS Impact $ in Millions EPS Impact Non-recurring items 2007 2008

 


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29 Other Income/Expense ($0.9) ($0.9) ($1.0) ($1.0) Total Other Income (Expense) 0.3 (0.0) 0.2 (0.2) Other 0.0 0.0 (2.5) (3.7) FAS 133 Derivative (0.6) (0.3) 1.9 3.7 FX Gain / Loss (1.5) (1.6) (1.4) (1.4) Interest Expense $0.9 $1.0 $0.8 $0.6 Interest Income December 31, 2006 March 31, 2007 December 31, 2007 March 31, 2008 Quarter Ended

 


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30 Non-GAAP Financial Measures • This presentation includes operating free cash flow and backlog estimates. ACI is presenting these non-GAAP guidance measures to provide more transparency to its earnings, focusing on operating free cash flow and backlog • ACI is presenting operating free cash flow, which is defined as net cash provided (used) by operating activities, excluding cash payments associated with the cash settlement of stock options, cash payments associated with one-time employee related actions, less capital expenditures, plus net proceeds from IBM. 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 is considered a non-GAAP financial measure as defined by SEC Regulation G. • Operating free cash flow should be considered in addition to, rather than as a substitute for, net cash provided (used) 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. 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 of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, loss from operations and net loss per share calculated in accordance with GAAP. 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. We also believe that this measure can assist investors in comparing our performance to that of other companies on a consistent basis without regard to certain items, which do not directly affect our ongoing cash flow.

 


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31 Non-GAAP Financial Measures • ACI also includes backlog estimates which are 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 SEC Regulation G. Our 60-month backlog estimate represents expected revenues from existing customers using the following key assumptions: • 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 and facilities management 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. • The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

 


32 Forward Looking Statements This presentation 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”, “looks forward to,” 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 presentation include, but are not limited to, statements regarding the: The strength of, or improvement in, future sales results including the anticipation of considerably stronger sales for the second quarter of 2008; Expectations relating to our ability to convert current period sales into GAAP revenue at the rates projected throughout 2008; Retention of customers; Sales and financial expectations, including the ability to increase sales and market opportunities for our Wholesale Payment Solutions in all regions and leverage our on demand products; Expected impacts and benefits of the IBM alliance, including our ability to achieve success related to the sales pipeline for IBM Alliance customer prospects and other joint marketing efforts; Expectations relating to the IBM outsourcing relationship, including the ability to achieve the expected operating cost savings and capital expenditure reductions and our ability to leverage the IBM data centers for our on demand products; Ability to successfully enable our products to operate on IBM’s System z series and to successfully market the enabled products to customers; Expectations relating to the impact, if any, of the maturity announcement for our legacy retail payment products and the ability to successfully migrate affected retail payment customers to BASE24-eps; Expectations relating to technical headcount investment, aggression in product life cycle management, wholesale payment hub opportunity, solutions and integration focus, implementation and services margin improvement, and harvesting backlog; Expectations related to the reduced rate of increase in our overall deferred revenue and our belief that this indicates that we are converting a greater amount of deferred revenue into current period GAAP earnings; and Expectations related to the timing of the GAAP expense associated with the IBM outsourcing agreement. Any or all of the forward-looking statements may turn out to be wrong. They can be affected by the judgments and estimates underlying such assumptions or by known or unknown risks and uncertainties. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed or implied in any forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements after the date of this presentation. All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission. 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 Form 10-K filed on January 30, 2008 and our Form 10-Q filed on February 19, 2008, both as amended by our Form 10-K/A and Form 10-Q/A, respectively, filed on March 4, 2008, and specifically the sections entitled “Factors That May Affect Our Future Results or the Market Price of Our Common Stock.”

 

 

 


33 Forward Looking Statements The risks identified in our filings with the Securities and Exchange Commission include: Risks associated with the restatement of our financial statements; Risks associated with our performance which could be materially adversely affected by a general economic downturn or lessening demand in the software sector; Risks associated with our ability to successfully and effectively compete in a highly competitive and rapidly changing industry; Risks inherent in making an estimate of our backlogs which may not be accurate and may not generate the predicted revenue; Risks associated with tax positions taken by us which require substantial judgment and with which taxing authorities may not agree; Risks associated with consolidation in the financial services industry which may adversely impact the number of customers and our revenues in the future; Risks associated with our stock price which may be volatile; Risks associated with conducting international operations; Risks regarding one of our most strategic products, BASE24-eps, which may prove to be unsuccessful in the marketplace; Risks associated with our future profitability which depends on demand for our products; lower demand in the future could adversely affect our business; Risks associated with the complexity of our software products and the risk that our software products may contain undetected errors or other defects which could damage our reputation with customers, decrease profitability, and expose us to liability; Risks associated with the IBM alliance, including our and/or IBM’s ability to perform under the terms of that alliance and customer receptiveness to the alliance Risks associated with future acquisitions and investments which could materially adversely affect us; Risks associated with our ability to protect our intellectual property and technology and that we may be subject to increasing litigation over our intellectual property rights; Risks associated with litigation that could materially adversely affect our business financial condition and/or results of operations; Risks associated with our offshore software development activities which may be unsuccessful and may put our intellectual property at risk; Risks associated with security breaches or computer viruses which could disrupt delivery of services and damage our reputation; Risks associated with our ability to comply with governmental regulations and industry standards to which are customers are subject which may result in a loss of customers or decreased revenue; Risks associated with our ability to comply with privacy regulations imposed on providers of services to financial institutions; Risks associated with system failures which could delay the provision of products and services and damage our reputation with our customers; Risks associated with our restructuring plan which may not achieve expected efficiencies; Risks associated with material weaknesses in our internal control over financial reporting; Risks associated with the impact of economic changes on our customers in the banking and financial services industries including the current mortgage crisis which could reduce the demand for our products and services; and Risks associated with the our recent outsourcing agreement with IBM which may not achieve the level of savings that we anticipate and involves many changes in systems and personnel which increases operational and control risk during transition, including, without limitation, the risks described in our Current report on Form 8-K filed March 19, 2008. Risks associated with our announcement of the maturity of certain legacy retail payment products may result in decreased customer investment in our products and our strategy to migrate customers to our next generation products may be unsuccessful which may adversely impact our business and financial condition.

 


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