8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant To Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2017(May 4, 2017)

 

 

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.)

3520 Kraft Rd, Suite 300

Naples, FL 34105

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (239) 403-4600

(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:

 

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

 

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

 

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

 

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

Indicated by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02. Results of Operation and Financial Condition.

On May 4, 2017, ACI Worldwide, Inc. (“the Company”) issued a press release announcing its financial results for the three months ended March 31, 2017. 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 Operation and Financial Condition” above.

 

Item 9.01. Financial Statements and Exhibits.

 

99.1    Press Release dated May 4, 2017
99.2    Investor presentation materials dated May 4, 2017

 

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

Executive Vice President,

Chief Financial Officer, and Chief Accounting Officer

Date: May 4, 2017

 

3


EXHIBIT INDEX

 

Exhibit

No.

  

Description

99.1    Press Release dated May 4, 2017
99.2    Investor presentation materials dated May 4, 2017

 

4

EX-99.1

Exhibit 99.1

 

LOGO         News Release

ACI Worldwide, Inc. Reports Financial Results for the

Quarter Ended March 31, 2017

HIGHLIGHTS*

 

    Revenue up 10% in Q1 year over year

 

    Adjusted EBITDA up 68% year over year to $42 million

 

    Operating Free Cash Flow up 157% year over year to $76 million

 

    Reiterating 2017 guidance

 

* Adjusted for FX and the Community Financial Services (CFS) divestiture

NAPLES, FLA — May 4, 2017 — ACI Worldwide (NASDAQ: ACIW), a leading global provider of real-time electronic payment and banking solutions, today announced financial results for the quarter ended March 31, 2017. Results and comparisons discussed in the Q1 Financial Summary section of this Press Release exclude the impact of the Community Financial Services (CFS) divestiture in Q1 2016, as well as foreign currency fluctuations.

“We had a solid start to 2017. We signed several important contracts in the quarter, including an Immediate Payments deal with Jack Henry. Q1 revenue grew 10% and Adjusted EBITDA increased 68% year over year. Our cash flow also increased significantly in the quarter,” commented Phil Heasley, President and CEO, ACI Worldwide. “Following a successful investor day in March as well as several customer-focused events, we remain excited about the growth opportunities for Universal Payments in the electronic payments landscape.”


Q1 2017 FINANCIAL SUMMARY

New bookings were $89 million, which was down compared to Q1 2016 due to timing. Term extension bookings were $96 million, up 34% from last year’s quarter.

Our 12-month backlog declined $6 million to $814 million and our 60-month backlog declined $23 million to $4.0 billion during the quarter. Both numbers were impacted by the timing of new bookings compared to the prior year quarter.

Revenue in Q1 was $231 million, up 10% from the same quarter last year. Monthly recurring revenue was $173 million, or 75% of total revenue.

Adjusted EBITDA in Q1 grew $17 million to $42 million, an increase of 68%, from $25 million in Q1 2016. After adjusting for pass through interchange revenues of $39 million and $34 million in Q1 2017 and Q1 2016, respectively, net adjusted EBITDA margin in Q1 was 22% in 2017 versus 14% in Q1 of 2016.

ACI ended Q1 2017 with $100 million in cash on hand, up from $76 million at year end, and a debt balance of $710 million, which represents a decrease of $43 million from year end 2016. Operating free cash flow (OFCF) for the quarter was $76 million, up 157% from Q1 2016.

REITERATE GUIDANCE

In 2017, we expect to generate revenue in a range of $1.0 billion to $1.025 billion, which represents 2-5% organic growth. Adjusted EBITDA is expected to be in a range of $250 million to $255 million, which excludes approximately $14 million in one-time integration related expenses for PAY.ON, the CFS divestiture, and data center and facilities consolidation. We expect to generate between $225 million and $230 million of revenue in the second quarter. We expect full year 2017 new bookings to grow in the upper single digit range.


CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND OUTLOOK

Management will host a conference call at 8:30 am ET to discuss these results as well as 2017 guidance. Interested persons may access a real-time audio broadcast of the teleconference at http://investor.aciworldwide.com/ or use the following numbers for dial-in participation: US/Canada: (866) 914-7436, international: +1 (817) 385-9117. Please provide your name, the conference name ACI Worldwide, Inc. and conference code 7764496. There will be a replay of the call available for two weeks on (855) 859-2056 for US/Canada callers and +1 (404) 537-3406 for international participants.

About ACI Worldwide

ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. More than 1,000 of the largest financial institutions and intermediaries, as well as thousands of global merchants, rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software solutions delivered on customers’ premises or through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.

© Copyright ACI Worldwide, Inc. 2017.

For more information contact:

John Kraft, Vice President, Investor Relations & Strategic Analysis

ACI Worldwide

239-403-4627

john.kraft@aciworldwide.com

To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries, significant transaction-related expenses, as well as other significant non-cash expenses such as depreciation, amortization and stock-based compensation, that we believe are helpful in understanding our past financial performance and our future results. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. 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 to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Certain non-GAAP measures include:

 

    Non-GAAP revenue: revenue plus deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements. Non-GAAP revenue should be considered in addition to, rather than as a substitute for, revenue.

 

    Non-GAAP operating income: operating income plus deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements and significant transaction-related expenses. Non-GAAP operating income should be considered in addition to, rather than as a substitute for, operating income.

 

    Adjusted EBITDA: net income plus income tax expense (benefit), net interest income (expense), net other income (expense), depreciation, amortization and stock-based compensation, as well as deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements and significant transaction-related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, operating income.

ACI is also presenting operating free cash flow, which is defined as net cash provided by operating activities, net after-tax payments associated with employee-related actions and facility closures, net after-tax payments associated with significant transaction-related expenses, and less capital expenditures plus European data center and cybersecurity capital expenditures. Operating free cash flow is considered a non-GAAP financial measure as defined by SEC Regulation G. We utilize this non-GAAP financial measure, and believe it is useful to investors, as an indicator of cash flow available for debt repayment and other investing activities, such as capital investments and acquisitions. We utilize operating free cash flow as a further indicator of operating performance and for planning investing activities. Operating free cash flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities. A limitation of


operating free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. This measure also does not exclude mandatory debt service obligations and, therefore, does not represent the residual cash flow available for discretionary expenditures. We believe that operating free cash flow is useful to investors to provide disclosures of our operating results on the same basis as that used by our management.

ACI also includes backlog estimates, which include all license, maintenance, and services (including SaaS and Platform) 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, facilities management, and software hosting arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences.

 

    Non-recurring license arrangements are assumed to renew as recurring revenue streams.

 

    Foreign currency exchange rates are assumed to remain constant over the 60-month backlog period for those contracts stated in currencies other than the U.S. dollar.

 

    Our pricing policies and practices are assumed to remain constant over the 60-month backlog period.

Estimates of future financial results are inherently unreliable. Our backlog estimates require substantial judgment and are based on a number of assumptions as described above. These assumptions may turn out to be inaccurate or wrong, including, but not limited to, reasons outside of management’s control. For example, our customers may


attempt to renegotiate or terminate their contracts for a number of reasons, including mergers, changes in their financial condition, or general changes in economic conditions in the customer’s industry or geographic location, or we may experience delays in the development or delivery of products or services specified in customer contracts which may cause the actual renewal rates and amounts to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue actually recognized in future periods. Accordingly, there can be no assurance that contracts included in backlog estimates will actually generate the specified revenues or that the actual revenues will be generated within the corresponding 60-month period.

Backlog should be considered in addition to, rather than as a substitute for, reported revenue and deferred revenue.


Forward-Looking Statements

This press release contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and may include words or phrases such as “believes,” “will,” “expects,” “anticipates,” “intends,” and words and phrases of similar impact. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in this press release include, but are not limited to, statements regarding: (i) our excitement about the growth opportunities for Universal Payments in the electronic payments landscape; (ii) expectations regarding revenue, adjusted EBITDA, and new bookings growth in 2017; and (iii) expectations regarding revenue in the second quarter of 2017.

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, increased competition, the success of our Universal Payments strategy, demand for our products, restrictions and other financial covenants in our credit facility, consolidations and failures in the financial services industry, customer reluctance to switch to a new vendor, the accuracy of management’s backlog estimates, 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, 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, volatility and disruption of the capital and credit markets and adverse changes in the global economy, our existing levels of debt, impairment of our goodwill or intangible assets, litigation, future acquisitions, strategic partnerships and investments, 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 legislation, governmental regulations and industry standards, our ability to protect customer information from security breaches or attacks, our compliance with privacy regulations, the protection of


our intellectual property in intellectual property litigation, exposure to credit or operating risks arising from certain payment funding methods, the cyclical nature of our revenue and earnings and the accuracy of forecasts due to the concentration of revenue-generating activity during the final weeks of each quarter, business interruptions or failure of our information technology and communication systems, our offshore software development activities, risks from operating internationally, including fluctuations in currency exchange rates, exposure to unknown tax liabilities, volatility in our stock price, our pending appeal of the $43 million judgement, plus $2.7 million of attorney fees and costs awarded against us in the BHMI litigation, and potential claims associated with our sale and transition of our CFS assets and liabilities. 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 our Quarterly Reports on Form 10-Q.


ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands, except share and per share amounts)

 

     March 31,     December 31,  
     2017     2016  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 99,744     $ 75,753  

Receivables, net of allowances

     183,482       268,162  

Recoverable income taxes

     6,749       4,614  

Prepaid expenses

     29,806       25,884  

Other current assets

     21,086       33,578  
  

 

 

   

 

 

 

Total current assets

     340,867       407,991  
  

 

 

   

 

 

 

Noncurrent assets

    

Property and equipment, net

     77,979       78,950  

Software, net

     175,708       185,496  

Goodwill

     913,014       909,691  

Intangible assets, net

     200,496       203,634  

Deferred income taxes, net

     85,440       77,479  

Other noncurrent assets

     37,302       39,054  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,830,806     $ 1,902,295  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities

    

Accounts payable

   $ 35,980     $ 42,873  

Employee compensation

     35,763       47,804  

Current portion of long-term debt

     17,701       90,323  

Deferred revenue

     109,990       105,191  

Income taxes payable

     10,982       11,334  

Other current liabilities

     54,153       78,841  
  

 

 

   

 

 

 

Total current liabilities

     264,569       376,366  
  

 

 

   

 

 

 

Noncurrent liabilities

    

Deferred revenue

     55,402       49,863  

Long-term debt

     679,133       653,595  

Deferred income taxes, net

     25,091       26,349  

Other noncurrent liabilities

     36,338       41,205  
  

 

 

   

 

 

 

Total liabilities

     1,060,533       1,147,378  
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity

    

Preferred stock

     —         —    

Common stock

     702       702  

Additional paid-in capital

     604,362       600,344  

Retained earnings

     544,123       545,731  

Treasury stock, at cost

     (290,865     (297,760

Accumulated other comprehensive loss

     (88,049     (94,100
  

 

 

   

 

 

 

Total stockholders’ equity

     770,273       754,917  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,830,806     $ 1,902,295  
  

 

 

   

 

 

 


ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)

 

     For the Three Months
Ended March 31,
 
     2017     2016  

Revenues

    

Software as a service and platform as a service

   $ 99,447     $ 111,736  

License

     59,381       37,423  

Maintenance

     54,471       57,331  

Services

     18,163       19,576  
  

 

 

   

 

 

 

Total revenues

     231,462       226,066  
  

 

 

   

 

 

 

Operating expenses

    

Cost of revenue (1)

     108,543       118,434  

Research and development

     37,285       43,604  

Selling and marketing

     27,137       29,992  

General and administrative

     32,503       26,068  

Gain on sale of CFS assets

     —         (151,952

Depreciation and amortization

     22,371       23,208  
  

 

 

   

 

 

 

Total operating expenses

     227,839       89,354  
  

 

 

   

 

 

 

Operating income

     3,623       136,712  
  

 

 

   

 

 

 

Other income (expense)

    

Interest expense

     (10,160     (10,414

Interest income

     106       150  

Other

     649       (334
  

 

 

   

 

 

 

Total other income (expense)

     (9,405     (10,598
  

 

 

   

 

 

 

Income (loss) before income taxes

     (5,782     126,114  

Income tax expense (benefit)

     (4,174     36,970  
  

 

 

   

 

 

 

Net income (loss)

   $ (1,608   $ 89,144  
  

 

 

   

 

 

 

Earnings (loss) per common share

    

Basic

   $ (0.01   $ 0.75  

Diluted

   $ (0.01   $ 0.74  

Weighted average common shares outstanding

    

Basic

     116,610       118,679  

Diluted

     116,610       119,938  

 

(1) The cost of revenue excludes charges for depreciation but includes amortization of purchased and developed software for resale.


ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

     For the Three Months
Ended March 31,
 
     2017     2016  

Cash flows from operating activities:

    

Net income (loss)

   $ (1,608   $ 89,144  

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

    

Depreciation

     6,274       5,488  

Amortization

     19,364       21,024  

Amortization of deferred debt issuance costs

     1,734       1,578  

Deferred income taxes

     (5,919     19,596  

Stock-based compensation expense

     6,297       9,711  

Gain on sale of CFS assets

     —         (151,952

Other

     538       (398

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

    

Receivables

     84,033       34,588  

Accounts payable

     (3,689     (12,880

Accrued employee compensation

     (12,421     3,036  

Current income taxes

     (3,339     17,424  

Deferred revenue

     9,049       8,542  

Other current and noncurrent assets and liabilities

     (14,627     (6,378
  

 

 

   

 

 

 

Net cash flows from operating activities

     85,686       38,523  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (6,566     (7,138

Purchases of software and distribution rights

     (5,839     (8,766

Proceeds from sale of CFS assets

     —         200,000  

Other

     —         (7,000
  

 

 

   

 

 

 

Net cash flows from investing activities

     (12,405     177,096  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     693       731  

Proceeds from exercises of stock options

     7,035       237  

Repurchase of restricted stock for tax withholdings

     (3,155     (40

Repurchases of common stock

     —         (52,449

Proceeds from revolving credit facility

     12,000       —    

Repayment of revolving credit facility

     (100,000     (143,000

Proceeds from term portion of credit agreement

     415,000       —    

Repayment of term portion of credit agreement

     (370,477     (23,823

Payment of debt issuance costs

     (5,340     —    

Payments on other debt and capital leases

     (4,629     (6,270
  

 

 

   

 

 

 

Net cash flows from financing activities

     (48,873     (224,614
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash

     (417     1,125  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     23,991       (7,870

Cash and cash equivalents, beginning of period

     75,753       102,239  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 99,744     $ 94,369  
  

 

 

   

 

 

 


ACI Worldwide, Inc.

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1)

(unaudited and in thousands, except per share data)

 

     FOR THE THREE MONTHS ENDED March 31,  
Selected Non-GAAP Financial Data    2017
GAAP
    Adj     2017
Non-GAAP
    2016
GAAP
     Adj     2016
Non-GAAP
    $ Diff     % Diff  

Total revenues (2)

   $ 231,462     $ —       $ 231,462     $ 226,066      $ 86     $ 226,152     $ 5,310       2

Total expenses (3)

     227,839       (6,065     221,774       89,354        147,996       237,350       (15,576     -7

Operating income (loss)

     3,623       6,065       9,688       136,712        (147,910     (11,198     20,886       -187

Income (loss) before income taxes

     (5,782     6,065       283       126,114        (147,910     (21,796     22,079       -101

Income tax expense (benefit) (4)

     (4,174     2,053       (2,121     36,970        (56,856     (19,886     17,765       -89
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (1,608   $ 4,012     $ 2,404     $ 89,144      $ (91,054   $ (1,910   $ 4,314       -226
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation

     6,274       —         6,274       5,488        —         5,488       786       14

Amortization - acquisition related intangibles

     4,783       —         4,783       5,791        —         5,791       (1,008     -17

Amortization - acquisition related software

     7,192       —         7,192       7,486        —         7,486       (294     -4

Amortization - other

     7,389       —         7,389       7,747        —         7,747       (358     -5

Stock-based compensation

     6,297       —         6,297       9,711        —         9,711       (3,414     -35
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 35,558     $ 6,065     $ 41,623     $ 172,935      $ (147,910   $ 25,025     $ 16,598       66
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share information

                 

Weighted average shares outstanding

                 

Basic

     116,610       117,556       117,556       118,679        118,679       118,679      

Diluted

     116,610       118,775       118,775       119,938        119,938       119,938      

Earnings (loss) per share

                 

Basic

   $ (0.01   $ 0.03     $ 0.02     $ 0.75      $ (0.77   $ (0.01   $ 0.03       300

Diluted

   $ (0.01   $ 0.03     $ 0.02     $ 0.75      $ (0.76   $ (0.01   $ 0.03       300

 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
(2) Adjustment for Online Resources Corporation deferred revenue that would have been recognized in the normal course of business but was not recognized due to GAAP purchase accounting requirements.
(3) Adjustment in Q1 2017 include employee related expenses of $5.7 million and $0.4 million for professional and other fees. In Q1 2016, adjustments included the gain on sale of CFS assets of $152.0 million and significant transaction related expenses of $4.0 million. Significant transaction related expenses includes, $2.4 million for employee related actions, $1.1 million for technology projects, and $0.5 million for professional and other fees in 2016.
(4) Tax effect of revenue and significant transaction related adjustments.

 

     Quarter Ended
March 31,
 
Reconciliation of Operating Free Cash Flow (millions)    2017      2016  

Net cash provided by operating activities

   $ 85.7      $ 38.5  

Net after-tax payments associated with employee-related actions

     2.4        1.9  

Net after-tax payments associated with facility closures

     0.2        —    

Net after-tax payments associated with significant transaction related expenses

     0.4        1.0  

Less capital expenditures

     (12.4      (15.9

Plus capital expenditures for European datacenter and cyber security

     —          4.2  
  

 

 

    

 

 

 

Operating Free Cash Flow

   $ 76.3      $ 29.7  
  

 

 

    

 

 

 
     Quarter Ended
March 31,
 
Reconciliation excluding CFS impact (millions)    2017      2016  

Total non-GAAP revenue

   $ 231.5      $ 226.2  

CFS product revenue

     —          (15.4
  

 

 

    

 

 

 

Total non-GAAP revenue excluding CFS

   $ 231.5      $ 210.8  
  

 

 

    

 

 

 

Total adjusted EBITDA

   $ 41.6      $ 25.0  

CFS adjusted EBITDA

     —          (1.2

Retained indirect costs during TSA period

     —          1.0  
  

 

 

    

 

 

 

Total adjusted EBITDA excluding CFS impact

   $ 41.6      $ 24.8  
  

 

 

    

 

 

 
     Quarter Ended
March 31,
 
Monthly Recurring Revenue (millions)    2017      2016  

Monthly SaaS and platform

   $ 99.4      $ 111.7  

Maintenance

     54.5        57.3  

Monthly license

     18.8        17.1  
  

 

 

    

 

 

 

Monthly Recurring Revenue

     172.7        186.1  

CFS contribution

     —          14.3  
  

 

 

    

 

 

 

Monthly Recurring Revenue

   $ 172.7      $ 171.8  
EX-99.2

Slide 1

May 4, 2017 March 31, 2017 Quarterly results ACI Worldwide Exhibit 99.2


Slide 2

Private Securities Litigation Reform Act of 1995 Safe Harbor For Forward-Looking Statements 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.


Slide 3

Phil Heasley Chief Executive Officer Quarter in Review


Slide 4

Q1 2017 in Review Revenue up 10% Adjusted EBITDA up 68% Free cash flow up 157% Continued traction with Universal Payments Reiterating guidance


Slide 5

Scott Behrens Chief Financial Officer Financial Review


Slide 6

Key Takeaways from the Quarter Bookings Total bookings down 14% and renewal bookings up 34%, adjusted for FX and CFS We continue to expect full year new bookings growth to be in the high single digits Backlog 12-month backlog of $814 million, down $6 million from Q4 2016, adjusted for FX 60-month backlog of $4 billion, down $23 million from Q4 2016, adjusted for FX Both numbers impacted by timing of new bookings compared with prior year Revenue and EBITDA Growth Revenue grew 10%, after adjusting for CFS and FX Adjusted EBITDA up 68% Debt and Liquidity Operating free cash flow was $76 million, up from $30 million in Q1 last year Ended the quarter with $100 million in cash and $710 million in debt $78 million remaining on share repurchase authorization


Slide 7

Reiterating 2017 Guidance Guidance New bookings growth expected to be in the upper single digits Revenue and Adjusted EBITDA phasing by quarter consistent with seasonal history Guidance excludes approximately $14 million in one-time integration related expenses for PAY.ON, the CFS divestiture and data center and facilities consolidation. Q2 revenue expected to be $225 to $230 million


Slide 8

Appendix


Slide 9

Monthly Recurring Revenue


Slide 10

Historic Bookings By Quarter


Slide 11

Non-GAAP Operating Income (Loss)


Slide 12

Adjusted EBITDA


Slide 13

Operating Free Cash Flow * Tax effected at 35%


Slide 14

60-Month Backlog


Slide 15

EPS Impact of Non-Cash and Significant Transaction Related Items


Slide 16

Confidential


Slide 17

Non-GAAP Financial Measures To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude certain business combination accounting entries, significant transaction related expenses, as well as other significant non-cash expenses such as depreciation, amortization, and non-cash compensation, that we believe are helpful in understanding our past financial performance and our future results. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. 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 to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Certain non-GAAP measures include: Non-GAAP revenue: revenue plus deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements. Non-GAAP revenue should be considered in addition to, rather than as a substitute for, revenue. Non-GAAP operating income: operating income plus deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements and significant transaction related expenses and less the pre-tax gain on the divestiture of CFS. Non-GAAP operating income should be considered in addition to, rather than as a substitute for, operating income. Adjusted EBITDA: net income plus income tax expense, net interest income (expense), net other income (expense), depreciation, amortization, and non-cash compensation, as well as deferred revenue that would have been recognized in the normal course of business if not for GAAP purchase accounting requirements and significant transaction related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, operating income.


Slide 18

Non-GAAP Financial Measures ACI is also presenting operating free cash flow, which is defined as net cash provided by operating activities, plus payments associated with acquired opening balance sheet liabilities, net after-tax payments associated with employee-related actions and facility closures, net after-tax payments associated with significant transaction related expenses and less capital expenditures plus capital expenditures for European data center and cyber security. Operating free cash flow is considered a non-GAAP financial measure as defined by SEC Regulation G. We utilize this non-GAAP financial measure, and believe it is useful to investors, as an indicator of cash flow available for debt repayment and other investing activities, such as capital investments and acquisitions. We utilize operating free cash flow as a further indicator of operating performance and for planning investing activities. Operating free cash flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities. A limitation of operating free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. This measure also does not exclude mandatory debt service obligations and, therefore, does not represent the residual cash flow available for discretionary expenditures. We believe that operating free cash flow is useful to investors to provide disclosures of our operating results on the same basis as that used by our management. ACI also includes backlog estimates, which include all license, maintenance, and services (including SaaS and Platform) 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.


Slide 19

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, facilities management, and software hosting arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences. Non-recurring license arrangements are assumed to renew as recurring revenue streams. Foreign currency exchange rates are assumed to remain constant over the 60-month backlog period for those contracts stated in currencies other than the U.S. dollar. Our pricing policies and practices are assumed to remain constant over the 60-month backlog period.   Estimates of future financial results are inherently unreliable. Our backlog estimates require substantial judgment and are based on a number of assumptions as described above. These assumptions may turn out to be inaccurate or wrong, including, but not limited to, 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.


Slide 20

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: Continued traction with Universal Payments; Expectations regarding 2017 financial guidance related to revenue, adjusted EBITDA and full year new bookings growth; Expectations regarding Q2 2017 revenue.


Slide 21

Forward-Looking Statements 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, increased competition, the success of our Universal Payments strategy, demand for our products, restrictions and other financial covenants in our credit facility, consolidations and failures in the financial services industry, customer reluctance to switch to a new vendor, the accuracy of management’s backlog estimates, 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, 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, volatility and disruption of the capital and credit markets and adverse changes in the global economy, our existing levels of debt, impairment of our goodwill or intangible assets, litigation, future acquisitions, strategic partnerships and investments, 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 legislation, governmental regulations and industry standards, our ability to protect customer information from security breaches or attacks, our compliance with privacy regulations, the protection of our intellectual property in intellectual property litigation, exposure to credit or operating risks arising from certain payment funding methods, the cyclical nature of our revenue and earnings and the accuracy of forecasts due to the concentration of revenue-generating activity during the final weeks of each quarter, business interruptions or failure of our information technology and communication systems, our offshore software development activities, risks from operating internationally, including fluctuations in currency exchange rates, exposure to unknown tax liabilities, volatility in our stock price, our pending appeal of the $43 million judgement, plus $2.7 million of attorney fees and costs awarded against us in the BHMI litigation, and potential claims associated with our sale and transition of our CFS assets and liabilities. 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 our Quarterly Reports on Form 10-Q.