ACI Worldwide, Inc. Reports Financial Results for the Quarter and Full Year Ended December 31, 2022

March 1, 2023

2022 HIGHLIGHTS

Revenue of $1.422 billion, up 7% from 2021 adjusted for FX and divestiture¹
ARR² bookings up 35% from 2021
Repurchased 8.6 million shares for $207 million
Increased repurchase authorization up to $200 million

MIAMI--(BUSINESS WIRE)--Mar. 1, 2023-- ACI Worldwide (NASDAQ: ACIW), the global leader in mission-critical, real-time payments software, announced financial results today for the quarter and full year ended December 31, 2022.

"2022 was an important year for ACI, with significant new business wins, solid organic revenue growth and accelerating ARR bookings,” said Thomas Warsop, Interim President and CEO of ACI Worldwide. “Looking forward, we are excited about the opportunities across our businesses, particularly in Real Time and the Cloud, and confident in our ability to achieve our long term revenue growth target of 7-9% by 2024. We are making progress in our CEO search and expect to conclude the search in the coming months.”

FINANCIAL SUMMARY
In Q4 2022, revenue was $452 million, down from $467 million in Q4 2021. Net income was $90 million, versus $109 million in Q4 2021. Adjusted EBITDA in Q4 2022 was $194 million, versus $205 million in Q4 2021.

Full-year 2022 total revenue was $1.422 billion, up 4% from 2021, or 7% adjusted for FX and the divestiture. Net income of $142 million increased 11% from $128 million in 2021. Total adjusted EBITDA in 2022 was $373 million compared to $384 million in 2021. Consolidated ARR bookings for 2022 grew 35% over 2021.

Bank segment revenue increased 9% and Bank segment adjusted EBITDA increased 4%, versus 2021, adjusted for FX and the divestiture.
Merchant segment revenue increased 5% and Merchant segment adjusted EBITDA decreased 4%, versus 2021 on a constant currency basis, driven by investment that is expected to increase growth in 2023.
Biller segment revenue increased 6%, while Biller segment adjusted EBITDA decreased 17%, versus 2021, driven by increased interchange costs due to inflationary increases in average bill size.

ACI ended 2022 with $125 million in cash on hand and a debt balance of $1 billion, which represents a net debt leverage ratio of 2.6x. The company repurchased 8.6 million shares for $207 million during the year and the Board has approved an increase in the share repurchase authorization up to $200 million.

“The ACI Board continues to actively pursue opportunities to enhance shareholder value, as evidenced by the increase in the share repurchase authorization,” Warsop concluded.

2023 GUIDANCE
For the full year of 2023, we expect revenue growth to be in the mid-single-digits on a constant currency and divestiture-adjusted basis, or in the range of $1.436 billion to $1.466 billion. We expect adjusted EBITDA to be in the range of $380 million to $395 million with net adjusted EBITDA margin expansion. We expect revenue to be between $280 million and $290 million and adjusted EBITDA of $20 million to $30 million in Q1 2023. This excludes one-time charges related to the move of our European data centers to the public cloud and one-time costs to implement certain efficiency strategies.

1 Corporate Online Banking divestiture
2 “ARR”' is annual recurring revenue expected to be generated from new bookings signed in the quarter, including new accounts, new applications and add-on sales

CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS
Today, management will host a conference call at 8:30 am ET to discuss these results. Interested persons may access a real-time audio broadcast of the teleconference at http://investor.aciworldwide.com/ or use the following number for dial-in participation: toll-free 1 (888) 660-6377; and conference code 3153574. A call replay will be 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 is a global leader in mission-critical, real-time payments software. Our proven, secure and scalable software solutions enable leading corporations, fintechs and financial disruptors to process and manage digital payments, power omni-commerce payments, present and process bill payments, and manage fraud and risk. We combine our global footprint with a local presence to drive the real-time digital transformation of payments and commerce.

ACI, ACI Worldwide, ACI Payments, Inc., ACI Pay, Speedpay and all ACI product/solution 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.

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 (loss) 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 (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 (loss).
Diluted EPS adjusted for non-cash and significant transaction related items: diluted EPS plus tax effected significant transaction related items, amortization of acquired intangibles and software, and non-cash stock-based compensation. Diluted EPS adjusted for non-cash and significant transaction related items should be considered in addition to, rather than as a substitute for, diluted EPS.
Recurring revenue: revenue from software as a service and platform as a service fees and maintenance fees. Recurring revenue should be considered in addition to, rather than as a substitute for, total revenue.
*ARR: Annual recurring revenue expected to be generated from new accounts, new applications, and add-on sales bookings contracts signed in the quarter.

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: (i) excitement about the opportunities across our businesses, particularly in Real Time and the Cloud, (ii) confidence in our ability to achieve our long term revenue growth of 7-9% by 2024, (iii) progress in our CEO search and expectations to conclude the search in the coming months, (iv) the ACI Board continuing to actively pursue opportunities to enhance shareholder value, and (v) statements regarding Q1 2023 and full year 2023 revenue and adjusted EBITDA financial guidance.

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, business interruptions or failure of our information technology and communication systems, security breaches or viruses, our ability to attract and retain senior management personnel and skilled technical employees, future acquisitions, strategic partnerships and investments, divestitures and other restructuring activities, implementation and success of our strategy, impact if we convert some or all on-premise licenses from fixed-term to subscription model, anti-takeover provisions, exposure to credit or operating risks arising from certain payment funding methods, customer reluctance to switch to a new vendor, our ability to adequately defend our intellectual property, litigation, our offshore software development activities, risks from operating internationally, including fluctuations in currency exchange rates, events in eastern Europe, adverse changes in the global economy, compliance of our products with applicable legislation, governmental regulations and industry standards, the complexity of our products and services and the risk that they may contain hidden defects, complex regulations applicable to our payments business, our compliance with privacy and cybersecurity regulations, our involvement in investigations, lawsuits and other expense and time-consuming legal proceedings, exposure to unknown tax liabilities, changes in tax laws and regulations, consolidations and failures in the financial services industry, volatility in our stock price, demand for our products, failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate project completion estimates, impairment of our goodwill or intangible assets, the accuracy of management’s backlog estimates, 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, restrictions and other financial covenants in our debt agreements, our existing levels of debt, events outside of our control including natural disasters, wars, and outbreaks of disease, and revenues or revenue mix. 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
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except share and per share amounts)

	December 31,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	124,981	$	122,059
Receivables, net of allowances		403,781		320,405
Settlement assets		540,667		452,396
Prepaid expenses		28,010		24,698
Other current assets		17,366		17,876
Total current assets		1,114,805		937,434
Noncurrent assets
Accrued receivables, net		297,818		276,164
Property and equipment, net		52,499		63,050
Operating lease right-of-use assets		40,031		47,825
Software, net		129,109		157,782
Goodwill		1,226,026		1,280,226
Intangible assets, net		228,698		283,004
Deferred income taxes, net		53,738		50,778
Other noncurrent assets		67,171		62,478
TOTAL ASSETS	$	3,209,895	$	3,158,741
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	47,997	$	41,312
Settlement liabilities		539,087		451,575
Employee compensation		45,289		51,379
Current portion of long-term debt		65,521		45,870
Deferred revenue		58,303		84,425
Other current liabilities		102,645		79,594
Total current liabilities		858,842		754,155
Noncurrent liabilities
Deferred revenue		23,233		25,925
Long-term debt		1,024,351		1,019,872
Deferred income taxes, net		40,371		36,122
Operating lease liabilities		33,910		43,346
Other noncurrent liabilities		36,001		34,544
Total liabilities		2,016,708		1,913,964
Stockholders’ equity
Preferred stock		—		—
Common stock		702		702
Additional paid-in capital		702,458		688,313
Retained earnings		1,273,458		1,131,281
Treasury stock		(665,771)		(475,972)
Accumulated other comprehensive loss		(117,660)		(99,547)
Total stockholders’ equity		1,193,187		1,244,777
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,209,895	$	3,158,741

ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)

	Three Months Ended December 31,						Years Ended December 31,
		2022			2021			2022			2021
Revenues
Software as a service and platform as a service	$	205,800		$	190,812		$	802,880		$	774,342
License		179,874			209,484			348,134			319,867
Maintenance		48,902			51,462			200,045			210,499
Services		17,229			15,071			70,842			65,890
Total revenues		451,805			466,829			1,421,901			1,370,598
Operating expenses
Cost of revenue (1)		178,699			162,060			696,071			638,871
Research and development		31,963			39,519			146,311			144,310
Selling and marketing		32,019			36,328			134,812			126,539
General and administrative		29,441			34,372			114,194			123,801
Depreciation and amortization		31,460			31,746			126,678			127,180
Total operating expenses		303,582			304,025			1,218,066			1,160,701
Operating income		148,223			162,804			203,835			209,897
Other income (expense)
Interest expense		(16,179	)		(11,117	)		(53,193	)		(45,060	)
Interest income		3,342			2,969			12,547			11,522
Other, net		(2,355	)		(258	)		43,446			(1,294	)
Total other income (expense)		(15,192	)		(8,406	)		2,800			(34,832	)
Income before income taxes		133,031			154,398			206,635			175,065
Income tax expense		42,803			44,927			64,458			47,274
Net income	$	90,228		$	109,471		$	142,177		$	127,791
Income per common share
Basic	$	0.81		$	0.94		$	1.25		$	1.09
Diluted	$	0.81		$	0.93		$	1.24		$	1.08
Weighted average common shares outstanding
Basic		111,077			116,912			113,700			117,407
Diluted		111,354			118,141			114,238			118,647

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

ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

	Three Months Ended December 31,						Years Ended December 31,
		2022			2021			2022			2021
Cash flows from operating activities:
Net income	$	90,228		$	109,471		$	142,177		$	127,791
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		6,129			5,062			23,181			20,900
Amortization		25,330			27,965			104,147			112,493
Amortization of operating lease right-of-use assets		2,740			2,763			11,036			10,515
Amortization of deferred debt issuance costs		1,126			1,160			4,561			4,685
Deferred income taxes		10,662			15,475			1,603			3,733
Stock-based compensation expense		7,869			6,452			29,753			27,242
Gain on divestiture		—			—			(38,452	)		—
Other		545			882			3,028			855
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables		(137,961	)		(99,783	)		(132,194	)		(43,830	)
Accounts payable		10,777			6,488			7,730			1,408
Accrued employee compensation		711			4,814			(3,161	)		3,674
Deferred revenue		3,390			(27,671	)		(2,977	)		(17,332	)
Other current and noncurrent assets and liabilities		19,869			22,913			(7,051	)		(31,661	)
Net cash flows from operating activities		41,415			75,991			143,381			220,473
Cash flows from investing activities:
Purchases of property and equipment		(4,980	)		(7,614	)		(13,103	)		(20,582	)
Purchases of software and distribution rights		(8,396	)		(4,745	)		(26,790	)		(24,786	)
Proceeds from divestiture		—			—			100,139			—
Net cash flows from investing activities		(13,376	)		(12,359	)		60,246			(45,368	)
Cash flows from financing activities:
Proceeds from issuance of common stock		780			914			3,581			3,440
Proceeds from exercises of stock options		2,792			1,610			4,584			8,862
Repurchase of stock-based compensation awards for tax withholdings		(1,163	)		—			(6,983	)		(14,833	)
Repurchases of common stock		(115,603	)		(67,967	)		(206,537	)		(107,378	)
Proceeds from revolving credit facility		95,000			35,000			180,000			35,000
Repayment of revolving credit facility		—			(35,000	)		(75,000	)		(90,000	)
Repayment of term portion of credit agreement		(14,606	)		(9,738	)		(85,431	)		(38,950	)
Payments on or proceeds from other debt, net		(2,017	)		(4,998	)		(12,123	)		(15,185	)
Net increase (decrease) in settlement assets and liabilities		6,765			17,635			26,849			(37,834	)
Net cash flows from financing activities		(28,052	)		(62,544	)		(171,060	)		(256,878	)
Effect of exchange rate fluctuations on cash		(1,977	)		449			(2,037	)		533
Net increase (decrease) in cash and cash equivalents		(1,990	)		1,537			30,530			(81,240	)
Cash and cash equivalents, including settlement deposits, beginning of period		216,662			182,605			184,142			265,382
Cash and cash equivalents, including settlement deposits, end of period	$	214,672		$	184,142		$	214,672		$	184,142
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	124,981		$	122,059		$	124,981		$	122,059
Settlement deposits		89,691			62,083			89,691			62,083
Total cash and cash equivalents	$	214,672		$	184,142		$	214,672		$	184,142

Adjusted EBITDA (millions)	Three Months Ended December 31,						Years Ended December 31,
		2022			2021			2022			2021
Net income	$	90.2		$	109.5		$	142.2		$	127.8
Plus:
Income tax expense		42.8			44.9			64.5			47.3
Net interest expense		12.8			8.1			40.6			33.5
Net other (income) expense		2.4			0.3			(43.4	)		1.3
Depreciation expense		6.1			5.1			23.2			20.9
Amortization expense		25.3			28.0			104.1			112.5
Non-cash stock-based compensation expense		7.9			6.4			29.8			27.2
Adjusted EBITDA before significant transaction-related expenses	$	187.5		$	202.3		$	361.0		$	370.5
Significant transaction-related expenses:
CEO transition		3.6			—			3.6			—
Employee related actions		—			2.2			—			10.3
European datacenter migration		2.4			—			5.8			—
Divestiture transaction related		0.4			—			3.0			—
Other		—			0.6			—			3.1
Adjusted EBITDA	$	193.9		$	205.1		$	373.4		$	383.9
Revenue, net of interchange:
Revenue	$	451.8		$	466.8		$	1,421.9		$	1,370.6
Interchange		111.2			90.0			406.6			352.7
Revenue, net of interchange	$	340.6		$	376.8		$	1,015.3		$	1,017.9

Net adjusted EBITDA Margin		57	%		54	%		37	%		38	%

Segment Information (millions)	Three Months Ended December 31,				Years Ended December 31,
	2022		2021		2022		2021
Revenue
Banks	$	247.0	$	283.4	$	638.6	$	625.1
Merchants		40.8		37.9		153.9		153.0
Billers		164.0		145.5		629.4		592.5
Total	$	451.8	$	466.8	$	1,421.9	$	1,370.6
Recurring revenue
Banks	$	53.6	$	61.0	$	232.9	$	250.6
Merchants		37.1		35.8		140.6		141.8
Billers		164.0		145.5		629.4		592.4
Total	$	254.7	$	242.3	$	1,002.9	$	984.8
Segment adjusted EBITDA
Banks	$	186.3	$	213.6	$	371.0	$	372.9
Merchants		16.8		12.3		49.0		54.3
Billers		26.4		28.4		107.4		129.0

EPS Impact of Non-cash and Significant Transaction-related Items (millions)	Three Months Ended December 31,
	2022				2021
	EPS Impact		$ in Millions (Net of Tax)		EPS Impact		$ in Millions (Net of Tax)
GAAP net income	$	0.81	$	90.2	$	0.93	$	109.5
Adjusted for:
Significant transaction-related expenses		0.04		4.9		0.02		2.1
Amortization of acquisition-related intangibles		0.06		6.4		0.06		7.0
Amortization of acquisition-related software		0.04		4.5		0.05		5.5
Non-cash stock-based compensation		0.05		6.0		0.04		4.9
Total adjustments	$	0.19	$	21.8	$	0.17	$	19.5
Diluted EPS adjusted for non-cash and significant transaction-related items	$	1.00	$	112.0	$	1.10	$	129.0

EPS Impact of Non-cash and Significant Transaction-related Items (millions)	Years Ended December 31,
	2022						2021
	EPS Impact			$ in Millions (Net of Tax)			EPS Impact		$ in Millions (Net of Tax)
GAAP net income	$	1.24		$	142.2		$	1.08	$	127.8
Adjusted for:
Gain on divestiture		(0.26	)		(29.2	)		—		—
Significant transaction-related expenses		0.08			9.6			0.09		10.2
Amortization of acquisition-related intangibles		0.24			27.0			0.24		28.1
Amortization of acquisition-related software		0.16			18.6			0.21		24.6
Non-cash stock-based compensation		0.20			22.6			0.17		20.7
Total adjustments	$	0.42		$	48.6		$	0.71	$	83.6
Diluted EPS adjusted for non-cash and significant transaction-related items	$	1.66		$	190.8		$	1.79	$	211.4

Recurring Revenue (millions)	Three Months Ended December 31,				Years Ended December 31,
	2022		2021		2022		2021
SaaS and PaaS fees	$	205.8	$	190.8	$	802.9	$	774.3
Maintenance fees		48.9		51.5		200.0		210.5
Recurring revenue	$	254.7	$	242.3	$	1,002.9	$	984.8

Annual Recurring Revenue (ARR) Bookings (millions)	Three Months Ended December 31,				Years Ended December 31,
	2022		2021		2022		2021
ARR bookings	$	40.2	$	31.8	$	109.7	$	81.5

View source version on businesswire.com: https://www.businesswire.com/news/home/20230301005168/en/

For more information:

Investor Relations:
John Kraft
SVP, Head of Strategy and Finance
239-403-4627 / john.kraft@aciworldwide.com

Source: ACI Worldwide