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): November 5, 2009 (November 5, 2009)
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)
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 November 5, 2009, ACI Worldwide, Inc. (“the Company”) issued a press release announcing its
financial results for the three months ended September 30, 2009. 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 November 5, 2009 | ||
| 99.2 | Investor presentation materials dated November 5, 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, Senior Vice President, Chief Financial | |||||
| Officer, Controller and Chief Accounting Officer | |||||
Date: November 5, 2009
3
EXHIBIT INDEX
| Exhibit No. | Description | |
99.1
|
Press Release dated November 5, 2009 | |
99.2
|
Investor presentation materials dated November 5, 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 |
Investors contact:
|
Media Contact: | |
Tamar Gerber
|
Gretchen Lium | |
Vice President, Investor Relations & Financial Communications
|
IR Results | |
646.348.6706
|
303-638-9185 |
ACI Worldwide, Inc. Reports Financial
Results for the Quarter Ended September 30, 2009
Results for the Quarter Ended September 30, 2009
OPERATING HIGHLIGHTS
| • | Achieved $11.9 million in operating income, representing significant operating expense improvement of $13.1 million over prior-year quarter | ||
| • | EPS of $0.23, an increase of $0.18 over prior-year quarter, driven largely by $0.38 improvement in operating expenses offset by lower revenues and higher taxes | ||
| • | Renewed large US bank customer as standard ILF/annuity contract; achieved “go-live” with 41 customers including large BASE-24-eps systems as well as SEPA-compliant cross border cash management systems. |
| Quarter Ended | |||||||||||||||
| September 30, | Better / (Worse) | Better / (Worse) | |||||||||||||
| 2009 | September 30, 2008 | September 30, 2008 | |||||||||||||
| Sales | $ | 96.4 | $ | (10.2 | ) | (10 | )% | ||||||||
| Revenue | $ | 104.5 | $ | (4.1 | ) | (4 | )% | ||||||||
| GAAP Operating Income | $ | 11.9 | $ | 8.9 | 297 | % | |||||||||
(NEW YORK — November 5, 2009) — ACI Worldwide, Inc. (NASDAQ:ACIW), a leading international
provider of electronic payments software and solutions, today
announced financial results for the period ended September 30, 2009. We will hold a conference
call on November 5, 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.
“This past week we announced an alliance with Bell ID which expands our comprehensive back office
product suite. Bell ID is consistent with our long-stated goal of strategically adding product
depth to our portfolio, particularly in non-US markets. Outside of the corporate development
activity, this was a quarter with milestone renewal events, significant add-on sales and a lot of
management energy dedicated to the improvement of our product offerings. Our financial results are
beginning to reflect both increased efficiency and profitability in our business as well as better
management of our expense structure. I was especially pleased to see us attain an operating margin
of over 11%,” said Chief Executive Officer Philip Heasley.
FINANCIAL SUMMARY
Sales
Sales bookings in the quarter totaled $96.4 million which was a reduction of 10%, or $10.2 million,
as compared to the September 2008 quarter. Term extension timing in both EMEA and Asia resulted in
a reduction of $12 million in EMEA term renewal sales business and a rise of $2.4 million in Asia
renewals over prior-year quarter. Sales net of term extensions of $74.3 million were a result of
an add-on sales rise in the Americas channel category by
$20 million, largely due to expansion of our
relationship with large North American renewal customers, while EMEA contracted by $17.6 million
and Asia contracted by $1.7 million in sales, respectively.
Revenues
Revenue was $104.5 million in the quarter ended September 30, 2009, a reduction of $4.1 million or
4% over the prior-year quarter revenue of $108.6 million. The decrease in revenue was largely
attributable to initial license fee revenue variance of
approximately $4.0 million primarily due to the non-recurring impact of the final Faster Payments
customer revenue in the EMEA region in the prior-year quarter.
Backlog
As of September 30, 2009, our estimated 60-month backlog was $1.487 billion as compared to $1.476
billion at June 30, 2009, and $1.414 billion as of September 30, 2008. As of September 30, 2009,
our 12-month backlog was $342 million, a decrease from $349 million in the quarter
ended June 30,
2009, while representing an increase compared to $323 million for the quarter ended September 30,
2008.
Liquidity
We had $103.0 million of cash and cash equivalents at September 30, 2009, a decrease of
$11.4 million as compared to September 30, 2008. As of September 30, 2009, we also had
approximately $75.0 million in available borrowings under our credit facility.
Operating Free Cash Flow
Operating free cash flow (“OFCF”) for the quarter was $(10.4) million compared to $(0.3) million
for the September 2008 quarter. The year-over-year negative variance in operating free cash flow of
$10.1 million was largely due to timing of receipts under term renewal contracts signed in the
quarter.
Operating Income
Operating income was $11.9 million in the September 2009 quarter, an improvement of $8.9 million as
compared to operating income of $3.0 million in the September 2008 quarter.
Operating Expenses
Operating expenses were $92.5 million in the September 2009 quarter compared to $105.6 million in
the September 2008 quarter, an improvement of $13.1 million or 12.4%. Operating expense variances
over prior-year quarter were mainly driven by a
variance of $9.9 million in human resource costs, partially due to prior-year’s inclusion of IT
outsourcing transition expenses, headcount reductions, as well as cost reductions of $1.8 million
in travel and entertainment fees and $0.7 million in facility costs.
Other Income and Expense
Other expense for the quarter was $0.4 million, compared to other income of $0.4 million in the
September 2008 quarter. The increase in other expense versus the prior-year quarter resulted
primarily from a $0.5 million reduction in foreign currency gains compared to the
same period in the prior year.
Taxes
Income tax expense in the quarter was $3.8 million as compared to $1.7 million in the prior-year
quarter. The increase of $2.1 million was due primarily to increased operating income as compared
to prior-year quarter.
Net Income and Diluted Earnings Per Share
Net income for the quarter was $7.8 million, compared to net income of $1.7 million during the same
period last year.
Earnings per share for the quarter ended September 2009 was $0.23 per diluted share compared to
earnings of $0.05 per diluted share during the same period last year.
Weighted Average Shares Outstanding
Total diluted weighted average shares outstanding were 34.2 million for the quarter ended September
30, 2009 as compared to 34.8 million shares outstanding for the quarter ended September 30, 2008.
Re-affirmation of Guidance
We do not anticipate any significant changes to our annual guidance reaffirmed in October based
upon what we are seeing in our business markets to date. However, we currently anticipate that we
will achieve the low end of sales guidance. Guidance,
incorporating previously disclosed risks and opportunities, remains as indicated on October 6,
2009. Calendar year guidance is as follows: Sales of $414-428 million, GAAP revenue of
approximately $406 million and GAAP Operating Income of $36.7-38.5 million.
-End-
About ACI Worldwide, Inc.
ACI Worldwide is a leading provider of software and services solutions to initiate, manage, secure
and operate electronic payments for major banks, retailers and processors around the world. The
company enables payment processing, online banking, fraud prevention and detection, and back-office
services. ACI solutions provide agility, reliability, manageability and scale, to more than 800
customers in 90 countries. Visit ACI Worldwide at www.aciworldwide.com.
Non GAAP Financial Measures
ACI is presenting operating free cash flow, which is defined as net cash provided (used) by
operating activities, excluding after-tax cash payments for employee related actions and IBM IT
Outsourcing transition and severance, 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. Operating free cash flow may not be computed in a similar manner by other companies.
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.
| Reconciliation of Operating Free Cash Flow | Quarter Ended September 30, | |||||||
| (millions) | 2009 | 2008 | ||||||
Net cash provided by operating activities |
$ | (8.0 | ) | $ | 3.2 | |||
Net after-tax payments associated with
employee related actions |
$ | 0.3 | $ | 0.4 | ||||
Net after-tax payments associated with IBM IT
Outsourcing |
$ | 0.3 | $ | 0.6 | ||||
Transition and Severance |
||||||||
Less capital expenditures |
(0.7 | ) | (2.6 | ) | ||||
Less alliance technical enablement expenditures |
(2.3 | ) | (1.9 | ) | ||||
Operating Free Cash Flow |
$ | (10.4 | ) | $ | (0.3 | ) | ||
| * | Tax Effected at 35% |
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. Backlog may not be computed in a similar manner by other companies.
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.
Reclassification
The Company redefined its cost of software license fees in order to better conform to industry
practice. The definition has been revised to be third-party software royalties as well as the
amortization of purchased and developed software for resale. Previously, cost of software license
fees also included certain costs associated with maintaining software products that have already
been developed and directing future product development efforts. These costs included human
resource costs and other incidental costs related to product management, documentation,
publications and education. These costs have now been reclassified to research and development and
cost of maintenance and services.
Forward-Looking Statements
This press release contains forward-looking statements based on current expectations that involve a
number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to
historical or current facts and may include words or phrases such as “believes,” “will,” “expects,”
“anticipates,” “intends,” and words and phrases of similar impact. The forward-looking statements
are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of
1995.
Forward-looking statements in this press release include, but are not limited to, statements
regarding (i) the expectations that our financial results are beginning to reflect both increased
efficiency and profitability in our business as well as better management of our expense structure;
(ii) the company’s 12- and 60-month backlog estimates; and (iii) expectations and assumptions
relating to 2009 financial guidance, including sales, GAAP revenues and GAAP operating income.
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 statement, 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 statement after the date of this press release.
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 global financial crisis, restrictions and other financial
covenants in our credit facility, volatility and disruption of the capital and credit markets, our
restructuring efforts, the restatement of our financial statements, consolidation in the financial
services industry, changes in the financial services industry, the accuracy of backlog estimates,
material weaknesses in our internal control over financial reporting, our tax positions, volatility
in our stock price, risks from operating internationally, increased competition, our offshore
software development activities, the performance of our strategic product, BASE24-eps, the maturity
of certain legacy retail payment products, our strategy to migrate customers to our next generation
products, ratable or deferred recognition of certain revenue associated with customer migrations
and the maturity of certain of our legacy retail payment products, demand for our products, our
alliance with IBM, our outsourcing agreement with IBM, the complexity of our products and services
and the risk that they may contain hidden defects or be subjected to security breaches,
governmental regulations and industry standards, our compliance with privacy regulations, system
failures, the protection of our intellectual property, future acquisitions and investments and
litigation. 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)
| September 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 102,986 | $ | 112,966 | ||||
Billed receivables, net of allowances of $2,852 and $1,920,
respectively |
86,486 | 77,738 | ||||||
Accrued receivables |
8,305 | 17,412 | ||||||
Deferred income taxes |
17,217 | 17,005 | ||||||
Recoverable income taxes |
505 | 3,140 | ||||||
Prepaid expenses |
10,939 | 9,483 | ||||||
Other current assets |
10,847 | 8,800 | ||||||
Total current assets |
237,285 | 246,544 | ||||||
Property, plant and equipment, net |
18,041 | 19,421 | ||||||
Software, net |
26,674 | 29,438 | ||||||
Goodwill |
203,611 | 199,986 | ||||||
Other intangible assets, net |
26,313 | 30,347 | ||||||
Deferred income taxes |
29,429 | 12,899 | ||||||
Other assets |
11,605 | 14,207 | ||||||
TOTAL ASSETS |
$ | 552,958 | $ | 552,842 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 14,880 | $ | 16,047 | ||||
Accrued employee compensation |
24,141 | 19,955 | ||||||
Deferred revenue |
103,400 | 99,921 | ||||||
Income taxes payable |
2,338 | 78 | ||||||
Alliance agreement liability |
5,237 | 6,195 | ||||||
Deferred income taxes |
1,507 | — | ||||||
Accrued and other current liabilities |
21,452 | 24,068 | ||||||
Total current liabilities |
172,955 | 166,264 | ||||||
Deferred revenue |
28,722 | 24,296 | ||||||
Note payable under credit facility |
75,000 | 75,000 | ||||||
Deferred income taxes |
4,351 | 2,091 | ||||||
Alliance agreement noncurrent liability |
28,836 | 37,327 | ||||||
Other noncurrent liabilities |
28,125 | 34,023 | ||||||
Total liabilities |
337,989 | 339,001 | ||||||
Commitments and contingencies (Note 14) |
||||||||
Stockholders’ equity |
||||||||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no
shares issued and
outstanding at September 30, 2009 and December 31, 2008 |
— | — | ||||||
Common stock; $0.005 par value; 70,000,000 shares authorized;
40,821,516
shares issued at September 30, 2009 and December 31, 2008 |
204 | 204 | ||||||
Common stock warrants |
24,003 | 24,003 | ||||||
Treasury stock, at cost, 6,841,411 and 5,909,000 shares outstanding
at September 30, 2009 and December 31, 2008, respectively |
(159,973 | ) | (147,808 | ) | ||||
Additional paid-in capital |
307,235 | 302,237 | ||||||
Retained earnings |
58,533 | 58,468 | ||||||
Accumulated other comprehensive loss |
(15,033 | ) | (23,263 | ) | ||||
Total stockholders’ equity |
214,969 | 213,841 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 552,958 | $ | 552,842 | ||||
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
| Three Months Ended September 30, | ||||||||
| 2009 | 2008 | |||||||
Revenues: |
||||||||
Software license fees |
$ | 40,714 | $ | 46,460 | ||||
Maintenance fees |
34,862 | 33,963 | ||||||
Services |
28,885 | 28,137 | ||||||
Total revenues |
104,461 | 108,560 | ||||||
Expenses: |
||||||||
Cost of software license fees (1) |
3,936 | 3,588 | ||||||
Cost of maintenance and services (1) |
27,959 | 31,320 | ||||||
Research and development |
20,071 | 19,170 | ||||||
Selling and marketing |
14,911 | 18,450 | ||||||
General and administrative |
21,064 | 28,889 | ||||||
Depreciation and amortization |
4,577 | 4,185 | ||||||
Total expenses |
92,518 | 105,602 | ||||||
Operating income |
11,943 | 2,958 | ||||||
Other income (expense): |
||||||||
Interest income |
117 | 635 | ||||||
Interest expense |
(488 | ) | (1,149 | ) | ||||
Other, net |
16 | 932 | ||||||
Total other income (expense) |
(355 | ) | 418 | |||||
Income before income taxes |
11,588 | 3,376 | ||||||
Income tax expense |
3,829 | 1,659 | ||||||
Net income (loss) |
$ | 7,759 | $ | 1,717 | ||||
Earnings (loss) per share information |
||||||||
Weighted average shares outstanding |
||||||||
Basic |
34,012 | 34,534 | ||||||
Diluted |
34,170 | 34,806 | ||||||
Earnings (loss) per share |
||||||||
Basic |
$ | 0.23 | $ | 0.05 | ||||
Diluted |
$ | 0.23 | $ | 0.05 | ||||
| (1) | The cost of software license fees excludes charges for depreciation but includes amortization of purchased and developed software for resale. The cost of maintenance and services excludes charges for depreciation. |
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 Three Months Ended | ||||||||
| September 30, | ||||||||
| 2009 | 2008 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 7,759 | $ | 1,717 | ||||
Adjustments to reconcile net loss to net cash flows from operating activities |
||||||||
Depreciation |
1,616 | 1,580 | ||||||
Amortization |
4,391 | 3,956 | ||||||
Tax expense of intellectual property shift |
550 | 590 | ||||||
Amortization of debt financing costs |
84 | 84 | ||||||
Gain on reversal of asset retirement obligation |
— | — | ||||||
Gain on transfer of assets under contractual obligations |
— | — | ||||||
Loss on disposal of assets |
23 | 17 | ||||||
Change in fair value of interest rate swaps |
653 | 775 | ||||||
Deferred income taxes |
(5,391 | ) | 2,862 | |||||
Stock-based compensation expense |
2,026 | 2,617 | ||||||
Tax benefit of stock options exercised |
8 | 205 | ||||||
Changes in operating assets and liabilities: |
||||||||
Billed and accrued receivables, net |
(13,096 | ) | 1,363 | |||||
Other current assets |
1,617 | 834 | ||||||
Other assets |
(834 | ) | 494 | |||||
Accounts payable |
(4,194 | ) | (230 | ) | ||||
Accrued employee compensation |
4,294 | (958 | ) | |||||
Proceeds from alliance agreement |
— | 3,100 | ||||||
Accrued liabilities |
(2,457 | ) | (2,615 | ) | ||||
Current income taxes |
4,869 | (2,888 | ) | |||||
Deferred revenue |
(8,455 | ) | (10,414 | ) | ||||
Other current and noncurrent liabilities |
(1,483 | ) | 60 | |||||
Net cash flows from operating activities |
(8,020 | ) | 3,149 | |||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(743 | ) | (2,180 | ) | ||||
Purchases of software and distribution rights |
(6 | ) | (441 | ) | ||||
Alliance technical enablement expenditures |
(2,347 | ) | (1,898 | ) | ||||
Proceeds from alliance agreement |
— | — | ||||||
Proceeds from assets transferred under contractual obligations |
— | (30 | ) | |||||
Acquisition of businesses, net of cash acquired |
(473 | ) | 20 | |||||
Net cash flows from investing activities |
(3,569 | ) | (4,529 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock |
321 | 311 | ||||||
Proceeds from exercises of stock options |
147 | 2,812 | ||||||
Excess tax benefit of stock options exercised |
24 | 79 | ||||||
Purchases of common stock |
— | — | ||||||
Common stock withheld from vested restricted stock awards for payroll
tax withholdings |
(277 | ) | — | |||||
Payments on debt and capital leases |
(383 | ) | (844 | ) | ||||
Net cash flows from financing activities |
(168 | ) | 2,358 | |||||
Effect of exchange rate fluctuations on cash |
340 | (4,830 | ) | |||||
Net decrease in cash and cash equivalents |
(11,417 | ) | (3,852 | ) | ||||
Cash and cash equivalents, beginning of period |
114,403 | 98,193 | ||||||
Cash and cash equivalents, end of period |
$ | 102,986 | $ | 94,341 | ||||
Exhibit 99.2
| September 30, 2009 Quarterly Results November 5, 2009 |
| 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 |
| Phil Heasley, Chief Executive Officer |
| Market Commentary Mega-bank Trends Banks used to regard each unit and country as disparate entities Now we are seeing banks moving towards global deals in software infrastructure to improve efficiencies The good news is that deals under discussion are larger and more comprehensive projects The bad news is that these type of deals take longer to close Still seeing lots of interest in payments system investments Speed hampered by rigid approval processes Banks paying cash closer to final contractual date Seeing usual YE sales volatility Band of possible sales outcomes for 2009 Our preference is to maintain moderate growth with good operating margins, not growth for its own sake Product alliances |
| Ron Totaro, Chief Operating Officer Quarterly Business Review |
| Q3 2009 Business Performance Revenues mostly flat when adjusting for impact of tail end of deals related to Faster Payments in Q3 2008 EMEA ILF business was significantly lower than last year's quarter Consistent monthly recurring revenue Expenses strongly improved, YTD-09 ~$33 million less than YTD-08 Restructuring HR savings at approximately $5.2 million reduction over prior-year quarter Prior year also had significant IT outsourcing and service contractor/HR costs which did not recur in 2009 largely due to Faster Payments/Middle East switch Good discretionary expense management throughout the business IBM System z fraud system sale at a major European bank, several significant System z deals with all product engines in current pipeline in both North and South America Fraud is seeing more individual pipeline opportunities right now than wholesale |
| Q3 2009 Sales Results Q3 2009 Sales Highlights: Significant add-on activity as relationship management deals continue to do well in this environment: Both Americas and EMEA saw major sales in Retail system add-ons Term extension activity in developed markets: Key Americas term extensions: JPMC, Target, Redeban, Transbank Key EMEA extensions included Visa Europe, ABN, The Co-Op Bank (UK) Q3 2009 sales down 10% relative to prior-year quarter Decline in new account/ new application sales globally as customers are slow to commit capital to new vendor relationship in current economy Wholesale payments business contraction led by $7 million in term extensions in Q3-2008 which did not recur in Q3-09; however, we booked $1.1 million higher add- on sales in the current quarter compared to prior-year quarter Application sales impacted by fewer terms and, therefore, fewer add-ons vs prior- year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter year quarter |
| Q3 2009 Channel Sales Results Sales (net of Term Extensions) Term Extension Sales Total Sales Q3 2009 v Q3 2008 Channel Performance: Total top 5 customers accounted for 45% of sales dollars in the quarter compared to 35% in Q2-09 and 12% in Q3-08 due to size of renewals in current quarter Americas: Top 5 customers accounted for $41.4 million of sales in Q3- 09 vs. $16.0 million of sales in Q3- 08. JPMC renewal led Americas sales, also aided by range of US retail customers and Latin banks EMEA: Top 5 customers accounted for $12.8 million of sales in Q3- 09 vs. $22.6 million of sales in Q3- 08. Sales figure driven by credit card agencies, processors, UK banks. Asia-Pacific: Top 5 customers accounted for $5.5 million of sales in Q3- 09 vs. $4.1 million of sales in Q3- 08. Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region Renewals and add-ons across region |
| Historic Sales By Quarter 2008-2009 Historic Sales By Quarter 2008-2009 |
| Channel Summary Americas Monthly recurring revenue reduction of $1.4 million or 4% compared to prior-year due to higher deferred MLF revenue releases in prior-year quarter Monthly recurring revenue rise of $1.0 million or 3% compared to June quarter Continued to protect revenue base with renewals across the Latin America region (Redeban Multicolor SA, Transbank, Red Link SA ) US significant term renewal revenue events: JPMC renewal, Target (XPNET) Two new On-Demand customers (large national fast food retailer, credit union) EMEA Two large ESP service deals closed at major credit card vendor and Cooperative Bank A new risk management application secured at ABN Amro In Q3-08 we experienced large renewal bookings of $14 million versus $1.7m in Q3- 09, further reinforced last year by strong New Accounts and New Apps activity Services revenue increased $4.2m underpinned by revenue releases on major projects at a large European retailer, Wincor, First Data and Saudi Hollandi Bank. Asia-Pacific Overall revenue grew ~4% year-over-year but was reduced by $0.6M or ~ 6% versus June quarter due to revenue booking for significant project go-live (BPI in Philippines) in Q2-09. Monthly recurring revenue increased by $0.4M or 7% compared to prior year, flat compared to Q2-09 Key deliveries noted in four ACI Global Banker/ACI Payments File Manager projects which comprised ~49% of Q3-09 service revenue Secured renewals in ASEAN, Korea, Pacific, new customer go-live events in Malaysia and Thailand |
| Q3 Product Development Summary Wholesale 6 ACI On Demand customers already live on ACI Enterprise Banker 7.5 (released in June) Reduced conversion time to bring new customer onto ACI Enterprise Banker from 9-12 months to 5 months Introduced Agile Payment Strategy ("APS") Excitement surrounding thought leadership at SIBOS Many customers discussing how they will implement APS with us Tightly integrating our products such as new combination between our testing tool "asset" and our financial crimes solution ACI Proactive Risk Manager |
| Agile Payments Solution Strategy Be the leading provider of a unified solution that initiates, manages, secures and operates payments to maximize the total economic impact for our customers. Identified 11 key products to comprise Agile Payments Solutions functionality required for a holistic solution. Deconstructing products into software services. Planning organic and inorganic events to build out services. Software services will create a single platform that breaks down the silos across customers, channels, networks, payment types, and technology vendors. |
| Product & Development Investments Improved Delivery BASE24-eps to extend global leadership in fast-growing markets Cut customer install time for ACI Enterprise Banker by 50% Organized a new function in the company completely focused on innovation to drive common architecture and new product concepts Diversifying product toolbox from retail into wholesale/fraud and back office opportunities Alliance with Bell ID for Smart Chip Manager Announced exclusive alliance to provide a global smart chip manager solution |
| Financial Review Scott Behrens, Chief Financial Officer |
| Key Takeaways from the Quarter Sales: Down 10% or $10.2 million versus prior-year third quarter or down 1% or $1.0 million compared to June quarter Revenue: Achieved $104.5 million in the current quarter versus $108.6 million in Q3-08 quarter, Q3-09 represented a $17.3 million improvement over Q2-09 performance Variance was mostly driven by the EMEA channel where we had the final Faster Payments/Middle East switch revenues in prior- year quarter Saw $2 million difference driven by currency fluctuations Consistent monthly recurring revenues representing 60% of total revenues |
| Takeaways from the Quarter (cont) Operating Expenses: Decreased $13.1 million (12%) versus prior-year quarter Other Income and Expense: ~ $0.4 million loss versus a gain of $0.4 million in Q3-08 Negative variance of $0.5 million in FX gain, Interest income/expense variance essentially offset one another OFCF: $(10.4) million in Q3-09 vs $(0.3) million in Q3-08 represents a $10.1 million decrease Impacted by timing of receipt of term renewal cash in Q4 rather than in Q3 Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales Annual OFCF number will be negatively impacted by the 8% reduction in anticipated sales |
| Backlog is Still a Significant Contributor to Current Period Revenue Revenue from sales reduced as absolute volume of renewals, particularly in Europe, was lower than in prior year quarter 'Go lives' from backlog continue to show consistent growth Revenue from backlog increased particularly when considering the currency fluctuations between the two periods currency fluctuations between the two periods currency fluctuations between the two periods currency fluctuations between the two periods currency fluctuations between the two periods currency fluctuations between the two periods |
| Guidance reiterates stronger operating margins At this point in time, anticipate full risk/opportunity adjustment is necessary Sales should come within the risk-adjusted range of $414-428 million GAAP Revenues are expected at approximately $406 million as sales perform to the risk-adjusted number Stronger operating income performance of $36.8- 38.5 million due to expense management management management management management management management |
| Appendix |
| Operating Free Cash Flow* ($ millions) Quarter Ended September 30, Quarter Ended September 30, 2009 2008 Net cash provided (used) by operating activities $(8.0) $ 3.2 Net after-tax payments associated with employee-related actions 0.3 0.4 Net after-tax payments associated with IBM IT Outsourcing Transition and Severance 0.3 0.6 Adjustments: Less capital expenditures (0.7) (2.6) Less alliance Technical enablement expenditures (2.3) (1.9) Operating Free Cash Flow $(10.4) $(0.3) *OFCF is defined as net cash provided (used) by operating activities, less cash payments for employee related actions and IBM IT Outsourcing transition and severance, less capital expenditures and plus or minus net proceeds from IBM. Tax effected at 35% |
| 60-Month Backlog ($ millions) Quarter Ended Quarter Ended Quarter Ended September 30, 2009 June 30, 2009 September 30, 2008 Americas 827 $817 $744 EMEA 504 504 511 Asia/Pacific 156 155 159 Backlog 60-Month $1,487 $1,476 $1,414 ACI Deferred Revenue 132 $140 $131 ACI Other 1,355 $1,336 $1,283 Backlog 60-Month $1,487 $1,476 $1,414 |
| Revenues by Channel ($ millions) Quarter Ended September 30, Quarter Ended September 30, 2009 2008 Revenues: United States $46.2 $39.8 Americas International 12.5 13.3 Americas $58.7 $53.1 EMEA 35.2 45.4 Asia/Pacific 10.6 10.1 Revenues $104.5 $108.6 |
| Monthly Recurring Revenue ($ millions) Quarter Ended September 30, Quarter Ended September 30, 2009 2008 Monthly license fees $19.5 $21.3 Maintenance fees 35.0 34.0 Processing Services 8.4 8.1 Monthly Recurring Revenue $62.9 $63.4 |
| Deferred Revenue & Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended June 30, June 30, September 30, 2009 2009 September 30, 2008 2008 Short Term Deferred Revenue $103.4 $107.7 $107.3 $123.0 Long Term Deferred Revenue 28.7 32.4 23.3 23.2 Total Deferred Revenue $132.1 $140.1 $130.6 $146.2 Total Deferred Expense $13.0 $13.9 $10.7 $11.3 |
| Non-Cash Compensation and Acquisition Intangibles Quarter ended September 30, 2009 Quarter ended September 30, 2009 Quarter ended September 30, 2008 Quarter ended September 30, 2008 EPS Impact* $ in Millions EPS Impact* $ in Millions Employee-Related $0.05 $1.6 $0.07 $2.3 IBM IT Outsourcing Severance Cost 0.00 0.0 0.01 0.3 IBM IT Outsourcing Transition Costs 0.00 0.0 0.08 2.8 Non-recurring items 0.05 $1.6 0.16 $5.4 Amortization of acquisition-related intangibles 0.03 1.0 0.03 1.0 Amortization of acquisition-related software 0.03 0.9 0.03 0.9 Non-cash equity-based compensation 0.04 1.3 0.05 1.7 Total: $0.14 $4.8 $0.26 $9.0 * Tax Effected at 35% |
| Other Income / Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended September 30, 2009 June 30, 2009 September 30, 2008 June 30, 2008 Interest Income $0.1 $0.4 $0.6 $0.7 Interest Expense ($0.5) (0.5) ($1.1) (1.0) FX Gain / Loss $1.1 (4.3) $1.6 (0.7) Interest Rate Swap Loss ($0.7) (0.3) ($0.8) 2.9 Other ($0.4) 1.0 $0.1 0.1 Total Other Income (Expense) ($0.4) ($3.7) $0.4 $2.0 |
| Sales by Channel and Product Division ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended Quarter Ended September 30, 2009 June 30, 2009 March 31, 2009 December 31, 2008 September 30, 2008 Sales by Channel: Americas $65.5 $43.8 $38.9 $119.6 $46.8 EMEA 23.3 44.7 17.4 47.1 53.0 Asia Pacific 7.5 8.8 4.6 22.6 6.8 Total Sales $96.4 $97.3 $60.8 $189.3 $106.6 Sales by Product Division: Retail Products $73.1 $62.9 $36.3 $134.3 $70.0 Wholesale Payments 10.5 18.7 11.4 30.3 17.6 Risk Management 7.3 5.6 4.9 14.7 5.5 Application Services 5.5 10.1 8.2 10.0 13.5 Total Sales $96.4 $97.3 $60.8 $189.3 $106.6 |
| Reclassification Recast The Company redefined its cost of software license fees in order to better conform to industry practice. The definition has been revised to be third-party software royalties as well as the amortization of purchased technology. Previously, cost of software license fees also included certain costs associated with maintaining software products that have already been developed and directing future product development efforts. These costs included human resource costs and other incidental costs related to product management, documentation, publications and education. These costs have now been reclassified to research and development and cost of maintenance and services. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. All products are trademarks or registered trademarks of their respective companies. |
| Non-GAAP Financial Measures ACI is presenting operating free cash flow, which is defined as net cash provided (used) by operating activities, excluding after-tax cash payments for employee related actions and IBM IT Outsourcing transition and severance 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. Operating free cash flow may not be computed in a similar manner by other companies. 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. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. without regard to certain items, which do not directly affect our ongoing cash flow. |
| 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. 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. Backlog may not be computed in a similar manner by other companies. 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. Non-GAAP Financial Measures |
| 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: Expectations that banks will be moving towards global deals in software infrastructure to improve efficiencies and that this trend will lead to larger, more comprehensive projects; Belief that there is lots of interest in payments system investments; Expectations relating to year-end sales volatility; Belief that fraud offerings are seeing more pipeline opportunities than wholesale offerings; The company's Agile Payments Solution strategy, market perception of this strategy and the expectation that this will result in a greater number of customer implementations and enhanced financial results; The company's 12- and 60-month backlog estimates; and Expectations relating to 2009 financial guidance, including sales, GAAP revenues and GAAP operating income. |
| Forward Looking Statements 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 statement. In addition, we disclaim any obligation to update any forward-looking statement 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 March 4, 2009, and our subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. The risks identified in our filings with the Securities and Exchange Commission include: The global financial crisis affecting the banking system and financial markets and the current global economic conditions which could reduce the demand for our products and services or otherwise adversely impact our cash flows, operating results and financial condition; Restrictions and other financial covenants contained in our current credit facility that limit our flexibility in operating our business; The volatility and disruption of the capital and credit markets and adverse changes in the global economy that may negatively impact our liquidity and our ability to access financing; The possibility that our restructuring and efficiency efforts as part of the implementation of our strategic plan may not achieve the expected efficiencies and cost savings which could affect our results of operations and financial condition; |
| Forward Looking Statements The recent restatements of our financial statements; The consolidation in the financial services industry that may adversely impact the number of customers and revenues in the future; The economic changes in the banking and financial services industries that apply to most of our customers could reduce the demand for our products and services; Management's backlog estimate which may not be accurate and may not generate the predicted revenues; A material weakness that management has identified in our internal control over financial reporting; Our possible exposure to unknown tax liabilities, which could adversely affect our financial condition and/or results of operations; Our stock price, which may be volatile; Our international operations; Rapid change and high competition in the software industry which may limit our ability to compete effectively; The offshore software development activities that we are engaged in, which may not be successful and which may put our intellectual property at risk; One of our most strategic products, BASE24-eps, which could prove to be unsuccessful in the market; Our announcement of the maturity of certain legacy retail payment products, which may result in decreased customer investment in our products, and the possibility that our strategy to migrate customers to our next generation products may be unsuccessful, which may adversely impact our business and financial condition; Our announcement of the maturity of certain legacy retail payment products, and customer migrations to our next generation products, may result in ratable or deferred recognition of certain revenue associated with the legacy retail payment products. Our future profitability's dependence on demand for our products and the possibility that lower demand in the future could adversely affect our business; |
| Forward Looking Statements The possibility that if we are unable to successfully perform under the terms of our alliance with IBM or our customers are not receptive to the alliance, then our business, financial condition and/or results of operations may be adversely affected; Our outsourcing agreement with IBM, which may not achieve the level of savings that we anticipate, and the many associated changes in systems and personnel being made, along with the increases in operational and control risk during transition, which may have an impact on the business and its financial condition; Undetected errors or other defects which may be contained in our software products which could damage our reputation with customers, decrease profitability and expose us to liability; Security breaches or computer viruses which could harm our business by disrupting delivery of services and damaging our reputation; Our products' and services' possible failure to comply with government regulations and industry standards to which our customers are subject, which could result in a loss of customers and decreased revenue; Our possible failure to comply with privacy regulations imposed on providers of services to financial institutions, which could result in harm to our business; System failures, which could delay or interrupt the products and services we provide to our customers, which could harm our business and reputation and result in the loss of customers; The possibility that we may be unable to protect our intellectual property and technology and could be subject to increasing litigation over our intellectual property rights; Future acquisitions and investments that could materially adversely affect our business; and The possibility that we may become involved in litigation that could materially adversely affect our business financial condition and/or results of operations. |
