ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended June 30, 2019
Q2 HIGHLIGHTS
- ACI total revenue up 27%
- Net income of
$6 million , versus net loss of$15 million last year - ACI adjusted EBITDA up 80%
- Speedpay acquisition integration on track
- Reiterating 2019 and 2020 guidance
“We are pleased with our results in Q2. ACI revenue increased 27%, or 6% excluding the Speedpay contribution. We continue to see strong margin improvement in our On Demand segment which saw net adjusted EBITDA margins of 18% compared to negative 5% last year,” commented
Q2 2019 FINANCIAL SUMMARY
In Q2 2019, total bookings were
In Q2 2019, revenue was
In Q2 2019, revenue from ACI’s On Demand segment was
ACI’s On Premise segment revenue was
ACI ended Q2 2019 with a 12-month backlog of
Cash flows from operating activities in Q2 2019 were
REITERATING GUIDANCE
We are reiterating our outlook for the full year 2019 and 2020. We continue to expect 2019 total revenue to be between
We continue to expect our 2020 adjusted EBITDA to be in a range of
CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS AND OUTLOOK
Management will host a conference call at
About
©
ACI,
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 revenue 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 regarding Speedpay integration and contribution; (ii) confidence in our full year outlook; (iii) expectations regarding revenue, adjusted EBITDA, and new bookings growth in 2019; (iv) expectations regarding revenue in Q3 2019; and (v) expectations regarding our 2020 adjusted EBITDA target.
All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the
|
ACI WORLDWIDE, INC. AND SUBSIDIARIES |
||||||||
| June 30, 2019 |
December 31, 2018 |
|||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents |
$ |
139,396 |
|
$ |
148,502 |
|
||
| Receivables, net of allowances |
|
286,393 |
|
|
348,182 |
|
||
| Settlement assets |
|
613,290 |
|
|
32,256 |
|
||
| Prepaid expenses |
|
30,645 |
|
|
23,277 |
|
||
| Other current assets |
|
52,259 |
|
|
14,260 |
|
||
| Total current assets |
|
1,121,983 |
|
|
566,477 |
|
||
| Noncurrent assets | ||||||||
| Accrued receivables, net |
|
177,513 |
|
|
189,010 |
|
||
| Property and equipment, net |
|
70,805 |
|
|
72,729 |
|
||
| Operating lease right-of-use assets |
|
62,316 |
|
— |
||||
| Software, net |
|
246,314 |
|
|
137,228 |
|
||
| Goodwill |
|
1,279,472 |
|
|
909,691 |
|
||
| Intangible assets, net |
|
374,908 |
|
|
168,127 |
|
||
| Deferred income taxes, net |
|
63,569 |
|
|
27,048 |
|
||
| Other noncurrent assets |
|
53,440 |
|
|
52,145 |
|
||
| TOTAL ASSETS |
$ |
3,450,320 |
|
$ |
2,122,455 |
|
||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable |
$ |
46,975 |
|
$ |
39,602 |
|
||
| Settlement liabilities |
|
589,742 |
|
|
31,605 |
|
||
| Employee compensation |
|
38,976 |
|
|
38,115 |
|
||
| Current portion of long-term debt |
|
34,089 |
|
|
20,767 |
|
||
| Deferred revenue |
|
79,311 |
|
|
104,843 |
|
||
| Other current liabilities |
|
81,156 |
|
|
61,688 |
|
||
| Total current liabilities |
|
870,249 |
|
|
296,620 |
|
||
| Noncurrent liabilities | ||||||||
| Deferred revenue |
|
59,122 |
|
|
51,292 |
|
||
| Long-term debt |
|
1,352,096 |
|
|
650,989 |
|
||
| Deferred income taxes, net |
|
23,243 |
|
|
31,715 |
|
||
| Operating lease liabilities |
|
50,550 |
|
— |
||||
| Other noncurrent liabilities |
|
42,483 |
|
|
43,608 |
|
||
| Total liabilities |
|
2,397,743 |
|
|
1,074,224 |
|
||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock |
— |
— |
||||||
| Common stock |
|
702 |
|
|
702 |
|
||
| Additional paid-in capital |
|
650,797 |
|
|
632,235 |
|
||
| Retained earnings |
|
843,530 |
|
|
863,768 |
|
||
| Treasury stock |
|
(349,426 |
) |
|
(355,857 |
) |
||
| Accumulated other comprehensive loss |
|
(93,026 |
) |
|
(92,617 |
) |
||
| Total stockholders’ equity |
|
1,052,577 |
|
|
1,048,231 |
|
||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
3,450,320 |
|
$ |
2,122,455 |
|
||
|
ACI WORLDWIDE, INC. AND SUBSIDIARIES |
||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2019 |
2018 |
2019 |
2018 |
|||||||||||||
| Revenues | ||||||||||||||||
| Software as a service and platform as a service |
$ |
172,499 |
|
$ |
113,600 |
|
$ |
281,056 |
|
$ |
217,880 |
|
||||
| License |
|
52,541 |
|
|
45,555 |
|
|
73,619 |
|
|
73,601 |
|
||||
| Maintenance |
|
51,922 |
|
|
55,048 |
|
|
107,033 |
|
|
111,707 |
|
||||
| Services |
|
20,656 |
|
|
20,792 |
|
|
41,765 |
|
|
41,117 |
|
||||
| Total revenues |
|
297,618 |
|
|
234,995 |
|
|
503,473 |
|
|
444,305 |
|
||||
| Operating expenses | ||||||||||||||||
| Cost of revenue (1) |
|
155,240 |
|
|
116,261 |
|
|
270,181 |
|
|
223,597 |
|
||||
| Research and development |
|
39,235 |
|
|
37,862 |
|
|
75,429 |
|
|
74,653 |
|
||||
| Selling and marketing |
|
32,962 |
|
|
33,160 |
|
|
62,392 |
|
|
65,053 |
|
||||
| General and administrative |
|
49,319 |
|
|
28,837 |
|
|
80,836 |
|
|
57,486 |
|
||||
| Depreciation and amortization |
|
26,744 |
|
|
21,033 |
|
|
48,610 |
|
|
42,378 |
|
||||
| Total operating expenses |
|
303,500 |
|
|
237,153 |
|
|
537,448 |
|
|
463,167 |
|
||||
| Operating loss |
|
(5,882 |
) |
|
(2,158 |
) |
|
(33,975 |
) |
|
(18,862 |
) |
||||
| Other income (expense) | ||||||||||||||||
| Interest expense |
|
(15,323 |
) |
|
(9,717 |
) |
|
(26,937 |
) |
|
(19,082 |
) |
||||
| Interest income |
|
2,997 |
|
|
2,742 |
|
|
6,030 |
|
|
5,486 |
|
||||
| Other, net |
|
1,402 |
|
|
(1,677 |
) |
|
(510 |
) |
|
(1,732 |
) |
||||
| Total other income (expense) |
|
(10,924 |
) |
|
(8,652 |
) |
|
(21,417 |
) |
|
(15,328 |
) |
||||
| Loss before income taxes |
|
(16,806 |
) |
|
(10,810 |
) |
|
(55,392 |
) |
|
(34,190 |
) |
||||
| Income tax expense (benefit) |
|
(22,531 |
) |
|
3,764 |
|
|
(35,154 |
) |
|
(188 |
) |
||||
| Net income (loss) |
$ |
5,725 |
|
$ |
(14,574 |
) |
$ |
(20,238 |
) |
$ |
(34,002 |
) |
||||
| Income (loss) per common share | ||||||||||||||||
| Basic |
$ |
0.05 |
|
$ |
(0.13 |
) |
$ |
(0.17 |
) |
$ |
(0.29 |
) |
||||
| Diluted |
$ |
0.05 |
|
$ |
(0.13 |
) |
$ |
(0.17 |
) |
$ |
(0.29 |
) |
||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic |
|
116,586 |
|
|
115,548 |
|
|
116,287 |
|
|
115,595 |
|
||||
| Diluted |
|
118,786 |
|
|
115,548 |
|
|
116,287 |
|
|
115,595 |
|
||||
| (1) The cost of revenue excludes charges for depreciation but includes amortization of purchased and developed software for resale. | ||||||||||||||||
|
ACI WORLDWIDE, INC. AND SUBSIDIARIES |
||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2019 |
2018 |
2019 |
2018 |
|||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income (loss) |
$ |
5,725 |
|
$ |
(14,574 |
) |
$ |
(20,238 |
) |
$ |
(34,002 |
) |
||||
| Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||||||||||||
| Depreciation |
|
5,930 |
|
|
5,949 |
|
|
11,831 |
|
|
11,875 |
|
||||
| Amortization |
|
23,848 |
|
|
18,402 |
|
|
42,799 |
|
|
37,469 |
|
||||
| Amortization of operating lease right-of-use assets |
|
3,646 |
|
|
— |
|
|
7,029 |
|
|
— |
|
||||
| Amortization of deferred debt issuance costs |
|
930 |
|
|
746 |
|
|
1,683 |
|
|
1,445 |
|
||||
| Deferred income taxes |
|
(23,917 |
) |
|
1,783 |
|
|
(41,331 |
) |
|
(3,044 |
) |
||||
| Stock-based compensation expense |
|
14,372 |
|
|
7,705 |
|
|
20,957 |
|
|
14,067 |
|
||||
| Other |
|
959 |
|
|
415 |
|
|
1,533 |
|
|
(248 |
) |
||||
| Changes in operating assets and liabilities, net of impact of acquisitions | ||||||||||||||||
| Receivables |
|
(5,953 |
) |
|
(1,052 |
) |
|
88,596 |
|
|
67,689 |
|
||||
| Accounts payable |
|
11,591 |
|
|
(1,047 |
) |
|
1,294 |
|
|
(3,658 |
) |
||||
| Accrued employee compensation |
|
7,435 |
|
|
8,938 |
|
|
(1,163 |
) |
|
(5,805 |
) |
||||
| Current income taxes |
|
(4,593 |
) |
|
(3,674 |
) |
|
(5,634 |
) |
|
(7,243 |
) |
||||
| Deferred revenue |
|
(13,854 |
) |
|
(1,184 |
) |
|
(17,981 |
) |
|
10,142 |
|
||||
| Other current and noncurrent assets and liabilities |
|
(11,681 |
) |
|
3,568 |
|
|
(32,510 |
) |
|
(17,576 |
) |
||||
| Net cash flows from operating activities |
|
14,438 |
|
|
25,975 |
|
|
56,865 |
|
|
71,111 |
|
||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchases of property and equipment |
|
(4,665 |
) |
|
(5,171 |
) |
|
(9,915 |
) |
|
(11,108 |
) |
||||
| Purchases of software and distribution rights |
|
(6,722 |
) |
|
(10,124 |
) |
|
(11,300 |
) |
|
(16,776 |
) |
||||
| Acquisition of businesses, net of cash acquired |
|
(758,546 |
) |
|
— |
|
|
(758,546 |
) |
|
— |
|
||||
| Other |
|
— |
|
|
(1,467 |
) |
|
— |
|
|
(1,467 |
) |
||||
| Net cash flows from investing activities |
|
(769,933 |
) |
|
(16,762 |
) |
|
(779,761 |
) |
|
(29,351 |
) |
||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from issuance of common stock |
|
922 |
|
|
811 |
|
|
1,753 |
|
|
1,564 |
|
||||
| Proceeds from exercises of stock options |
|
959 |
|
|
5,788 |
|
|
5,816 |
|
|
14,906 |
|
||||
| Repurchase of restricted share awards and restricted share units for tax withholdings |
|
(185 |
) |
|
(1,674 |
) |
|
(2,809 |
) |
|
(2,588 |
) |
||||
| Repurchases of common stock |
|
— |
|
|
(23,414 |
) |
|
(631 |
) |
|
(54,527 |
) |
||||
| Proceeds from revolving credit facility |
|
250,000 |
|
|
37,000 |
|
|
250,000 |
|
|
85,000 |
|
||||
| Repayment of revolving credit facility |
|
(15,000 |
) |
|
(34,000 |
) |
|
(15,000 |
) |
|
(84,000 |
) |
||||
| Proceeds from term portion of credit agreement |
|
500,000 |
|
|
— |
|
|
500,000 |
|
|
— |
|
||||
| Repayment of term portion of credit agreement |
|
(3,487 |
) |
|
(5,188 |
) |
|
(9,424 |
) |
|
(10,375 |
) |
||||
| Payments for debt issuance costs |
|
(12,830 |
) |
|
— |
|
|
(12,830 |
) |
|
— |
|
||||
| Payments on other debt |
|
(363 |
) |
|
(1,198 |
) |
|
(2,220 |
) |
|
(1,550 |
) |
||||
| Net cash flows from financing activities |
|
720,016 |
|
|
(21,875 |
) |
|
714,655 |
|
|
(51,570 |
) |
||||
| Effect of exchange rate fluctuations on cash |
|
(1,298 |
) |
|
(2,586 |
) |
|
(865 |
) |
|
(867 |
) |
||||
| Net decrease in cash and cash equivalents |
|
(36,777 |
) |
|
(15,248 |
) |
|
(9,106 |
) |
|
(10,677 |
) |
||||
| Cash and cash equivalents, beginning of period |
|
176,173 |
|
|
74,281 |
|
|
148,502 |
|
|
69,710 |
|
||||
| Cash and cash equivalents, end of period |
$ |
139,396 |
|
$ |
59,033 |
|
$ |
139,396 |
|
$ |
59,033 |
|||||
| Adjusted EBITDA (millions) | Quarter Ended June 30, | ||||||||
|
|
2019 |
|
2018 |
||||||
| Net Income (Loss) |
$ |
5.7 |
$ |
(14.6) |
|||||
| Plus: | |||||||||
| Income tax (benefit) expense |
|
(22.5) |
|
3.8 |
|||||
| Net interest expense |
|
12.3 |
|
7.0 |
|||||
| Net other (income) expense |
|
(1.4) |
|
1.7 |
|||||
| Depreciation expense |
|
5.9 |
|
5.9 |
|||||
| Amortization expense |
|
23.9 |
|
18.4 |
|||||
| Non-cash compensation expense |
|
14.4 |
|
7.7 |
|||||
| Adjusted EBITDA before significant transaction-related expenses |
$ |
38.3 |
$ |
29.9 |
|||||
| Significant transaction-related expenses |
|
16.6 |
|
0.6 |
|||||
| Adjusted EBITDA |
$ |
54.9 |
$ |
30.5 |
|||||
| Segment Information (millions) | Quarter Ended June 30, | ||||||||
|
|
2019 |
|
2018 |
||||||
| Revenue | |||||||||
| ACI On Premise |
$ |
125.1 |
$ |
121.4 |
|||||
| ACI On Demand |
|
172.5 |
|
113.6 |
|||||
| Total |
$ |
297.6 |
$ |
235.0 |
|||||
| Segment Adjusted EBITDA | |||||||||
| ACI On Premise |
$ |
57.1 |
$ |
54.8 |
|||||
| ACI On Demand |
|
17.3 |
|
(3.4) |
|||||
| Reconciliation of Adjusted Operating Free Cash Flow (millions) | Quarter Ended June 30, | |||||
|
|
2019 |
|
2018 |
|||
| Net cash flows from operating activities |
$ |
14.4 |
$ |
26.0 |
||
| Net after-tax payments associated with significant transaction-related expenses |
|
12.5 |
|
2.2 |
||
| Less: capital expenditures |
|
(11.4) |
|
(15.3) |
||
| Adjusted Operating Free Cash Flow |
$ |
15.5 |
$ |
12.9 |
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190808005201/en/
Source:
John Kraft, Vice President, Investor Relations & Strategic Analysis
ACI Worldwide
239-403-4627
john.kraft@aciworldwide.com
