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 9, 2019 (May 9, 2019)
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
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. ☐
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Common Stock, $0.005 par value | ACIW | Nasdaq Global Select Market |
| Item 2.02. | Results of Operation and Financial Condition. |
On May 9, 2019, ACI Worldwide, Inc. (“the Company”) issued a press release announcing its financial results for the three months and year ended March 31, 2019. 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 9, 2019 | |
| 99.2 | Investor presentation materials dated May 9, 2019 | |
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 9, 2019
3
Exhibit 99.1
|
News Release |
ACI Worldwide, Inc. Reports Financial Results for the
Quarter Ended March 31, 2019
HIGHLIGHTS
| • | ACI On Demand segment revenue grew 5% |
| • | ACI On Demand net adjusted EBITDA margin improved 600 bps |
| • | Completion of Speedpay acquisition |
| • | Updating full year 2019 and 2020 guidance |
NAPLES, FLA — May 9, 2019 — 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, 2019.
“We are pleased to announce that the acquisition of Speedpay will close today and we are updating our full year 2019 outlook,” commented Phil Heasley, President and CEO, ACI Worldwide. “The addition of Speedpay is strategically compelling and is expected to provide notable financial benefits, including increases in recurring revenue and net adjusted EBITDA margin in our On Demand business. We welcome the talented Speedpay employees and valuable customers. Looking to the rest of 2019 and beyond, with a strong new bookings pipeline, our improving AOD operations, and the addition of Speedpay, ACI is poised to capitalize even more quickly on the growing global payment transaction opportunity.”
Q1 2019 FINANCIAL SUMMARY
In Q1 2019, new bookings were $70 million, which was down when compared to our record bookings quarter in Q1 last year.
In Q1 2019, revenue was $206 million, versus $209 million in Q1 2018. Net loss in the quarter was $26 million, versus a net loss of $19 million last year. Adjusted EBITDA was $8 million, versus $19 million in Q1 2018.
In Q1 2019, revenue from ACI’s On Demand segment was $110 million, up 5% from $104 million last year. On Demand segment net adjusted EBITDA margin improved 600 basis points from last year. On Demand segment net adjusted EBITDA margins are adjusted for pass through interchange revenue of $45 million and $40 million, for Q1 2019 and Q1 2018, respectively. ACI’s On Premise segment revenue was $96 million, versus $105 million last year due to timing of nonrecurring license fees. On Premise segment adjusted EBITDA margin was 29% in Q1 2019 versus 37% in Q1 2018.
ACI ended Q1 2019 with a 12-month backlog of $813 million and a 60-month backlog of $4.2 billion. After adjusting for foreign currency fluctuations, our 12-month backlog increased $3 million and our 60-month backlog decreased $22 million from Q4 2018.
Cash flows from operating activities in Q1 2019 were $42 million, versus $45 million in Q1 2018. Adjusted operating free cash flow in Q1 2019 was $35 million, versus $36 million in Q1 2018. ACI ended Q1 2019 with $176 million in cash on hand, up from $149 million in Q4 2018, and a debt balance of $679 million. The company has $176 million remaining on its share repurchase authorization.
GUIDANCE
We are updating our outlook for the full year 2019 and 2020 given the contribution from Speedpay. We expect Speedpay to contribute between $215 million and $220 million in revenue and between $50 million and $55 million in adjusted EBITDA to the remainder of 2019. We expect Speedpay to contribute $90 million to $95 million in adjusted EBITDA in 2020. We now expect 2019 total revenue to be between $1.315 billion and $1.345 billion and adjusted EBITDA to be in a range of $360 million to $380 million, which excludes between $30 million and $35 million in significant transaction related expenses. This is up from our prior guidance of $1.1 billion to $1.125 billion and $310 million to $325 million for
revenue and adjusted EBITDA, respectively. We expect Q2 2019 revenue to be between $280 and $290 million. We continue to expect full year 2019 new bookings growth to be in the upper single digits to low double digits.
We now expect our 2020 adjusted EBITDA to be in a range of $425 million to $445 million, up from the prior outlook of $335 million to $350 million.
CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND OUTLOOK
Management will host a conference call at 8:30 am ET today to discuss these results, the Speedpay acquisition, as well as 2019 and 2020 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 1270429. 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. 2019.
ACI, ACI Worldwide, ACI Payment Systems, the ACI logo and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties’ trademarks referenced are the property of their respective owners.
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 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:
| • | 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 significant transaction-related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. |
| • | Net Adjusted EBITDA Margin: Adjusted EBITDA divided by revenue net of pass through interchange revenue. Net Adjusted EBITDA Margin should be considered in addition to, rather than as a substitute for, net income. |
ACI is also presenting adjusted operating free cash flow, which is defined as net cash provided by operating activities and net after-tax payments associated with significant transaction-related expenses, less capital expenditures. Adjusted 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 adjusted operating free cash flow as a further indicator of operating performance and for planning investment activities. Adjusted 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 adjusted 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 adjusted 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 backlog includes estimates for SaaS and PaaS, license, maintenance, and services specified in executed contracts but excluded from contracted revenue that will be recognized in future periods, as well as revenue 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 estimates are derived using the following key assumptions:
| • | License arrangements are assumed to renew at the end of their committed term or under the renewal option stated in the contract at a rate consistent with historical experience. If the license arrangement includes extended payment terms, the renewal estimate is adjusted for the effects of a significant financing component. |
| • | 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. |
| • | SaaS and PaaS arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences. |
| • | 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 revenue or that the actual revenue will be generated within the corresponding 60-month period.
Backlog estimates should be considered in addition to, rather than as a substitute for, reported revenue and contracted but not recognized revenue (including 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) expectations that the addition of Speedpay is strategically compelling and is expected to provide notable financial benefits, including increases in recurring revenue and net adjusted EBITDA margin in our On Demand business; (ii) expectations regarding a strong new bookings pipeline, improving AOD operations, the addition of Speedpay and the positioning to capitalize even more quickly on the growing global payment transaction opportunity; (iii) expectations regarding revenue, adjusted EBITDA, and new bookings growth in 2019; (iv) expectations regarding revenue in Q2 2019; (v) and expectations regarding our 2020 EBITDA target.
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 debt agreements, 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, 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, our ability to adequately defend our intellectual property, 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, 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, | |||||||
| 2019 | 2018 | |||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 176,173 | $ | 148,502 | ||||
| Receivables, net of allowances |
265,750 | 348,182 | ||||||
| Prepaid expenses |
31,464 | 23,277 | ||||||
| Other current assets |
40,830 | 46,516 | ||||||
|
|
|
|
|
|||||
| Total current assets |
514,217 | 566,477 | ||||||
|
|
|
|
|
|||||
| Noncurrent assets |
||||||||
| Accrued receivables, net |
177,407 | 189,010 | ||||||
| Property and equipment, net |
70,909 | 72,729 | ||||||
| Operating lease right-of-use assets |
60,978 | — | ||||||
| Software, net |
130,812 | 137,228 | ||||||
| Goodwill |
909,691 | 909,691 | ||||||
| Intangible assets, net |
162,845 | 168,127 | ||||||
| Deferred income taxes, net |
38,408 | 27,048 | ||||||
| Other noncurrent assets |
48,875 | 52,145 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
$ | 2,114,142 | $ | 2,122,455 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 28,046 | $ | 39,602 | ||||
| Employee compensation |
29,570 | 38,115 | ||||||
| Current portion of long-term debt |
20,788 | 20,767 | ||||||
| Deferred revenue |
91,369 | 104,843 | ||||||
| Other current liabilities |
90,604 | 93,293 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
260,377 | 296,620 | ||||||
|
|
|
|
|
|||||
| Noncurrent liabilities |
||||||||
| Deferred revenue |
60,853 | 51,292 | ||||||
| Long-term debt |
645,784 | 650,989 | ||||||
| Deferred income taxes, net |
24,705 | 31,715 | ||||||
| Operating lease liabilities |
50,636 | — | ||||||
| Other noncurrent liabilities |
39,203 | 43,608 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
1,081,558 | 1,074,224 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
702 | 702 | ||||||
| Additional paid-in capital |
636,960 | 632,235 | ||||||
| Retained earnings |
837,805 | 863,768 | ||||||
| Treasury stock |
(351,587 | ) | (355,857 | ) | ||||
| Accumulated other comprehensive loss |
(91,296 | ) | (92,617 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
1,032,584 | 1,048,231 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,114,142 | $ | 2,122,455 | ||||
|
|
|
|
|
|||||
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, |
||||||||
| 2019 | 2018 | |||||||
| Revenues |
||||||||
| Software as a service and platform as a service |
$ | 108,557 | $ | 104,280 | ||||
| License |
21,078 | 28,046 | ||||||
| Maintenance |
55,111 | 56,659 | ||||||
| Services |
21,109 | 20,325 | ||||||
|
|
|
|
|
|||||
| Total revenues |
205,855 | 209,310 | ||||||
|
|
|
|
|
|||||
| Operating expenses |
||||||||
| Cost of revenue (1) |
114,941 | 107,336 | ||||||
| Research and development |
36,194 | 36,791 | ||||||
| Selling and marketing |
29,430 | 31,893 | ||||||
| General and administrative |
31,517 | 28,649 | ||||||
| Depreciation and amortization |
21,866 | 21,345 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
233,948 | 226,014 | ||||||
|
|
|
|
|
|||||
| Operating loss |
(28,093 | ) | (16,704 | ) | ||||
|
|
|
|
|
|||||
| Other income (expense) |
||||||||
| Interest expense |
(11,614 | ) | (9,365 | ) | ||||
| Interest income |
3,033 | 2,744 | ||||||
| Other, net |
(1,912 | ) | (55 | ) | ||||
|
|
|
|
|
|||||
| Total other income (expense) |
(10,493 | ) | (6,676 | ) | ||||
|
|
|
|
|
|||||
| Loss before income taxes |
(38,586 | ) | (23,380 | ) | ||||
| Income tax benefit |
(12,623 | ) | (3,952 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
$ | (25,963 | ) | $ | (19,428 | ) | ||
|
|
|
|
|
|||||
| Loss per common share |
||||||||
| Basic |
$ | (0.22 | ) | $ | (0.17 | ) | ||
| Diluted |
$ | (0.22 | ) | $ | (0.17 | ) | ||
| Weighted average common shares outstanding |
||||||||
| Basic |
116,090 | 115,642 | ||||||
| Diluted |
116,090 | 115,642 | ||||||
| (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, |
||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (25,963 | ) | $ | (19,428 | ) | ||
| Adjustments to reconcile net income to net cash flows from operating activities: |
||||||||
| Depreciation |
5,901 | 5,926 | ||||||
| Amortization |
18,951 | 19,067 | ||||||
| Amortization of operating lease right-of-use assets |
3,383 | — | ||||||
| Amortization of deferred debt issuance costs |
753 | 699 | ||||||
| Deferred income taxes |
(17,414 | ) | (4,827 | ) | ||||
| Stock-based compensation expense |
6,585 | 6,362 | ||||||
| Other |
574 | (663 | ) | |||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
94,549 | 68,741 | ||||||
| Accounts payable |
(10,297 | ) | (2,611 | ) | ||||
| Accrued employee compensation |
(8,598 | ) | (14,743 | ) | ||||
| Current income taxes |
(1,041 | ) | (3,569 | ) | ||||
| Deferred revenue |
(4,127 | ) | 11,326 | |||||
| Other current and noncurrent assets and liabilities |
(20,829 | ) | (21,144 | ) | ||||
|
|
|
|
|
|||||
| Net cash flows from operating activities |
42,427 | 45,136 | ||||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(5,250 | ) | (5,937 | ) | ||||
| Purchases of software and distribution rights |
(4,578 | ) | (6,652 | ) | ||||
|
|
|
|
|
|||||
| Net cash flows from investing activities |
(9,828 | ) | (12,589 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock |
831 | 753 | ||||||
| Proceeds from exercises of stock options |
4,857 | 9,118 | ||||||
| Repurchase of restricted share awards and restricted stock units for tax withholdings |
(2,624 | ) | (914 | ) | ||||
| Repurchases of common stock |
(631 | ) | (31,113 | ) | ||||
| Proceeds from revolving credit facility |
— | 48,000 | ||||||
| Repayments of revolving credit facility |
— | (50,000 | ) | |||||
| Repayment of term portion of credit agreement |
(5,937 | ) | (5,187 | ) | ||||
| Payments on other debt |
(1,857 | ) | (352 | ) | ||||
|
|
|
|
|
|||||
| Net cash flows from financing activities |
(5,361 | ) | (29,695 | ) | ||||
|
|
|
|
|
|||||
| Effect of exchange rate fluctuations on cash |
433 | 1,719 | ||||||
|
|
|
|
|
|||||
| Net increase in cash and cash equivalents |
27,671 | 4,571 | ||||||
| Cash and cash equivalents, beginning of period |
148,502 | 69,710 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ |
176,173 |
|
$ | 74,281 | |||
|
|
|
|
|
|||||
ACI Worldwide, Inc.
Reconciliation of Selected GAAP Measures to Non-GAAP Measures
(unaudited and in millions, except per share data)
| Adjusted EBITDA (millions) | Quarter Ended March 31, | |||||||
| 2019 | 2018 | |||||||
| Net Loss |
$ | (26.0 | ) | $ | (19.4 | ) | ||
| Plus: |
||||||||
| Income tax benefit |
(12.6 | ) | (4.0 | ) | ||||
| Net interest expense |
8.6 | 6.6 | ||||||
| Net other expense |
1.9 | 0.1 | ||||||
| Depreciation expense |
5.9 | 5.9 | ||||||
| Amortization expense |
19.0 | 19.1 | ||||||
| Non-cash compensation expense |
6.6 | 6.4 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA before significant transaction-related expenses |
$ | 3.4 | $ | 14.7 | ||||
| Significant transaction-related expenses |
4.7 | 4.3 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 8.1 | $ | 19.0 | ||||
|
|
|
|
|
|||||
| Segment Information (millions) | Quarter Ended March 31, | |||||||
| 2019 | 2018 | |||||||
| Revenue |
||||||||
| ACI On Premise |
$ | 96.0 | $ | 105.0 | ||||
| ACI On Demand |
109.9 | 104.3 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 205.9 | $ | 209.3 | ||||
|
|
|
|
|
|||||
| Segment Adjusted EBITDA |
||||||||
| ACI On Premise |
$ | 28.3 | $ | 38.9 | ||||
| ACI On Demand |
(0.3 | ) | (4.2 | ) | ||||
| Reconciliation of Adjusted Operating Free Cash Flow (millions) | Quarter Ended March 31, | |||||||
| 2019 | 2018 | |||||||
| Net cash flows from operating activities |
$ | 42.4 | $ | 45.1 | ||||
| Net after-tax payments associated with significant transaction-related expenses |
2.8 | 3.6 | ||||||
| Less: capital expenditures |
(9.8 | ) | (12.6 | ) | ||||
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Q1 2019 QUARTERLY EARNINGS AND SPEEDPAY ACQUISITION PRESENTATION May 9, 2019 ACI Worldwide Exhibit 99.2
This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward-looking statements and risk factors 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 Quarter in Review
Q1 Review and Speedpay Strategic Opportunity Completion of Speedpay acquisition Speedpay brings immediate scale to ACI On Demand Significantly boosts recurring revenue Materially improves net adjusted EBITDA margin Unifies two leading platforms and brings together top talent Accelerates technical innovation through increased R&D and shared feature enhancements Accelerates convergence of Merchant and Bill Pay Combination creates the foundation for a comprehensive digital commerce solution – enabled by integrating our omni-channel merchant, payments intelligence and bill payments assets – to serve the converging segment of merchant commerce and billing. Updating 2019 guidance
To achieve growth in e-commerce and Bill Pay we will combine our assets and invest in going after the fast growing subscription billing space Digital subscription – Digital subscription – Services p.a. We will create an MVP by combining merchant and Bill Pay solutions… Merchant Bill Pay Gateway solution for eCommerce, mCommerce and mobile point of sale Real-time fraud and monitoring of online and mobile transactions for merchants and payment service providers Complete suite of direct bill payment solutions across verticals Suite of customer communication and bill presentment tools Intuitive customer experience/front-end Support for non-card payments We will focus on a sub-segment of new digital billers that combines physical goods and services …to enter into the fast growing digital subscription billing Number of bills, bn 18 3 21 CAGR % Digital Subscriptions Traditional Billing
Scott Behrens Chief Financial Officer Financial Review
*Adjusted for fx Bookings New bookings were $70 million and total bookings were $112 million Both down versus record bookings quarter in Q1 2018 Backlog* 12-month backlog of $813 million, up $3 million from Q4 2018 60-month backlog of $4.2 billion, down $22 million from Q4 2018 Revenue and Adjusted EBITDA On Demand revenue grew 5% versus Q1 2018 On Demand net adjusted EBITDA margin improved 600 bps versus Q1 2018 On Premise revenue declined 9% from Q1 2018 due to timing of non-recurring license revenues On Premise adjusted EBITDA margin 29% versus 37% in Q1 2018 Debt and Liquidity Cash flow from operating activities was $42 million, versus $45 million in Q1 2018 Adjusted operating free cash flow was $35 million, versus $36 million in Q1 2018 Ended the quarter with $176 million in cash Ended the quarter with $679 million in debt, down $6 million from year end $176 million remaining on share repurchase authorization Key Takeaways from the quarter
Updated 2019 Guidance Speedpay expected to contribute between $215 million and $220 million in revenue and between $50 million and $55 million in Adjusted EBITDA to the remainder of 2019 These metrics exclude between $30 million and $35 million in significant transaction related expenses New bookings growth expected to be in the upper single digits to low double digits 2019 adjusted operating free cash flow expected to be in a range of $190 million and $200 million Q2 2019 revenue expected to be $280 million to $290 million 2020 adjusted EBITDA targeted to be in a range of $425 million to $445 million, up from the previous range of $335 million to $350 million Low High Low High Low High Revenue 1,100 1,125 215 220 1,315 1,345 Adjusted EBITDA 310 325 50 55 360 380 $'s in millions Updated 2019 Guidance Prior 2019 Guidance Expected Speedpay Contribution (Partial Year)
Updated 2019 Guidance Other 2019 Guidance Assumptions Interest expense of $65 million and cash interest of $60 million Capital expenditures to approximate $55 million Depreciation and amortization to approximate $130 million Non-cash compensation expense to approximate $35 million to $40 million Pass through interchange revenues to approximate $300 million to $305 million Cash taxes expected to approximate $40 million Effective tax rate expected to approximate 25% Diluted share count to approximate 118.5 million (excluding future share buy-back activity)
Appendix
$750M Speedpay Transaction Summary $750 million implies 2.2x Revenue and 8.0x EBITDA Valuation prior to consideration of: Tax benefit with NPV of ~$100 million Potential synergies Double digit accretive in first full year on an adjusted EPS basis Attractive Value* * Based on 2018 gross revenue and adjusted EBITDA. Carve-out of Western Union’s U.S. Bill Pay business includes: ~270 biller customers Speedpay intellectual property ~145 direct employees More than $350 million in revenue and $90 million in adjusted EBITDA Speedpay Overview* 100% cash. No financing contingency; bank facility committed at signing Pro forma Net debt / EBITDA <4x Strong cash flow profile allows for rapid deleveraging Transaction Funding Expect Speedpay to contribute between $215 million and $220 million in revenue and between $50 million and $55 million in Adjusted EBITDA Financial Impact (2019)
Monthly Recurring Revenue
Historic Bookings By Quarter
Adjusted EBITDA and Segmented Data
Adjusted Operating Free Cash Flow and 60-Month Backlog
EPS Impact of Non-Cash and Significant Transaction Related Items
Contract Duration Metric Represents dollar average remaining contract life (in years) for term license software contracts Excludes perpetual contracts (primarily acquired software contracts) Excludes all On Demand contracts as both cash and revenue are ratable over the contract term
To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the tables, which exclude 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: Adjusted EBITDA: net income (loss) plus income tax expense (benefit), net interest income (expense), net other income (expense), depreciation, amortization, and non-cash compensation, as well as significant transaction related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income (loss). Net Adjusted EBITDA Margin: Adjusted EBITDA divided by revenue net of pass through interchange revenue. Net Adjusted EBITDA Margin should be considered in addition to, rather than as a substitute for, net income. Non-GAAP Financial Measures
Non-GAAP Financial Measures ACI is also presenting adjusted operating free cash flow, which is defined as net cash provided by operating activities, plus net after-tax payments associated with employee-related actions and facility closures, plus net after-tax payments associated with significant transaction-related expenses, and less capital expenditures plus European data center and cybersecurity capital expenditures. Adjusted 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 adjusted operating free cash flow as a further indicator of operating performance and for planning investing activities. Adjusted 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 adjusted 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 adjusted 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 SaaS and platform 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. Non-GAAP Financial Measures
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: Expectations that Speedpay brings immediate scale, significantly boosting recurring revenue and materially improving net adjusted EBITDA margin; Expectations regarding our leadership position, talent and technical innovation ; Expectations regarding the convergence of Merchant and Bill Pay and the creation of an MVP; 2019 financial guidance related to revenue, adjusted EBITDA and full-year new bookings growth; Expectations regarding revenue in the second quarter of 2019; Expectations regarding adjusted operating free cash flow in 2019; Expectations regarding 2020 adjusted EBITDA target; and Expectations regarding 2019 interest expense, capital expenditures, tax rate, and other financial guidance. 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 debt agreements, 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, 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, our ability to adequately defend our intellectual property, 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, 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. Forward-Looking Statements