UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2009 (February 26, 2009)
ACI WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction |
0-25346 (Commission File Number) |
47-0772104 (IRS Employer |
||
| of incorporation) | Identification No.) |
120 Broadway, Suite 3350
New York, New York 10271
(Address of principal executive offices) (Zip Code)
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 February 26, 2009, ACI Worldwide, Inc. (“the Company”) issued a press release announcing
its financial results for the three months ended December 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 February 26, 2009 |
| 99.2 | Investor presentation materials dated February 26, 2009 |
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, Chief Financial Officer, Controller and Chief Accounting Officer |
Date: February 26, 2009
3
EXHIBIT INDEX
| Exhibit No. | Description | |||
| 99.1 | Press Release dated February 26, 2009 |
|||
| 99.2 | Investor presentation materials dated February 26, 2009 |
|||
4
Exhibit 99.1
|
ACI Worldwide, Inc. 120 Broadway — Suite 3350 New York, NY 10271 646.348.6700 FAX 212.479.4000 |
News Release |
Contact:
Tamar Gerber
Vice President, Investor Relations & Financial Communications
646.348.6706
Tamar Gerber
Vice President, Investor Relations & Financial Communications
646.348.6706
ACI Worldwide, Inc. Reports Financial
Results for the Quarter and Year Ended December 31, 2008
Results for the Quarter and Year Ended December 31, 2008
OPERATING HIGHLIGHTS
| • | Year-over-year revenues grew $43.4 million or 12% aided by customer ‘go live’ recognition and term renewals | ||
| • | Operating Free Cash Flow (OFCF) increased to approximately $65 million, $12 million higher than the prior year | ||
| • | Calendar Year GAAP EPS grew $0.68 to $0.30 per share in fiscal year 2008. | ||
| • | Signed five major customer renewals; two of which were formerly PUFs and are improved economic deals on a normal five-year contract basis. | ||
| • | Removed approximately $30 million in annualized costs from the business during full year 2008 and we currently expect to remove an additional $8.0 million in annualized cost in 2009 |
| Quarter and Year Ended | ||||||||||||
| Quarter | Year | Better / (Worse) | Better / (Worse) | Better / (Worse) | Better / (Worse) | |||||||
| ended Dec 31, | ended Dec 31, | Quarter ended Dec | Quarter ended Dec | Year ended Dec 31, | Year ended Dec 31, | |||||||
| 2008 | 2008 | 31, 2007 | 31, 2007 | 2007 | 2007 | |||||||
Operating Free Cash Flow
($ Mil) |
$31.1 | $65.1 | $10.0 | 47% | $12.3 | 23% | ||||||
60 month
Backlog
($Bil) |
$1.407 | $1.407 | $0.019 | 1% | $0.019 | 1% | ||||||
Revenues
($ Mil) |
$109.2 | $417.7 | $7.9 | 8% | $43.4 | 12% | ||||||
(NEW YORK — February 26, 2009) — ACI Worldwide, Inc. (NASDAQ:ACIW), a leading international
provider of software for electronic payment systems, today announced financial results for the
quarter and year ended December 31, 2008. We will hold a conference call on February 26,
2009, at 8.30 a.m. EST to discuss this information. Interested persons may also access a
real-time audio broadcast of the teleconference at
www.aciworldwide.com/investors.
“In 2008, ACI achieved strong sales and operational performance. Our infrastructure investment over
the past few years has begun to pay off as we demonstrated higher completion rates in multi-product
customer installations. In the fourth quarter, we achieved success in renewing term contracts,
previously booked at deep discounts, at economically advantageous rates”, Chief Executive Officer
Philip Heasley said.
Heasley further added, “I can reiterate my statements from last quarter. We do not currently expect
sales of our products to be unduly affected by the macroeconomic climate as our solutions enhance
the productivity of bank processing. Even in a credit-constrained environment, we believe it will
continue to be critical for the payments side of the banks to achieve further productivity
improvements.”
As previously disclosed, on February 23, 2007, our Board of Directors approved a change in our
fiscal year from a September 30 fiscal year-end to a December 31 fiscal year-end, effective as of
January 1, 2008 for the year ended December 31, 2008. Accordingly, for comparison purposes, we have
included financial information for the twelve months ended December 31, 2007 in this press release,
which has been derived by combining the results of the four quarters ended March 31, 2007, June 30,
2007, September 30, 2007 and December 31, 2007.
Notable new business during the quarter included:
| • | EMEA: Products selected across the Europe/Middle East region included large service deals incorporating BASE24-epsTM combinations in Western Europe, ACI Proactive Risk ManagerTM, and ACI Money Transfer Service. Customer geographies included Hungary, Italy, the Netherlands, Russia, Spain, the United Kingdom as well as a new customer in Kenya. |
| • | Asia: New accounts and new applications signed in Thailand, Australia and in New Zealand for products ranging from BASE24-posTM, ACI Proactive Risk ManagerTM, and numerous add-on/ capacity deals in Korea, Thailand, China, Philippines and Australia. Our two largest Asian customers signed renewals in the quarter as well. | ||
| • | Americas: Major term renewals drove a large amount of Base24 systems in combination with Payments Manager. There was also a significant Enterprise Banker win. Retail sector sales occurred in supermarkets, pharmacies and gas station chains. During 2008, total sales for the Americas rose approximately 10% with new business sales up 14% year-over-year. |
FINANCIAL SUMMARY
Operating Free Cash Flow
Operating free cash flow for the December 2008 quarter was $31.1 million compared to $21.1 million
for the December 2007 quarter. The primary items driving the year-over-year increase of $10.0
million in operating free cash flow were related to higher customer cash receipts, lower payroll
and benefits expenses and capital expenditures as well as lower cash taxes paid in the 2008 period.
Negative variance over the December 2007 quarter was driven by the lack of a corresponding IBM alliance
receipt in the prior year quarter.
Operating free cash flow for the twelve months ended December 31, 2008 was $65.1 million, an
increase of approximately $12 million over the twelve months ended December 31, 2007. Driving the
increase in operating free cash flow was IBM alliance receipts of approximately $33 million, an
approximately $19 million increase in customer cash receipts and a reduction of
approximately $7 million in payroll and benefits expenses as a result of restructuring and
favorable foreign exchange fluctuations. This increase was partially offset by growth of
approximately $9 million in contractor expenses during 2008, higher annual capital expenditures
related to the relocation of our Omaha facilities, and approximately $6 million in cash
expenditures on the IBM IT transition and outsourcing.
Liquidity
We had $113.0 million in cash and cash equivalents on hand at December 31, 2008, an increase of
$16.0 million as compared to December 31, 2007. As of December 31, 2008, we also had $75.0 million
of unused borrowings under our credit facility.
Sales
Sales bookings in the quarter totaled $189.3 million compared to $131.5 million in the December
2007 quarter. The $57.8 million, or 44%, rise in period-over-period sales is primarily from add-on
business and term extensions. Add-on business accounted for $82.5 million of the December 2008
quarter sales compared to $55.6 million in the December 2007 quarter sales while term extensions
contributed $73.3 million in the 2008 quarter compared to $44.5 million in the 2007 quarter.
Add-ons were comprised of capacity upgrades, migrations to BASE24-epsTM, and sales of additional
functionality to existing customers. Term extensions to existing customers were booked at
economically normalized renewal rates as compared to the discounted incentives offered in the
previous renewal terms.
Backlog
As of December 31, 2008, our estimated 60-month backlog was $1.407 billion compared to $1.414
billion at September 30, 2008, and $1.388 billion as of December 31, 2007. The sequential decrease
of approximately $7 million, or 0.5%, in our 60-month backlog was primarily due to foreign exchange
translation loss of approximately $54 million on a sequential quarterly basis offset by increases
from 2008 new sales. The 60-month backlog metric was negatively
impacted by an approximately $78 million variance in
currency rates year-over-year. As of December 31, 2008, our estimated 12-month backlog was $325
million, a decrease of approximately $11 million from the quarter ended December 31, 2007,
reflecting both the large deals which moved out of backlog into current period GAAP revenue in
calendar 2008 and the approximately $18 million impact of the strengthening US Dollar. Customer
installations which went live during the year were predominantly in Western Europe, the Middle East
and the United States.
Revenue
Revenue was $109.2 million in the quarter ended December 31, 2008, an increase of $7.9 million, or
8%, over the prior-year period revenue of $101.3 million driven primarily by increases in service
revenues. Consistent with the performance of prior quarters in calendar year 2008, our December
2008 quarterly GAAP revenue was derived principally from our backlog: 81% from backlog and 19% of
the revenue was provided by current-period sales of license renewal fees and capacity. The amount
of revenue originating from same period sales was higher than in the
prior year due to the sales mix being more heavily weighted to renewal
and add-on business. Services revenue
increased by 34%, or $7.8 million, to $30.7 million due to higher ongoing and ancillary services
provided to customers at more commercially attractive rates. License fee revenues, as well as
maintenance revenues, were largely unchanged on a year over year basis. Revenue growth in the
December 2008 quarter was negatively impacted by an estimated $8 million in foreign exchange rate
fluctuations compared to the December 2007 quarter.
Revenue for the twelve months ended December 31, 2008 was $417.7 million, an increase of $43.4
million or 12% compared to revenue of $374.2 million for the twelve months ended December 31, 2007.
Revenue growth is attributed to our success in completing multi-phase, complex new customer and
new application installations. Revenue growth year-over-year, much like backlog, was adversely
impacted by an estimated $3 million in foreign exchange rate fluctuations.
Operating Expenses
Operating expenses were $89.6 million in the December 2008 quarter compared to $98.4 million in the
December 2007 quarter, a decrease of $8.8 million or approximately 9%. This decrease in operating
expense was largely due to a reduction of $10.2 million in personnel and related costs due to the
implementation of our restructuring and headcount reduction program, in addition to the lower
headcount resulting from the IBM IT outsourcing arrangement. Other large decreases resulted from
reductions in travel and entertainment of $1.0 million, a $0.6 million reduction in advertising
and promotion as well as a nearly $1.0 million reduction in facilities. These savings were
partially offset by $2.0 million in additional severance in the December 2008 quarter as well as
$2.0 million in professional fees related to reinvestments and development of our corporate
management office.
Operating expenses for the twelve months ended December 31, 2008 were $395.9 million, an increase
of $22.0 million, or 6%, compared to expense of $373.9 million in the twelve months ended December
31, 2007. The increase in operating expense year over year resulted from a rise of $14.8 million in
personnel and related costs. The increase was due to cost of maintenance and services as we implemented large volumes of multi-product systems and invested in next generation
software releases. Other large increases resulted from the release of $3.2 million of deferred
costs related to the recognition of the Faster Payments and Mastercard implementations upon project
completion, an increase of $2.9 million in distributor commissions related to mix of sales in 2008.
We also incurred an incremental $2.9 million in 2008 above 2007 costs related to severance actions,
recruitment and consulting fees and the IBM IT outsourcing transition costs.
Other Income and Expense
Other income for the December 2008 quarter was $4.4 million compared to other expense of $1.0
million in the December 2007 quarter. The variance of $5.4 million in other income resulted
primarily from a positive variance of $7.4 million in foreign exchange gains due to change in
exchange rates and our net monetary asset positions in US dollars and in Euros. The foreign
exchange gain was partially offset by a $1.8 million increase in the non-cash charge on our
interest rate swaps. Interest expense and interest income were largely unchanged compared to the
prior year quarter.
On an annual basis, other income for the twelve months ended December 31, 2008 was $5.8 million
as compared to other expense of $6.4 million for the twelve months ended December 31, 2007. The
$12.2 million change in other income resulted primarily from a positive variance of $13.2 million
in foreign exchange gains partially offset by a $1.2 million increase in the non-cash charge on our
interest rate swaps. Both interest expense and interest income were lower primarily due to the
cyclical market trend of reductions in interest rates.
Taxes
Income tax expense in the December 2008 quarter was $11.0 million or a 46% effective tax rate,
compared to an expense of $3.9 million, or a 207% effective tax rate in the prior year quarter.
The tax expense cost and high effective rates in both quarters were due to losses in tax
jurisdictions for which we received no tax benefit and by income in tax jurisdictions in which we
accrued tax expense.
Net Income (Loss) and Diluted Earnings Per Share
Net income for the December 2008 quarter was $12.9 million compared to net loss of $2.0 million
during the same period last year, an increase of $14.9 million as a result of the factors described
above.
Earnings per share for the quarter ended December 31, 2008 was $0.37 per diluted share compared to
a loss of $(0.06) per diluted share during the same period last year.
Earnings per share for the twelve months ended December 2008 was $0.30 per diluted share compared
to a loss of $(0.38) per diluted share for the twelve month period. The $0.68 improvement in
earnings per share was due to the stronger business performance in 2008 as compared to 2007.
Diluted Weighted Average Shares Outstanding
Total diluted weighted average shares outstanding were 34.6 million for the quarter and 34.8
million for the twelve months ended December 31, 2008 as compared to 35.7 million shares
outstanding for the quarter and 36.6 million for the twelve months ended December 31, 2007.
2009 Guidance
ACI is guiding on three metrics for calendar year 2009. We currently expect GAAP Revenue to achieve
a range of $415-425 million, Sales of $450-460 million and GAAP Operating Income of $35-40 million.
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.
Regulatory Filings
As explained in the company’s February 17, 2009 press release, the company determined that $1.9
million of revenue recognized in its March 31, 2008 quarter for a software project should have been
deferred until further project milestones were achieved. Subject to completion of the review of
that matter, ACI will file an amended Form 10-Q for the quarter ended March 31, 2008 containing
restated consolidated financial statements correcting this error. At that time, ACI also intends to
amend its second and third quarter 2008 reports on Form 10-Q to report year-to-date data reflecting
the error and to file its 2008 annual report on Form 10-K.
The information in this press release is subject to change based upon the final findings of that
review and the review of the restated financial statements by the company’s independent registered
public accounting firm. Until those reviews are completed, there is a risk that additional
information may arise that would require the company to make adjustments beyond those previously
disclosed.
Non GAAP Financial Measures
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. 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 (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. 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.
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
Net cash provided by operating activities |
$ | 31.6 | $ | 12.1 | $ | 77.8 | $ | 37.9 | ||||||||
Selected non-recurring items: |
||||||||||||||||
Net after tax cash payments associated
with employee-related activities |
2.0 | 2.7 | 3.5 | 4.1 | ||||||||||||
Net after tax cash payments associated
with corporate jet lease termination |
— | 0.8 | — | 0.8 | ||||||||||||
Net after tax cash payments associated with
early termination of Watford facility lease |
— | — | 0.6 | — | ||||||||||||
Net after tax cash payments associated
with stock option cash settlement |
— | — | — | 8.4 | ||||||||||||
Less capital expenditures |
(0.7 | ) | (3.9 | ) | (12.0 | ) | (7.7 | ) | ||||||||
Less alliance technical enablement
expenditures |
(2.0 | ) | — | (6.3 | ) | — | ||||||||||
Proceeds from alliance agreement |
0.2 | 9.3 | 1.5 | 9.3 | ||||||||||||
Operating Free Cash Flow |
$ | 31.1 | $ | 21.1 | $ | 65.1 | $ | 52.8 | ||||||||
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.
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 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 presentation include, but are
not limited to, statements regarding the: (a) expectations
regarding the Company’s belief that sales of its
products should not be unduly affected by the macroeconomic climate as the Company’s solutions
enhance the productivity of bank processing; (b) expectations that it is critical for bank
customers in a credit-constrained environment to achieve further productivity improvements; (c)
expectations and assumptions regarding sales, revenues, operating
income; and (d) the company’s expectation regarding the filing
of restated Forms 10-Q for the first three quarters of 2008 and the
filing of the company’s annual report on Form 10-K.
Forward-looking
statements 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, and
our business, financial condition and results of operations could be materially and adversely
affected. In addition, we disclaim any obligation to update any forward-looking statements after
the date of this press release, except as required by law. All of the foregoing forward-looking
statements are expressly qualified by the risk factors discussed in our filings with the Securities
and Exchange Commission. Such factors include, but are not limited to, risks related to the
restatement of our financial statements, general economic downturn, demand for our products,
increased competition, the accuracy of backlog estimates, risks from operating internationally, our
alliance with IBM, our outsourcing agreement with IBM, the protection of our intellectual property,
volatility in our stock price, the performance of our strategic product, BASE24-eps, changes in the
financial services industry, our tax positions, the complexity of our products and the risk that
they may contain hidden defects, future acquisitions and investments, our offshore software
development activities, litigation, security breaches or computer viruses, governmental regulations
and industry standards, our compliance with privacy regulations, system failures, our restructuring
plan, material weaknesses in our internal control over financial reporting, the maturity of certain
legacy retail payment products, restrictions and other financial covenants in our credit facility,
head-count reductions, and volatility and disruption of the capital and credit markets. For a
detailed discussion of these risk factors, parties that are relying on the forward-looking
statements should review our filings with the Securities and Exchange Commission, including our
most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
| December 31, | September 30, | December 31, | September 30, | |||||||||||||
| 2008 | 2008 | 2007 | 2007 | |||||||||||||
ASSETS |
||||||||||||||||
Current assets |
||||||||||||||||
Cash and cash equivalents |
$ | 112,966 | $ | 94,341 | $ | 97,011 | $ | 60,794 | ||||||||
Billed receivables, net |
77,738 | 79,742 | 87,932 | 70,384 | ||||||||||||
Accrued receivables |
17,412 | 16,697 | 11,132 | 11,955 | ||||||||||||
Deferred income taxes |
12,507 | 4,238 | 5,824 | 7,088 | ||||||||||||
Recoverable income taxes |
3,140 | 9,998 | 6,336 | 3,852 | ||||||||||||
Prepaid expenses |
9,483 | 10,991 | 9,803 | 10,572 | ||||||||||||
Other current assets |
8,800 | 8,249 | 8,399 | 7,233 | ||||||||||||
Total current assets |
242,046 | 224,256 | 226,437 | 171,878 | ||||||||||||
Property, plant and equipment, net |
19,421 | 20,355 | 19,503 | 19,356 | ||||||||||||
Software, net |
29,438 | 28,805 | 31,430 | 31,764 | ||||||||||||
Goodwill |
199,986 | 204,560 | 206,770 | 205,715 | ||||||||||||
Other intangible assets, net |
30,347 | 32,799 | 38,088 | 39,685 | ||||||||||||
Deferred income taxes |
17,397 | 31,281 | 30,530 | 24,315 | ||||||||||||
Other assets |
14,207 | 16,270 | 17,700 | 14,028 | ||||||||||||
TOTAL ASSETS |
$ | 552,842 | $ | 558,326 | $ | 570,458 | $ | 506,741 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||||
Current liabilities |
||||||||||||||||
Accounts payable |
$ | 16,047 | $ | 12,291 | $ | 16,351 | $ | 14,677 | ||||||||
Accrued employee compensation |
19,955 | 22,532 | 22,659 | 22,625 | ||||||||||||
Deferred revenue |
99,921 | 105,370 | 115,519 | 97,042 | ||||||||||||
Income taxes payable |
78 | — | — | 2,251 | ||||||||||||
Alliance agreement liability |
6,195 | 5,404 | 9,331 | — | ||||||||||||
Accrued and other current liabilities |
24,068 | 20,261 | 22,992 | 17,925 | ||||||||||||
Total current liabilities |
166,264 | 165,858 | 186,852 | 154,520 | ||||||||||||
Deferred revenue |
24,296 | 23,262 | 27,253 | 30,280 | ||||||||||||
Note payable under credit facility |
75,000 | 75,000 | 75,000 | 75,000 | ||||||||||||
Deferred income taxes |
2,091 | 3,393 | 3,245 | 3,265 | ||||||||||||
Alliance agreement noncurrent liability |
37,327 | 40,706 | — | — | ||||||||||||
Other noncurrent liabilities |
34,023 | 33,791 | 37,069 | 18,664 | ||||||||||||
Total liabilities |
339,001 | 342,010 | 329,419 | 281,729 | ||||||||||||
Commitments and contingencies |
||||||||||||||||
Stockholders’ equity |
||||||||||||||||
Preferred Stock |
— | — | — | — | ||||||||||||
Common stock |
204 | 204 | 204 | 204 | ||||||||||||
Common stock warrants |
24,003 | 24,003 | 24,003 | — | ||||||||||||
Treasury stock |
(147,808 | ) | (148,807 | ) | (140,320 | ) | (140,340 | ) | ||||||||
Additional paid-in capital |
302,237 | 302,549 | 311,108 | 312,642 | ||||||||||||
Retained earnings |
58,468 | 46,971 | 47,886 | 53,226 | ||||||||||||
Accumulated other comprehensive income (loss) |
(23,263 | ) | (8,604 | ) | (1,842 | ) | (720 | ) | ||||||||
Total stockholders’ equity |
213,841 | 216,316 | 241,039 | 225,012 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 552,842 | $ | 558,326 | $ | 570,458 | $ | 506,741 | ||||||||
“The financial information for the twelve months ended December 31, 2007 has been derived by
combining the results of the four quarters ended March 31, 2007, June 30, 2007, September 30, 2007
and December 31, 2007. ”
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenues: |
||||||||||||||||
Software license fees |
$ | 46,797 | $ | 46,266 | $ | 169,210 | $ | 154,566 | ||||||||
Maintenance fees |
31,748 | 32,167 | 130,015 | 124,671 | ||||||||||||
Services |
30,666 | 22,849 | 118,428 | 94,974 | ||||||||||||
Total revenues |
109,211 | 101,282 | 417,653 | 374,211 | ||||||||||||
Expenses: |
||||||||||||||||
Cost of software license fees |
9,291 | 10,214 | 45,487 | 42,240 | ||||||||||||
Cost of maintenance and services |
26,891 | 24,689 | 124,744 | 99,147 | ||||||||||||
Research and development |
9,256 | 16,411 | 45,896 | 56,514 | ||||||||||||
Selling and marketing |
15,990 | 20,673 | 74,028 | 72,803 | ||||||||||||
General and administrative |
28,211 | 26,443 | 105,785 | 103,201 | ||||||||||||
Total expenses |
89,639 | 98,430 | 395,940 | 373,905 | ||||||||||||
Operating income |
19,572 | 2,852 | 21,713 | 306 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
678 | 763 | 2,609 | 3,960 | ||||||||||||
Interest expense |
(1,460 | ) | (1,389 | ) | (5,013 | ) | (6,573 | ) | ||||||||
Other, net |
5,172 | (334 | ) | 8,247 | (3,781 | ) | ||||||||||
Total other income (expense) |
4,390 | (960 | ) | 5,843 | (6,394 | ) | ||||||||||
Income (loss) before income taxes |
23,962 | 1,892 | 27,556 | (6,088 | ) | |||||||||||
Income tax expense |
11,024 | 3,908 | 16,974 | 7,680 | ||||||||||||
Net income (loss) |
$ | 12,938 | $ | (2,016 | ) | $ | 10,582 | $ | (13,768 | ) | ||||||
Earnings (loss) per share information |
||||||||||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
34,433 | 35,700 | 34,498 | 36,559 | ||||||||||||
Diluted |
34,610 | 35,700 | 34,795 | 36,559 | ||||||||||||
Earnings (loss) per share |
||||||||||||||||
Basic |
$ | 0.38 | $ | (0.06 | ) | $ | 0.31 | $ | (0.38 | ) | ||||||
Diluted |
$ | 0.37 | $ | (0.06 | ) | $ | 0.30 | $ | (0.38 | ) | ||||||
“The financial information for the twelve months ended December 31, 2007 has been derived by
combining the results of the four quarters ended March 31, 2007, June 30, 2007, September 30, 2007
and December 31, 2007. ”
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| For the Twelve Months Ended | ||||||||
| December 31, | ||||||||
| 2008 | 2007 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 10,582 | $ | (13,768 | ) | |||
Adjustments to reconcile net income (loss) to net cash flows from
operating activities |
||||||||
Depreciation |
6,506 | 6,017 | ||||||
Amortization |
15,544 | 14,828 | ||||||
Tax expense of intellectual property shift |
1,942 | 2,025 | ||||||
Amortization of debt financing costs |
336 | 336 | ||||||
Gain on reversal of asset retirement obligation |
(949 | ) | (386 | ) | ||||
Gain on transfer of assets under contractual obligations |
(219 | ) | — | |||||
(Gain) loss on disposal of assets |
290 | (65 | ) | |||||
Change in fair value of interest rate swaps |
5,800 | 4,552 | ||||||
Deferred income taxes |
4,739 | (9,231 | ) | |||||
Stock-based compensation expense |
7,888 | 5,816 | ||||||
Tax benefit of stock options exercised and cash settled |
357 | 1,019 | ||||||
Changes in operating assets and liabilities, net of impact of acquisitions: |
||||||||
Billed and accrued receivables, net |
(5,401 | ) | (15,971 | ) | ||||
Other current assets |
(187 | ) | (1,796 | ) | ||||
Other assets |
617 | (3,116 | ) | |||||
Accounts payable |
(2,494 | ) | 2,189 | |||||
Accrued employee compensation |
51 | 910 | ||||||
Proceeds from alliance agreement |
40,935 | — | ||||||
Accrued liabilities |
(2,609 | ) | 4,357 | |||||
Current income taxes |
2,130 | 3,109 | ||||||
Deferred revenue |
(7,012 | ) | 36,963 | |||||
Other current and noncurrent liabilities |
(1,020 | ) | (207 | ) | ||||
Net cash flows from operating activities |
77,826 | 37,581 | ||||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(7,021 | ) | (5,363 | ) | ||||
Purchases of software and distribution rights |
(4,936 | ) | (2,334 | ) | ||||
Sales of marketable securities |
— | 2,500 | ||||||
Proceeds from transfer of assets under contractual arrangement |
— | 500 | ||||||
Alliance technical enablement expenditures |
(6,328 | ) | — | |||||
Proceeds from alliance agreement, net of common stock warrants |
1,498 | 9,330 | ||||||
Acquisition of businesses, net of cash acquired |
(169 | ) | (10,869 | ) | ||||
Other |
— | 6 | ||||||
Net cash flows from investing activities |
(16,956 | ) | (6,230 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock |
1,704 | 279 | ||||||
Proceeds from issuance of common stock warrants |
— | 24,003 | ||||||
Payments for cash settlement of stock options |
285 | |||||||
Proceeds from exercises of stock options |
3,841 | 625 | ||||||
Excess tax benefit of stock options exercised |
142 | 123 | ||||||
Purchases of common stock |
(30,063 | ) | (46,348 | ) | ||||
Payments on debt and capital leases |
(3,311 | ) | (2,505 | ) | ||||
Net cash flows from financing activities |
(27,687 | ) | (23,538 | ) | ||||
Effect of exchange rate fluctuations on cash |
(17,228 | ) | (702 | ) | ||||
Net decrease in cash and cash equivalents |
15,955 | 7,111 | ||||||
Cash and cash equivalents, beginning of period |
97,011 | 89,900 | ||||||
Cash and cash equivalents, end of period |
$ | 112,966 | $ | 97,011 | ||||
“The financial information for the twelve months ended December 31, 2007 has been derived by
combining the results of the four quarters ended March 31, 2007, June 30, 2007, September 30, 2007
and December 31, 2007. ”
Exhibit 99.2
| December 31, 2008 Quarterly and Year End Results |
| 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 that may affect them is set forth at the end of this presentation. The Company assumes no obligation to update any forward-looking statement in this presentation, except as required by law. Private Securities Litigation Reform Act of 1995 Safe Harbor For Forward-Looking Statements |
| Phil Heasley, Chief Executive Officer Ron Totaro, Chief Operating Officer Scott Behrens, Chief Financial Officer Q&A: Phil Heasley, Ron Totaro and Scott Behrens Agenda |
| Ron Totaro, Chief Operating Officer Business Review |
| General Market Update Financial crisis has spread to most markets Cost pressures on our customers Inefficient technologies and processes Exacerbated by M&A activity seen over past half year Heavy focus on compliance, fraud and risk management Good for the ACI hub multi-product solution sales Our Enterprise On Demand opportunities are also very key for this market Starting to see impact of M&A activity as customers consolidate licenses Cross sell opportunities even as we lose the benefit of second license stream revenue Many license amalgamations which would occur as a result of M&A have already been factored into backlog (Wamu, Mellon, ABN, Wachovia, etc) |
| Base 24 Classic Sunset Announced in 2008 SUNSET was announced in March 2008 Not End-of-Life announcement Sunset will be effective in November 2011 Sunset means: Standard maintenance will increase significantly We still fix product defects Enhancements must be customer-funded Mandates must be customer-funded Supported platforms for BASE24-eps: IBM System z IBM System p Sun Solaris HP Nonstop |
| BASE24-eps - Ready for Primetime Licensed over 70 times (new accounts, new apps) Live over 35 times Live in many different operating environments ATM driving, merchant acquiring, switching, merchant retail, multi-channel Live on all of our supported platforms And now, with version 8.2, optimized for System z |
| In 2008 we began moving towards a Hub Strategy Example: A Retail Payments Hub Integrated Retail Payments Processing Hub Internal Bank Host Systems CIF/CRM Revolving Credit Prepaid Cust Service Brokerage DDA External Networks and Hosts Transaction Acquiring Integrated Fraud Detection Authorization and Switching Settlement and Reconciliation Customer and device authentication Native message formats Message translation Comms Negative and/or positive Limits and utilization Balances Scripted authorization Card, account, customer Rules or model-based Real-time, near real-time, or post-transaction Scripted transaction selection Centralized settlement Reporting Exception management Switching and routing Transaction logging Stand-in ATM POS Issuer Branch Internet Banking Call Center IVR Transaction Channels Network Access |
| IBM Alliance Key Deals Strategic wins for Base24-eps (Americas) Proactive Risk Manager (Asia) on IBM System z Enterprise Banker On Demand (Americas) Sales Summary Strong finish in Q4, led by wholesale payments FY 2008 performance doubled IBM platform business as compared to prior year Achieved expectations for business plan Product Investment Successful rollouts for new releases of Base24-eps and Proactive Risk Manager Continued focus on wholesale payments Service oriented architecture, System z optimization Single European Payments Area (SEPA) functionality |
| Customer Revenue by Industry Type We maintained a similar product line segmentation year-over-year Strong revenue from banks and processors in 2008 Growing activity in the retailer segment in the United States Contraction in the 'other' category led by loss of large Canadian processing deal in 2007 All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% All product attrition for the year at extremely low rates of 4.2% |
| Q4 2008 Sales Results Q4 2008 demonstrated strong add on / term renewals sales performance compared to last year Positive pricing gains in add-on business and term extensions in this quarter as evidenced by growth in retail payments Top 5 customers accounted for 45% of sales performance in the quarter as compared to 12% in Q3 2008 and 38% of sales in the preceding year quarter Positive variance versus prior year quarter due to: Major deal renewals at improved economic terms in the North American market Sale of add-on products to existing customers driven by term contract renewals Service deals at improved economic rates Negative variance in application services due to significant customer renewal activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period activity in prior year period |
| Q4 2008 Channel Sales Results Sales (net of Term Extensions) Term Extension Sales Total Sales Q4 2008 v Q4 2007 Channel Performance: Americas ... Top 5 customers accounted for $84.6 million of sales in Q4 08 vs. $44.3 million of sales in Q4 07. Americas sales figures driven by the extremely sizable renewals to long term customers and, largely, by add-on business. EMEA ... Top 5 customers accounted for $24.4 million of sales in Q4 08 vs. $22.5 million of sales in Q4 07. EMEA 2008 sales driven by processors as well as by Persian Gulf and UK banks. Asia-Pacific ... Top five customers accounted for $19.3 million of sales in Q4 08 vs. $3.4 million of sales in Q4 07. Asia-Pacific y-o-y favorable variance driven by big term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks term renewals at two large banks |
| Historic Sales By Quarter 2007-2008 Sales Mix by Category Quarter-End Total Economic Value of Sales New Accounts New Applications Add-on Business inc. Capacity Upgrades & Services Term Extensions 3/31/2007 $125,408 $20,333 $18,295 $43,192 $43,660 16% 15% 34% 35% 6/30/2007 85,220 $7,780 $12,048 $49,803 $26,558 9% 14% 58% 18% 9/30/3007 $91,052 $8,244 $21,617 $35,425 $25,765 9% 24% 39% 28% 12/31/2007 $131,539 $17,665 $16,721 $55,635 $44,518 13% 10% 42% 34% 3/31,2008 $63,814 $1,182 $9,718 $37,896 $15,017 2% 15% 59% 24% 6/30/2008 $99,938 $15,856 $23,487 $45,434 $15,160 16% 24% 45% 15% 9/30/2008 $106,594 $14,354 $7,180 $52,133 $32,936 13% 7% 49% 31% 12/31/2008 $189,337 $16,490 $17,014 $82,509 $73,324 9% 9% 44% 39% Sales New Accounts New Applications Add-in Business inc. Capacity Upgrades & Services Term Extensions Dec. YTD 08 $459,683 $47,873 $57,399 $217,972 $136,437 Dec. YTD 07 $433,291 $54,022 $65,681 $184,055 $129,531 Variance $26,392 ($6,149) ($8,282) $33,917 $6,906 |
| Americas Q4/Year in Review Q4 Revenue of $57.8 million, an increase of 16% over Q4 2007 driven by two large term renewals Annual revenue of $207.4 million, an increase of 5% over prior year Sales in the year were very strong New business sales up 14% year-over-year Term extension sales flat although dollar amount rose significantly U.S. sales up 14% even while headcount was reduced by 17% 20 new accounts Including Synovus, Tempo Servicios, Banred (Ecuador), Sumitomo U.S. 22 new applications sold in calendar year 2008 31 deals sold over $1 million in contract value during the year 10-12 major renewals Including Bank of America, Fiserv, Shoppers Drug, M&T, Comerica |
| 2009 Opportunities- Americas North American Banks Top bank ATM systems currently on processors Hub consolidation and cross-sell Online banking consolidation Risk Management cross-sell and upsell Wholesale payments in Canada North American Retailers Replace redundant, fragmented legacy technologies Processors Replace redundant legacy technologies Latin America New accounts and cross-selling Wholesale payments |
| EMEA Q4/Year in Review Q4 Revenue of $39.5 million, a decrease of 8% over Q4 2007 revenue of $43.1 million largely due to FX impact of approximately $5-6 million Q4 Major Term Extensions in Italy and Slovakia Q4 Large Services deals at El Corte Ingles and HBOS for Base24-eps Annual Revenue of $169.0 million, an improvement of 21% due to Faster Payments services acceptance 9 New customer names and 41 new applications during the year 25 deals over $1m in contract value in 2008 Major 2008 renewals at: Al Rajhi Erste Bank Fortis HSBC OTP |
| 2009 Opportunities- EMEA BASE24-eps - Focus on Tier 1 migrations and new names Payments HUB consolidation opportunities Build Operate Transfer model creates opportunity during a difficult economic climate and with major M&A activity Wholesale focus on SEPA-express with market regulations driver, expansion of Faster Payments and MTS-eps business development Continue to build on the success of PRM Professional Services - expansion of existing offerings to include support packages for sunset products and continue to increase margins |
| Asia-Pacific Q4/Year in Review Q4 revenue of $12.0 million, an increase of 40% due to wholesale service customers Term extension contracts signed for AP's 2 largest revenue customers. Two new customers - 1st PRM license on IBM System Z in the world Significant capacity contracts in China, India, Korea, and Thailand. Annual revenue of $41.3 million, an increase of 13% over prior year Largely due to strong professional services deals being implemented across Wholesale and Retail business 5 new customers and 9 new applications licensed during the year Grew sales by 37% year on year Wholesale Product related sales grew by 156% year on year Operating entities and sales operations in China and India established |
| 2009 Opportunities- Asia North Asia is the growth opportunity Japan upgrading retail/wholesale infrastructure China banks looking for payment hubs & upgrade risk India volumes continue to grow Indian banks rapidly extend coverage in consumer payments Australia consolidates Drives urgency to implement payment hubs across retail/wholesale Transaction banking services growing Corporate banking services attracting greater budgets in ASEAN |
| Cost Management Annualized gross cost savings of $30 million achieved in 2008 Rationalized headcount in mature markets and reinvested in growth regions A further $8 million in cost savings which will complete restructuring in 2009 Approximately $11.5 million to be re-invested in products, services and operational management Globalize Help24 customer support to create better quality as well as to control costs through better common tools and processes Assessing back office delivery / functionality |
| Continuing to Deepen Ops Management Bench Filling out the second level of management expertise... Chief Product Officer VP Global Risk Solutions APAC Strategy & Planning Leader EMEA VP of Services EMEA Strategy & Planning Leader Global Help24 Leader VP Human Resources Key Hires to Date: APAC Head of Services On-Demand Leader S. Europe / Middle East Leader Remaining Roles to Fill: |
| The CMO is the "nerve center" for program excellence and coordination of projects across the enterprise CMO Measurement Governance Organization Tools Reporting Methodology Corporate Management Office (CMO) CMO Purpose Define processes / methodologies Provide governance / oversight Provide tools / infrastructure Facilitate communication Escalate issues when appropriate Audit issues when necessary CMO Benefits Provides the consistent processes, tools and oversight to enable integrated planning and management across the business units to achieve strategic objectives |
| DRP Purpose Created to monitor and manage the sales and services teams All deals will be run through a formal requirements and delivery estimation process Deal Review Committee (DRC) will discuss and approve specific deals meeting pre-set criteria before formal pricing terms are offered to the customer DRP Benefits Estimate of the total cost that ACI will incur to deliver the project to the customer Understand the complete economic benefit of executing a customer deal Understand ACI's resource capacity needed to implement the deal within the timeframe the customer needs Obtain formal internal sign-offs (Sales, Services, Product, CIO, FP&A, Legal, etc.) for proposed deals Ensures we have agreement on the functionality we're committing to deliver to the customer Institutes process guidelines for the economic analysis of all deals being negotiated with clients Deal Review Process (DRP) |
| Financial Review Scott Behrens, Chief Financial Officer |
| Key Takeaways from the Quarter Revenue growth of 8%; achieved $109.2 million in the current quarter versus $101.3 million in December 2007 quarter Increase largely attributable to implementation and professional services $2 million growth in recurring revenue Sales were up 44%; achieved $189 million, or $57.8 million over prior year quarter, up 78% sequentially Rollover of discounted "PUFs" into new, economically priced deals OFCF of $31.1 million versus $21.1 million in December 2007 quarter Sequential improvement of $31.4 million versus Q3 2008 Prior year quarterly OFCF included $9.3 million contribution from IBM alliance which did not recur in Q4 2008 |
| Takeaways from the Quarter (cont) 12-month backlog reduction of $11 million year over year due to FX 12-month backlog impacted by currency fluctuation of ~$18 million versus Q4- 07's backlog currency rate Sterling equates to approximately 15% of all backlog and £ dropped from $1.99 to $1.45 in the year-over-year time period Expenses decreased $8.8 million versus prior year quarter primarily due to: Approximately $6 million reduction in expenses from restructuring Strong cost controls throughout organization as evidenced by reduction of $2.6 million in T&E, facilities and advertising and promotion FX contributed positive $9.3 million in the quarter while interest rate swaps contributed a non-cash loss of $4.3 million |
| OFCF Walk Q4 2007 vs Q4 2008 Cash Receipts Stronger AR management plus strong Latin American cash collections Increase in recurring monthly license fees largely due to de-emphasis on PUF deals across the business Payroll expenditures benefit from restructuring IBM IT Outsourcing use of cash in 2008 offset by payroll and reduced capex savings capex savings capex savings capex savings capex savings capex savings capex savings capex savings |
| Backlog is Still a Significant Contributor to current period Revenue Larger reliance on term renewals as a percentage of revenue on a year- over-year basis Rise in revenue contributed by current period sales was due to ILFs and capacity related to large retail system term renewals and add-on sales 60-month backlog contribution to revenue constant over prior year quarter 60-month backlog contribution to revenue constant over prior year quarter 60-month backlog contribution to revenue constant over prior year quarter 60-month backlog contribution to revenue constant over prior year quarter 60-month backlog contribution to revenue constant over prior year quarter 60-month backlog contribution to revenue constant over prior year quarter |
| Financials- Year in Review Financials- Year in Review Revenues up 12% on very strong term extensions and add-on sales and in spite of FX depreciation of revenue in European currencies Expenses up 6% Better than our 7-8% guidance given in March 2008 Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates Favorably impacted in EMEA by currency exchange rates |
| Performance versus 2008 Guidance Exceeded OFCF expectations due to Stronger than expected cash collections on a global basis $3 million tax refund in Canada Achieved $460 million in sales Signed $189 million of business in Q4, term renewals came in larger and earlier than expected, primarily in the US banking sector customer base Rev-log of $62 million achieved; ex-FX would have achieved $140.8 million rev-log Currency Impact of ~$81 million: extreme volatility in currency markets impacting ~ $78 million of backlog and approximately $3 million of revenue Sales mix- term extensions greater percentage of sales than what we had expected expected expected expected expected expected expected expected expected expected expected expected expected |
| 2009 Guidance Sales Flat to slightly down compared to prior year using constant budgeted FX rates from September 2008. FX Impact Beneficial to operating income percentage Revenue Growth rate excluding FX impact would have been 3-5% GAAP Operating Income Operating income to achieve 8-10% up from 5-6% in 2008 Sales are at a constant September 2008 budgeted FX rate of $:£ 1:1.82, $:€ 1:1.44 Revenue & GAAP Operating Income at 1/30/2009 prevailing FX Rates of $:£ 1:1.43, $:€ 1:1.29 |
| Other factors impacting Guidance Expenses Cash expenses should remain flat compared to 2008 calendar year Rise in professional fees driven by IBM IT outsourcing expected to offset drop in salaried headcount Annual net impact of $26 million restructuring will be realized in 2010; expect net $18 million impact in 2009 Dep'n and Amortization of approximately $23 million Non Cash compensation expense of approximately $9 million $1.6 million spend on IBM IT transition $5 million non-recurring severance / facilities moves primarily in Q2 and Q3 OFCF Capex in the $11 million range Cash taxes to be approximately $17 million in 2009 Phasing Margin will be a hockey stick in 2009, similar to 2008 performance U- shaped phasing of cash we generate more cash in Q1 and Q4 |
| Appendix |
| Operating Free Cash Flow ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2008 2007 Net cash provided by operating activities* $31.6 $ 12.1 Selected non-recurring items: Net after-tax cash payments associated with employee-related actions 2.0 2.7 Net after-tax payments associated with corp jet lease termination 0.0 0.8 Less capital expenditures (0.7) (3.9) Less alliance Technical enablement expenditures (2.0) 0.0 Proceeds from alliance agreement 0.2 9.3 Operating Free Cash Flow $31.1 $21.1 *OFCF is defined as net cash provided (used) by operating activities, excluding cash payments associated with the cash settlement of stock options, cash payments associated with one-time employee related actions, less capital expenditures and plus or minus net proceeds from IBM. All figures estimated tax effect at 35%. |
| 60-Month Backlog ($ millions) Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, 2008 2008 2007 Americas $771 $744 $739 EMEA 480 511 505 Asia/Pacific 156 159 144 Backlog 60-Month $1,407 $1,414 $1,388 ACI Deferred Revenue $124 $131 $143 ACI Other 1,283 1,283 1,245 Backlog 60-Month $1,407 $1,414 $1,388 |
| Revenues by Channel ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2008 2007 Revenues: United States $43.9 $36.0 Americas International 13.9 13.6 Americas $57.8 $49.6 EMEA 39.4 43.1 Asia/Pacific 12.0 8.6 Revenues $109.2 $101.3 |
| Monthly Recurring Revenue ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2008 2007 Monthly license fees $18.3 $16.0 Maintenance fees 31.7 32.2 Processing Services 8.1 8.4 Monthly Recurring Revenue $58.2 $56.6 |
| Deferred Revenue & Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, September 30, 2008 2008 2007 2007 Short Term Deferred Revenue $99.9 $107.3 $115.5 $97.0 Long Term Deferred Revenue $24.3 $23.3 $27.3 $30.3 Total Deferred Revenue $124.2 $130.6 $142.8 $127.3 Total Deferred Expense $11.3 $10.3 $11.4 $7.4 |
| Non-Cash Compensation, Acquisition Intangibles and Non-Recurring Items Quarter ended December 31, 2008 Quarter ended December 31, 2008 Quarter ended December 31, 2007 Quarter ended December 31, 2007 Non-recurring items EPS Impact* $ in Millions EPS Impact* $ in Millions Employee-related $0.05 $1.9 $0.01 $0.4 Reversal of LTIP Program (0.04) (1.4) (0.04) (1.4) Corporate jet lease termination 0.00 0.0 0.02 0.8 IBM Professional fees 0.00 0.0 0.01 0.3 Non-recurring items $0.01 $0.5 $0.00 $0.1 Amortization of acquisition-related intangibles and software 0.05 1.9 0.05 1.9 Non-cash equity-based compensation 0.04 1.3 0.04 1.4 Total: $0.10 $3.6 $0.09 $3.4 * Tax Effected at 35% |
| Other Income/Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended December 31, 2008 September 30, 2008 December 31, 2007 September 30, 2007 Interest Income $0.7 $0.6 $0.8 $1.2 Interest Expense (1.5) (1.1) (1.3) (2.2) FX Gain / Loss 9.3 1.6 1.9 0.5 Interest Rate Swap Loss (4.3) (0.8) (2.5) (2.1) Other (0.2) 0.0 0.2 0.0 Total Other Income (Expense) $4.4 $0.4 ($1.0) ($2.5) |
| Sales by Channel and Product Division ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended December 31, 2008 September 30, 2008 June 30, 2008 March 31, 2007 December 31, 2007 Sales by Channel: Americas $119.6 $46.8 $49.9 $19.2 $83.0 EMEA 47.1 53.0 42.4 30.6 43.3 Asia Pacific 22.6 6.8 7.6 14.0 5.3 Total Sales $189.3 $106.6 $99.9 $63.8 $131.6 Sales by Product Division: Retail Products $134.3 $70.0 $55.6 $45.8 $77.7 Wholesale Payments 30.3 17.6 24.9 14.4 27.1 Risk Management 14.7 5.5 5.1 1.1 8.6 Application Services 10.0 13.5 14.3 2.5 18.2 Total Sales $189.3 $106.6 $99.9 $63.8 $131.6 |
| Non-GAAP Financial Measures 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. 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 (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. 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. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. which do not directly affect our ongoing cash flow. |
| Non-GAAP Financial Measures 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. 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. |
| Non-GAAP Financial Measures 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. |
| Non-GAAP Financial Measures 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," "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 presentation include, but are not limited to, statements regarding the: (a) expectations regarding 2009 opportunities in the Americas, EMEA, and Asia; (b) expectations and assumptions for 2009 sales, FX impact, revenue, and GAAP operating income; and (c) expectations and assumption regarding 2009 expenses, operating free cash flow, and phasing. These forward-looking statements 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, and our business, financial condition and results of operations could be materially and adversely affected. In addition, we disclaim any obligation to update any forward-looking statements after the date of this press release, except as required by law. All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission. Such factors include, but are not limited to, risks related to the restatement of our financial statements, general economic downturn, demand for our products, increased competition, the accuracy of backlog estimates, risks from operating internationally, our alliance with IBM, our outsourcing agreement with IBM, the protection of our intellectual property, volatility in our stock price, the performance of our strategic product, BASE24-eps, changes in the financial services industry, our tax positions, the complexity of our products and the risk that they may contain hidden defects, future acquisitions and investments, our offshore software development activities, litigation, security breaches or computer viruses, governmental regulations and industry standards, our compliance with privacy regulations, system failures, our restructuring plan, material weaknesses in our internal control over financial reporting, the maturity of certain legacy retail payment products, restrictions and other financial covenants in our credit facility, head-count reductions, and volatility and disruption of the capital and credit markets. For a detailed discussion of these risk factors, parties that are relying on the forward-looking statements should review our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. |
