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 24, 2010 (February 22, 2010)
ACI WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-25346 | 47-0772104 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) | |||
120 Broadway,
Suite 3350 10271
New York, New York (Zip Code)
(Address of principal executive offices)
New York, New York (Zip Code)
(Address of principal executive offices)
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.
Item 5.02. Entry Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangement of Certain Officers.
(b) On February 22, 2010, J. Ronald Totaro, Senior Vice President and Chief Operating Officer,
notified ACI Worldwide, Inc. (the “Company”) that he will be resigning from the Company effective
April 1, 2010. Mr. Totaro’s resignation did not result from any disagreement or dispute with the
Company on any matter relating to its operations, polices or practices. The Company does not
currently intend to replace the Chief Operating Officer position.
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 25, 2010 | |
| 99.2 | Investor presentation materials dated February 25, 2010 |
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: February 25, 2010
3
EXHIBIT INDEX
| Exhibit No. | Description | |
99.1
|
Press Release dated February 25, 2010 | |
99.2
|
Investor presentation materials dated February 25, 2010 |
Exhibit 99.1
|
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 and Year Ended December 31, 2009
Results for the Quarter and Year Ended December 31, 2009
OPERATING HIGHLIGHTS
| • | Full year diluted EPS of $0.57, an increase of $0.27 over prior year | ||
| • | Achieved $31.8 million in operating expense savings over prior-year | ||
| • | Year-over-year operating income growth of 91% | ||
| • | Achieved year-over-year quarterly revenue growth of 15% driven by 48 customer project “go-lives” | ||
| • | Record $80 million of wholesale product sales in the quarter |
| Quarter and Year | Better / | |||||||||||||||||||||||
| Ended | Better / | (Worse) | ||||||||||||||||||||||
| Quarter | (Worse) | Year | ||||||||||||||||||||||
| ended Dec | Better / (Worse) | Better / (Worse) | Year ended | ended | ||||||||||||||||||||
| 31, | Year ended | Quarter ended | Quarter ended | Dec 31, | Dec 31, | |||||||||||||||||||
| $ MMs | 2009 | Dec 31, 2009 | Dec 31, 2008 | Dec 31, 2008 | 2008 | 2008 | ||||||||||||||||||
Sales |
$ | 170.1 | $ | 424.6 | $ | (19.2 | ) | (10 | %) | $ | (35.1 | ) | (7 | )% | ||||||||||
Revenues |
$ | 125.9 | $ | 405.8 | $ | 16.7 | 15 | % | $ | (11.9 | ) | (3 | )% | |||||||||||
Operating Income |
$ | 35.0 | $ | 41.6 | $ | 15.4 | 79 | % | $ | 19.9 | 91 | % | ||||||||||||
(NEW YORK — February 25, 2010) — ACI Worldwide, Inc. (NASDAQ:ACIW), a leading international
provider of electronic payments software and solutions, today announced financial
results for the
quarter and year ended December 31, 2009. We will hold a conference call on
February 25, 2010, 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 2009, ACI achieved strong growth in profitability on a stable revenue base as compared to the
prior year, albeit in a much more challenging climate. Our extensive expense management exercises
produced sizable operating expense reductions even while we booked significant renewal business
across our enterprise at economic rates. As I anticipated, long-tenured implementation projects
began to move out of our backlog in the second half of 2009 and into current period revenue. During
the second half of 2009 we had 89 projects go live which represented a significant improvement over
prior-year,” Chief Executive Officer Philip Heasley said.
Heasley further added, “I can reiterate my statements from last quarter. We expect our 2010 focus
to remain on the operating profitability of the business as well as on growing new account and new
applications activities across our geographic footprint. Lastly, we are announcing today that Ron
Totaro will be leaving ACI. Ron joined us two years ago to lead a very challenging restructuring
and business process improvement effort and he has successfully completed those activities at the
company. We appreciate his service to ACI. Now that our major global reorganization activities are
complete, we’re focused upon growing a more profitable business globally and we think that our
strong management team will achieve the strategic plan objectives,” commented Heasley.
FINANCIAL SUMMARY
Sales
Sales bookings in the quarter totaled $170.1 million compared to $189.3 million in the December
2008 quarter. The $19.2 million, or 10%, reduction in period-over-period sales is primarily due to
lower new account and term extension business. New customer business accounted for $9.7 million of
the December 2009 quarter sales compared to $16.5 million in the December 2008 quarter sales. Term
extensions contributed $57.5 million in the 2009 quarter compared to $73.3 million in the 2008
quarter. Term extensions decreased due to timing of existing customer
renewals; in 2008 renewal bookings of more significantly sized contracts occurred as compared to
2009.
On an annual basis, sales decreased by $35.1 million to total $424.6 million in fiscal year 2009 as
compared to $459.7 million in fiscal year 2008. Reductions were driven by lower new applications
and new accounts sales.
Revenue
Revenue was $125.9 million in the quarter ended December 31, 2009, an increase of $16.7 million, or
15%, over the prior-year period revenue of $109.2 million driven by increases in capacity,
maintenance and on-demand revenues.
Revenue for the twelve months ended December 31, 2009 was $405.8 million, a decrease of $11.9
million, or 3%, compared to revenue of $417.7 million for the twelve months ended December 31,
2008. Revenue reduction is attributable largely to foreign currency fluctuations in 2009 compared
to the same period in 2008.
Backlog
As of December 31, 2009, our estimated 60-month backlog was $1.517 billion compared to $1.490
billion at September 30, 2009. The quarterly increase of approximately $27 million, or 2%, in our
60-month backlog was primarily due to the large number of sales achieved in the final quarter of
2009.
As of December 31, 2009, our estimated 12-month backlog was $355 million, an increase of
approximately $30 million, or 9%, from December 31, 2008, reflecting a partial recovery in foreign
exchange rates as well as larger deals expected to exit backlog during calendar 2010.
Liquidity
We had $125.9 million in cash and cash equivalents on hand at December 31, 2009, an increase of
$13.0 million as compared to December 31, 2008. As of December 31, 2009, we also had $75.0 million
of unused borrowings under our credit facility.
Operating Free Cash Flow
Operating free cash flow for the December 2009 quarter was $29.8 million compared to $31.1 million
for the December 2008 quarter. The year-over-year negative variance in operating free cash flow of
$1.3 million was largely due to timing of receipts under term renewal contracts signed in the
quarter.
Operating free cash flow for the twelve months ended December 31, 2009 was $30.3 million, a
decrease of approximately $34.8 million over the twelve months ended December 31, 2008. Driving the
decrease in operating free cash flow was prior-year non-recurring IBM alliance receipts of
approximately $33 million.
Operating Expenses
Operating expenses were $90.9 million in the December 2009 quarter compared to $89.6 million in the
December 2008 quarter, an increase of $1.3 million or approximately 1%. Operating expense variances
over prior-year quarter were mainly driven by higher deferred expense recognition as a result of
customer project go-live events in the December 2009 quarter.
Operating expenses for the twelve months ended December 31, 2009 were $364.2 million, a decrease of
$31.8 million, or 8%, compared to operating expense of $395.9 million in the twelve months ended
December 31, 2008. Operating expense variances over prior fiscal year were mainly driven by lower
personnel and related expenses as a result of cost reduction initiatives.
Operating Income
Operating income was $35.0 million in the December 2009 quarter, an improvement of $15.4 million as
compared to operating income of $19.6 million in the December 2008 quarter.
Operating income was $41.6 million in the fiscal year ended December 31, 2009, an improvement of
$19.9 million as compared to operating income of $21.7 million in the fiscal year ended December
31, 2008.
Other Income and Expense
Other expense for the December 2009 quarter was $2.8 million, compared to other income of $4.4
million in the December 2008 quarter. The negative variance of $7.2 million versus the prior-year
quarter resulted primarily from a $10.5 million unfavorable variance in foreign currency
translation compared to the same period in the prior year. Foreign currency losses were partially
offset by an improvement of $4.1 million related to the non-cash loss on the fair value of the
interest rate swap.
On an annual basis, other expense for the twelve months ended December 31, 2009 was $8.5 million as
compared to other income of $5.8 million for the twelve months ended December 31, 2008. Foreign
currency losses during the period were partially offset by improvements in interest expense and the
non-cash loss on the fair value of the interest rate swap.
Taxes
Income tax expense in the December 2009 quarter was $12.6 million, or a 39% effective tax rate,
compared to an expense of $11.0 million, or a 46% effective tax rate, in the prior-year quarter.
The rise in income tax expense was due to increased pre-tax income. The decline in the effective
tax rate was driven by the change in the tax jurisdictions in which we generated earnings and
losses versus prior year.
Income tax expense for the year ended December 2009 was $13.5 million, or a 41% effective tax rate,
as compared to $17.0 million, or a 62% effective tax rate, for the prior year ended December 2008.
The effective tax rate for both years was higher than the U.S. effective tax rate of 35% due to the
inability to recognize income tax benefits during the period resulting from losses sustained in
certain tax jurisdictions. The decline in the effective tax rate was driven by the change in the
tax jurisdictions in which we generated earnings and losses versus prior year.
Net Income and Diluted Earnings Per Share
Net income for the December 2009 quarter was $19.6 million compared to net income of $12.9 million
during the same period last year, an increase of $6.7 million. Net income for the year
ended December 31, 2009 was $19.6 million compared to net income of $10.6 million during the same
period last year, an increase of $9.0 million.
Earnings per share for the quarter ended December 2009 was $0.57 per diluted share compared to
$0.37 per diluted share during the same period last year.
Earnings per share for the twelve months ended December 31, 2009 was $0.57 per diluted share
compared to $0.30 per diluted share for the prior year twelve month period. The $0.27 improvement
in earnings per share was due primarily to stronger expense management in 2009 as compared to 2008
in spite of the $19 million (or approximately $0.36 per diluted share, net of tax) negative change
in foreign currency during 2009 compared to the prior year foreign currency gains.
Diluted Weighted Average Shares Outstanding
Total diluted weighted average shares outstanding were 34.2 million for the quarter and 34.6
million for the twelve months ended December 31, 2009 as compared to 34.6 million shares
outstanding for the quarter and 34.8 million for the twelve months ended December 31, 2008.
2010 Guidance
ACI is guiding on three metrics for calendar year 2010. We currently expect GAAP Revenue to achieve a range of $418-428 million, GAAP Operating Income of $48-50 million and Operating EBITDA of $83-86 million. ACI further anticipates relatively flat sales on a year over year basis and expects Operating Free Cash Flow to trend higher with operating income growth.
ACI is guiding on three metrics for calendar year 2010. We currently expect GAAP Revenue to achieve a range of $418-428 million, GAAP Operating Income of $48-50 million and Operating EBITDA of $83-86 million. ACI further anticipates relatively flat sales on a year over year basis and expects Operating Free Cash Flow to trend higher with operating income growth.
Organizational Update
ACI has further strengthened its management team with the hiring of Tony Scotto. Mr. Scotto joins
ACI from 170 Systems, Inc. and will report directly to our CEO. Mr. Scotto will be responsible for
ACI’s global application development organization and he will be based in our Boston office.
Furthermore, Louis Blatt, Chief Product Officer, will now report directly to our CEO and continue
to lead our Global Product Management and Global Marketing organization. Ralph Dangelmaier will
continue as President of Global Sales & Services and also report directly
to the CEO. Effective April 1, 2010, Ron Totaro will be leaving ACI to become the CEO of a private
e-commerce company.
-End-
About ACI Worldwide
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.
ACI Agile Payments Solution offers a vision for the future for financial institutions of an
integrated solution that can meet all their payment needs – from a single service to a complete
toolset. Today, ACI products deliver payment processing, online banking, fraud prevention and
detection, and back-office services. ACI solutions provide agility, reliability, manageability and
scale to customers around the world. 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 associated with one-time employee related
actions, IBM IT outsourcing transition and severance, and the early termination of the Watford
facility lease, 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.
| Reconciliation of Operating Free Cash Flow | Year Ended December 31, | Quarter Ended December 31, | ||||||||||||||||
| (millions) | 2009 | 2008 | 2009 | 2008 | ||||||||||||||
Net cash provided by operating activities |
$ | 44.2 | $ | 77.8 | $ | 32.8 | $ | 31.6 | ||||||||||
Net after-tax payments associated with employee related actions* |
3.2 | 3.5 | 1.3 | 2.0 | ||||||||||||||
Net after-tax payments associated with IBM IT Outsourcing
Transition and Severance* |
0.3 | — | — | — | ||||||||||||||
Net after-tax payments associated with early termination of
Watford facility lease* |
— | 0.6 | — | — | ||||||||||||||
Less capital expenditures |
(10.5 | ) | (12.0 | ) | (3.4 | ) | (0.7 | ) | ||||||||||
Less alliance technical enablement expenditures |
(6.9 | ) | (6.3 | ) | (0.9 | ) | (2.0 | ) | ||||||||||
Proceeds from Alliance agreement |
0.0 | 1.5 | 0.0 | 0.2 | ||||||||||||||
Operating Free Cash Flow |
$ | 30.3 | $ | 65.1 | $ | 29.8 | $ | 31.1 | ||||||||||
| * | 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.
| Operating EBITDA | Year Ended December 31, | |||
| (millions) | 2009 | |||
Operating Income |
$ | 41.6 | ||
Depreciation Expense |
6.3 | |||
Amortization Expense |
17.4 | |||
Non-cash Compensation Expense |
7.6 | |||
Operating EBITDA |
$ | 72.9 | ||
Operating EBITDA is defined as operating income plus depreciation and amortization and
non-cash compensation.
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: (i) expectations regarding the company’s ability to continue to focus on operating
profitability in 2010 and its belief that it will grow new account and new applications activities
in 2010; (ii) expectations regarding the ability or our management team to achieve strategic plan
objectives; (iii) the Company’s 12- and 60-month backlog estimates and its expectations related to
the exit of larger deals from backlog during 2010; (iv) expectations and assumptions relating to
2010 financial guidance, including GAAP revenue, GAAP operating income, operating EBITDA; and (v)
expectations and assumptions related to sales and operating free cash flow during 2010.
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,
the cyclical nature of our revenue and earnings, exposure to unknown tax liabilities, volatility in
our stock price, risks from operating internationally, including fluctuations in currency exchange
rates, increased competition, our offshore software development activities, the performance of our
strategic product, BASE24-eps, the maturity of certain 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 products, demand for our products, failure to obtain renewals of customer contracts or to
obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate
project completion estimates, business interruptions or failure of our information technology and
communication systems, 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 or viruses, compliance of our products with applicable governmental regulations
and industry standards, our compliance with privacy regulations, the protection of our intellectual
property in intellectual property litigation, 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, except share and per share amounts)
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except share and per share amounts)
| December 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 125,917 | $ | 112,966 | ||||
Billed receivables, net of allowances of $2,732 and $1,920, respectively |
98,915 | 77,738 | ||||||
Accrued receivables |
9,468 | 17,412 | ||||||
Deferred income taxes |
17,459 | 17,005 | ||||||
Recoverable income taxes |
— | 3,140 | ||||||
Prepaid expenses |
12,079 | 9,483 | ||||||
Other current assets |
10,224 | 8,800 | ||||||
Total current assets |
274,062 | 246,544 | ||||||
Property, plant and equipment, net |
17,570 | 19,421 | ||||||
Software, net |
30,037 | 29,438 | ||||||
Goodwill |
204,850 | 199,986 | ||||||
Other intangible assets, net |
26,906 | 30,347 | ||||||
Deferred income taxes |
26,024 | 12,899 | ||||||
Other assets |
10,594 | 14,207 | ||||||
TOTAL ASSETS |
$ | 590,043 | $ | 552,842 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 17,591 | $ | 16,047 | ||||
Accrued employee compensation |
24,492 | 19,955 | ||||||
Deferred revenue |
106,349 | 99,921 | ||||||
Income taxes payable |
10,681 | 78 | ||||||
Alliance agreement liability |
10,507 | 6,195 | ||||||
Accrued and other current liabilities |
25,780 | 24,068 | ||||||
Total current liabilities |
195,400 | 166,264 | ||||||
Deferred revenue |
$ | 31,533 | 24,296 | |||||
Note payable under credit facility |
75,000 | 75,000 | ||||||
Deferred income taxes |
— | 2,091 | ||||||
Alliance agreement noncurrent liability |
21,980 | 37,327 | ||||||
Other noncurrent liabilities |
30,067 | 34,023 | ||||||
Total liabilities |
353,980 | 339,001 | ||||||
Commitments and contingencies |
||||||||
Stockholders’ equity |
||||||||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and
outstanding at December 31, 2009 and December 31, 2008 |
$ | — | $ | — | ||||
Common stock; $0.005 par value; 70,000,000 shares authorized; 40,821,516
shares issued at December 31, 2009 and December 31, 2008 |
204 | 204 | ||||||
Common stock warrants |
24,003 | 24,003 | ||||||
Treasury stock, at cost, 6,784,932 and 5,909,000 shares outstanding
at December 31, 2009 and December 31, 2008, respectively |
(158,652 | ) | (147,808 | ) | ||||
Additional paid-in capital |
307,279 | 302,237 | ||||||
Retained earnings |
78,094 | 58,468 | ||||||
Accumulated other comprehensive loss |
(14,865 | ) | (23,263 | ) | ||||
Total stockholders’ equity |
236,063 | 213,841 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 590,043 | $ | 552,842 | ||||
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, | ||||||||
| 2009 | 2008 | |||||||
Revenues: |
||||||||
Software license fees |
$ | 57,461 | $ | 46,797 | ||||
Maintenance fees |
37,089 | 31,748 | ||||||
Services |
31,361 | 30,666 | ||||||
Total revenues |
125,911 | 109,211 | ||||||
Expenses: |
||||||||
Cost of software license fees (1) |
3,818 | 3,414 | ||||||
Cost of maintenance and services (1) |
29,757 | 24,450 | ||||||
Research and development |
18,530 | 14,997 | ||||||
Selling and marketing |
16,269 | 15,907 | ||||||
General and administrative |
17,811 | 26,691 | ||||||
Depreciation and amortization |
4,756 | 4,180 | ||||||
Total expenses |
90,941 | 89,639 | ||||||
Operating income |
34,970 | 19,572 | ||||||
Other income (expense): |
||||||||
Interest income |
178 | 678 | ||||||
Interest expense |
(1,073 | ) | (1,460 | ) | ||||
Other, net |
(1,929 | ) | 5,172 | |||||
Total other income (expense) |
(2,824 | ) | 4,390 | |||||
Income before income taxes |
32,146 | 23,962 | ||||||
Income tax expense |
12,585 | 11,024 | ||||||
Net income (loss) |
$ | 19,561 | $ | 12,938 | ||||
Earnings (loss) per share information |
||||||||
Weighted average shares outstanding |
||||||||
Basic |
34,011 | 34,433 | ||||||
Diluted |
34,205 | 34,610 | ||||||
Earnings (loss) per share |
||||||||
Basic |
$ | 0.58 | $ | 0.38 | ||||
Diluted |
$ | 0.57 | $ | 0.37 | ||||
| (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 | ||||||||
| December 31, | ||||||||
| 2009 | 2008 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 19,561 | $ | 12,938 | ||||
Adjustments to reconcile net loss to net cash flows from operating activities |
||||||||
Depreciation |
1,577 | 1,752 | ||||||
Amortization |
4,673 | 3,847 | ||||||
Tax expense of intellectual property shift |
549 | 172 | ||||||
Amortization of debt financing costs |
84 | 84 | ||||||
Gain on reversal of asset retirement obligation |
(40 | ) | — | |||||
Gain on transfer of assets under contractual obligations |
— | (219 | ) | |||||
Loss on disposal of assets |
28 | 37 | ||||||
Change in fair value of interest rate swaps |
220 | 4,271 | ||||||
Deferred income taxes |
(2,700 | ) | 3,342 | |||||
Stock-based compensation expense |
977 | 106 | ||||||
Tax benefit of stock options exercised |
3 | 43 | ||||||
Changes in operating assets and liabilities: |
||||||||
Billed and accrued receivables, net |
(13,301 | ) | (5,553 | ) | ||||
Other current assets |
1,746 | 479 | ||||||
Other assets |
423 | 1,457 | ||||||
Accounts payable |
231 | 1,815 | ||||||
Accrued employee compensation |
118 | (752 | ) | |||||
Proceeds from alliance agreement |
— | 348 | ||||||
Accrued liabilities |
3,217 | 1,379 | ||||||
Current income taxes |
8,847 | 6,504 | ||||||
Deferred revenue |
5,007 | 743 | ||||||
Other current and noncurrent liabilities |
1,570 | (1,221 | ) | |||||
Net cash flows from operating activities |
32,790 | 31,572 | ||||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(696 | ) | (222 | ) | ||||
Purchases of software and distribution rights |
(2,672 | ) | (511 | ) | ||||
Alliance technical enablement expenditures |
(932 | ) | (1,985 | ) | ||||
Proceeds from alliance agreement |
— | 252 | ||||||
Proceeds from assets transferred under contractual obligations |
— | 30 | ||||||
Acquisition of businesses, net of cash acquired |
(6,574 | ) | (169 | ) | ||||
Net cash flows from investing activities |
(10,874 | ) | (2,605 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock |
278 | 351 | ||||||
Proceeds from exercises of stock options |
267 | 242 | ||||||
Excess tax benefit of stock options exercised |
9 | 1 | ||||||
Purchases of common stock |
— | 1 | ||||||
Common stock withheld from vested restricted stock awards for payroll tax withholdings |
— | — | ||||||
Payments on debt and capital leases |
(305 | ) | (563 | ) | ||||
Net cash flows from financing activities |
249 | 32 | ||||||
Effect of exchange rate fluctuations on cash |
766 | (10,374 | ) | |||||
Net increase in cash and cash equivalents |
22,931 | 18,625 | ||||||
Cash and cash equivalents, beginning of period |
102,986 | 94,341 | ||||||
Cash and cash equivalents, end of period |
$ | 125,917 | $ | 112,966 | ||||
Exhibit 99.2
| December 31, 2009 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 |
| Phil Heasley, Chief Executive Officer Year in Review |
| 2009 Year-End Summary Rise in all recurring revenue categories demonstrating intrinsic business improvement Particularly in maintenance revenue rise of $6.7 million over prior year Significant reduction in business operating costs Total savings of $31.8 million achieved over operating expenses in 2008 led by HR cost reduction of $29.6 million Strong sales performance notwithstanding external financial markets crisis Sold $424.6 million worth of products Better cash management controls led to strong OFCF Generated $30.3 million in OFCF through better op-ex and accounts receivable management Profitability of the business is significantly improved Strong rise in operating income to $41.6 million in 2009 as compared to $21.7 million in 2008 |
| Ron Totaro, Chief Operating Officer Business Review |
| General 2009 Sales Market Summary Demonstrated ability to renew contracts at profitable rates in 2009 Resulted in higher recurring revenue business throughout the year Impact of financial markets crisis Led to further sales cycle elongation so new contracts/new apps did not sell at the same rate as they did in prior year Emergence of global accounts Positive outcome to financial crisis was customer desire to better manage global back office processes Customer interest in their back office efficiencies led to the development of a global accounts model for customers with whom we contract in multiple geographies Expect 2010 to have more new account activity, fewer renewals coming down the pipe |
| Q4 2009 Sales Results Q4 2009 had fewer new account and term extension dollars than prior year Prior year impacted by larger term renewals compared to 2009 renewals Slight rise in new application and add-ons Top 5 customers accounted for 35% of sales performance in the quarter as compared to 45% in Q3 2009 and 45% of sales in the preceding year quarter Negative variance versus prior year quarter due to: Differential deal size in the North American renewals market which led to significantly smaller retail payments and risk systems sales by dollar Positive variance in wholesale services due largely to Enterprise Banker and cross-sale of Money Transfer Systems in EMEA as well as large MTS add- ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas ons in Americas |
| Q4 2009 Channel Sales Results Sales (net of Term Extensions) Term Extension Sales Total Sales Q4 2009 v Q4 2008 Channel Performance: Americas ... Top 5 customers accounted for $57 million of sales in Q4 09 vs. $84.6 million of sales in Q4 08. Americas sales figures driven by the strong demand for wholesale products in the quarter by new accounts and existing accounts EMEA ... Top 5 customers accounted for $26 million of sales in Q4 09 vs. $24.4 million of sales in Q4 08. EMEA 2009 sales driven by retail demand at large U.K. banks and in South Africa Asia-Pacific ... Top 5 customers accounted for $11 million of sales in Q4 09 vs. $19.3 million of sales in Q4 08. Asia-Pacific sales concentrated largely in Australia with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients with both banking and industrial clients |
| Historic Sales By Quarter 2008-2009 Historic Sales By Quarter 2008-2009 |
| Americas Q4/Year in Review Q4 revenue of $68.0 million, an increase of 18% over Q4 2008 Driven by non-recurring license fees and go-lives Annual revenue of $223.0 million, an increase of 8% over prior year Driven by increased recurring revenue and timely completion of services projects. Strong sales performance Focus in Latin America on securing customer term extensions Significant new On-Demand business (Enterprise Banker & Retail Commerce Server) While demonstrating good expense management, Americas out-performed prior- year sales/marketing 5 new On-Demand customers in the US 25 new applications sold in calendar year 2009 46 deals sold over $1 million in contract value during the year |
| 2010 Opportunities- Americas Cross Selling Selling risk products into existing customer base Leveraging retail relationships to sell wholesale and online banking Canada Expansion of our risk footprint New BASE24-eps(r) business Extended Support Services Latin America Migration services to move customers to BASE24-eps(r) Continue to secure customer renewals |
| EMEA Q4/Year in Review Q4 revenue of $43.2 million, an increase of 9% over Q4 2008 revenue of $39.4 million Significant license fee revenue derived from Q4 sales Q4 large services deals at El Corte Ingles and Muslim Commercial Bank Annual revenue of $137.1 million, a decrease of 19% Prior year included $18 million from Faster Payments Initiative FX impact of $8.5 million year-over-year Significant new business on BASE24-eps(r) Cedicam France is a new customer Expansion of business with large South African bank 24 deals over $1 million in contract value in 2009 Services sales up by 52% fueled by success in selling Enhanced Support Programs 13 |
| 2010 Opportunities- EMEA Wholesale Solutions Processors Consolidated license renewals Expansion of system footprint with correlating services Back office acquisitions and alliances substantially increase the value of the retail payments proposition Northern Europe Key renewals Several large UK banks Large global processor |
| Asia-Pacific Q4/Year in Review Q4 revenue of $14.7 million, an increase of 23% due to significant project completion with Thai bank Recurring revenue up 6% due to customer go-lives Strong services revenues due to project completions in general Annual revenue of $45.7 million, an increase of 11% over prior year Sales impacted by overall market decline Key sales deals with Westpac, BankWest & State Bank of India 3 new customers and 4 new applications licensed during the year |
| 2010 Opportunities- Asia Online Banking Cross Selling Selling risk products into existing customer base Cross leveraging retail relationships to sell wholesale and online banking China Direct model Retail and risk opportunities ASEAN Wholesale payments Expansion of retail footprint |
| Customer Revenue by Industry Type Reduction in bank/credit union revenue due to variance related to Faster Payments license fees recognized in 2008 'Processor' segment is down due to the significant project completion for Mastercard in 2008 which did not recur in 2009 3% attrition rates across the company, down from 4% in prior year |
| Product and Cost Containment Initiatives |
| Major Product Improvements/Initiatives 2009 Implemented first deployment of Proactive Risk Manager (PRM) on IBM System z using DB2 and Websphere MQ for a customer in Asia-Pacific Implemented BASE24-eps(r) 08.2 on IBM System z, with DB2 and WebSphere MQ for a customer in EMEA Delivered a significant maintenance release for Money Transfer System which addresses EMEA regulations |
| The Agile Payments Strategy in Action 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 key products 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. (tm) |
| Alliance Relationships Expand during 2009 Hired senior alliances leader to build and manage all synergistic third-party relationships Alliance approval model refinement begun Now instituting "Alliance Leadership Council" (ALC) approach Signed alliance with Bell ID Key IBM alliance deals in 2009 RBS Netherlands (ABN Amro) on System z Natixis Paiements & Qatar International Islamic Bank on System p IBM- related sales have risen ~31% since 2008 $162.4M total IBM alliance sales 63% of all new ACI business sales in 2009 on an IBM platform, a rise of ~3% over prior-year |
| Business Improvement Achievements in 2009 Rationalized headcount in mature markets and reinvested in growth regions Hired chief product officer, services leaders in EMEA and Asia as well as new EMEA sales leader Globalized Help24 customer support Purchased selected, strategic products and engineered alliances (Essentis and Bell ID) Cost containment of $31.8 million achieved overall |
| Financial Review Scott Behrens, Chief Financial Officer |
| Key Takeaways from the Quarter Strong Operating Income Rise of ~$15 million versus Q4 2008; rise of $23 million compared to Q3 OFCF of $29.8 million Sequential improvement of $40.2 million compared to Q3 2009 Revenue growth of 15%; achieved $125.9 million in the current quarter versus $109.2 million in December 2008 quarter Increase attributable to rise in capacity, maintenance, ALF and monthly recurring fees $5.8 million growth in recurring revenue Strong sales in an unusual market environment Better mix than prior-year which was heavily weighted towards large term renewals Achieved $170 million, or $19 million less than prior year quarter, yet sales up 77% sequentially versus Q3 Strong Americas sales growth but, similar to prior year, weighted towards add-ons and renewals 24 |
| Key Takeaways from the Year Higher Operating Income Rise of ~$20 million versus 2008 Recurring Revenue rise of approximately $8 million Revenue essentially flat y-o-y excluding impact of FX Expenses down dramatically as a result of restructuring ~$30 million reduction in personnel related costs Other Income/Expense significantly more negative in 2009 than in 2008 Led by full year negative variance of $19.1 million in FX Non-cash loss on interest rate swaps improved $4.2 million year- over-year |
| Backlog is the Significant Driver of Current Period Revenue Larger reliance on go-lives (48 achieved in Q4) and revenue releases from backlog than in prior fourth quarters as more projects successfully reached the end of their implementations Fewer large renewals compared to 2008 resulted in lower revenue from sales in the quarter Fewer large renewals compared to 2008 resulted in lower revenue from sales in the quarter Fewer large renewals compared to 2008 resulted in lower revenue from sales in the quarter Fewer large renewals compared to 2008 resulted in lower revenue from sales in the quarter 26 |
| Revenue Phasing is consistent over past two years Revenue Phasing is consistent over past two years Q2 2008 revenue was higher than a normal quarter due to Faster Payments regulatory mandate in the UK Generally we see stronger revenue in the second half of the year |
| Operating Income doubled over the past 8 quarters Operating income also remains back-half loaded and has grown significantly as we rationalized expenses globally significantly as we rationalized expenses globally significantly as we rationalized expenses globally |
| Performance versus 2009 Guidance Achieved $424.6 million in sales Signed $170 million of business in Q4 2009 alone Led by ~$107 million in US sales of which ~$80 million were wholesale accounts sold primarily to large banks First quarter wholesale purchases in US exceeded retail Revenue of ~ $406 million in line with our expectations and also relatively flat over 2008 when accounting for European currencies impact Consistent with prior year, annual results led strongly by the 'hockey stick' of the second half Revenue was less dependent on non-recurring ILFs and implementations Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance Operating Income of $41.6 million exceeded our revised positive guidance |
| 2010 Guidance Revenue Expect revenue growth even as we anticipate fewer term renewals in 2010 where revenue recognition occurs immediately Operating Income Operating income improves from the on-going focus on profitable sales and efficient expense management 15%-20% growth range implies expense growth of 2%-3.25% or $371- $376 million Operating EBITDA D&A increases from $23.7 million to approximately $26M 123R expected to run approximately the same as 2009 at $7.6 million Operating EBITDA = operating income + Depreciation & Amortization + non- cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation cash compensation |
| Other factors impacting Guidance Sales will be flat over 2009 performance Expenses Cash expenses should grow approximately 2-3% in calendar year Dep'n and Amortization of approximately $26 million Non Cash compensation expense of approximately $7-8 million OFCF should trend higher in line with operating income growth Capex in the $15 million range Cash taxes to be approximately $19 million in 2010 Phasing Margin will be a hockey stick in 2010, similar to performance in prior years |
| Appendix |
| Operating Free Cash Flow ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2009 2008 Net cash provided by operating activities* $32.8 $ 31.6 Selected non-recurring items: Net after-tax cash payments associated with employee-related actions 1.3 2.0 Less capital expenditures (3.4) (0.7) Less alliance technical enablement expenditures (0.9) (2.0) Proceeds from alliance agreement 0.0 0.2 Operating Free Cash Flow $29.8 $31.1 *OFCF is defined as net cash provided (used) by operating activities, excluding cash payments associated with the cash settlement of stock options, cash payments associated with one-time employee related actions, less capital expenditures and plus or minus net proceeds from IBM. All figures estimated tax effect at 35%. |
| 60-Month Backlog ($ millions) Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, 2009 2009 2008 Americas $850 $829 $773 EMEA 510 505 480 Asia/Pacific 157 156 157 Backlog 60-Month $1,517 $1,490 $1,410 ACI Deferred Revenue $138 $132 $124 ACI Other 1,379 1,358 1,286 Backlog 60-Month $1,517 $1,490 $1,410 |
| Revenues by Channel ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2009 2008 Revenues: United States $55.7 $43.9 Americas International 12.3 13.9 Americas $68.0 $57.8 EMEA 43.2 39.4 Asia/Pacific 14.7 12.0 Revenues $125.9 $109.2 |
| Monthly Recurring Revenue ($ millions) Quarter Ended December 31, Quarter Ended December 31, 2009 2008 Monthly license fees $18.5 $18.3 Maintenance fees 37.1 31.7 Processing Services 8.3 8.1 Monthly Recurring Revenue $63.9 $58.1 |
| Deferred Revenue & Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, September 30, 2009 2009 2008 2008 Short Term Deferred Revenue $106.3 $103.4 $99.9 $107.3 Long Term Deferred Revenue 31.5 28.7 24.3 23.3 Total Deferred Revenue $137.8 $132.1 $124.2 $130.6 Total Deferred Expense $12.1 $13.0 $11.3 $10.7 |
| Non-Cash Compensation, Acquisition Intangibles and Non-Recurring Items Quarter ended December 31, 2009 Quarter ended December 31, 2009 Quarter ended December 31, 2008 Quarter ended December 31, 2008 Non-recurring items EPS Impact* $ in Millions EPS Impact* $ in Millions Employee-related $0.00 $0.0 $0.05 $1.9 Reversal of LTIP Program 0.00 0.0 (0.04) (1.4) IBM IT Outsourcing Transition Costs 0.00 0.0 0.01 0.2 Non-recurring items $0.00 $0.0 $0.02 $0.7 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 0.02 0.6 0.04 1.3 Total: $0.07 $2.5 $0.11 $3.9 * Tax Effected at 35% |
| Other Income/Expense ($ millions) Quarter Ended Quarter Ended Quarter Ended Quarter Ended December 31, 2009 September 30, 2009 December 31, 2008 September 30, 2008 Interest Income $0.2 $0.1 $0.7 $0.6 Interest Expense (1.1) (0.5) (1.5) (1.1) FX Gain / Loss (1.2) 1.1 9.3 1.6 Interest Rate Swap Loss (0.2) (0.7) (4.3) (0.8) Other (0.5) (0.4) 0.2 0.1 Total Other Income (Expense) ($2.8) ($0.4) $4.4 $0.4 |
| Operating EBITDA Year Ended December 31, 2009 Operating Income $41.6 Depreciation Expense 6.3 Amortization Expense 17.4 Non-Cash Compensation Expense 7.6 Operating EBITDA $72.9 Operating EBITDA is defined as operating income plus depreciation and amortization and non-cash compensation. |
| 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 associated with one-time employee related actions, IBM IT outsourcing transition and severance, and the early termination of the Watford facility lease, 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. |
| 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: Belief that the rise in recurring revenue categories in 2009 demonstrates intrinsic business improvement; Belief that the profitability of the business is significantly improved and that the financial crisis has led to customer desire to better manage global back office process; Expectations regarding 2010 having more new account activity and fewer renewals coming down the pipe; Expectations regarding opportunities in the Americas, EMEA and Asia-Pacific with respect to cross selling risk products and leveraging retail relationships to sell wholesale and online banking products, expanding our risk footprint in Canada and obtaining new BASE24-eps(r) business, extended support services, migration of Latin American customers to BASE24- eps(r), securing Latin American customer renewals, wholesale solutions, consolidated license renewals with processors and expansion of our system footprint with correlating services, increasing the value of our retail payments proposition with our back office acquisitions and alliances, obtaining key renewals in Northern Europe; growth of our direct model in China, retail and risk opportunities in China, growth of wholesale payments and expansion of our retail footprint in ASEAN; The company's Agile Payments Solution strategy, market perception of this strategy and expectations that this strategy will result in a greater number of customer implementations and enhanced financial results; Expectations regarding our ability to build and manage all synergistic third-party relationships; The company's 12- and 60-month backlog estimates; Expectations regarding 2010 financial guidance, including GAAP revenue, GAAP operating income, operating EBITDA and assumptions regarding other factors impacting our 2010 financial guidance, including sales, expenses and operating free cash flow; and Expectations regarding our cyclical quarterly results and our belief that we will have similar "hockey stick" performance in 2010. |
| Forward Looking Statements (Cont) 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, the cyclical nature of our revenue and earnings, exposure to unknown tax liabilities, volatility in our stock price, risks from operating internationally, including fluctuations in currency exchange rates, increased competition, our offshore software development activities, the performance of our strategic product, BASE24-eps, the maturity of certain 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 products, demand for our products, failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate project completion estimates, business interruptions or failure of our information technology and communication systems, 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 or viruses, compliance of our products with applicable governmental regulations and industry standards, our compliance with privacy regulations, the protection of our intellectual property in intellectual property litigation, 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. 46 |
