ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended September 30, 2023

Rhea-AI Summary

ACI Worldwide reports strong financial results for Q3 2023, with total revenue growing by 21% and net income increasing by 64%. Total EBITDA also experienced significant growth, rising by 147% to $103 million. The company reiterates its guidance for full-year 2023.

Positive

• Total revenue grew by 21% in Q3 2023.
• Net income increased by 64% to $38 million.
• Total EBITDA grew by 147% to $103 million.

Negative

• None.

Q3 2023 HIGHLIGHTS

• Total revenue grew 21%¹
• Total recurring revenue grew 10%¹
• Net income of $38 million grew 64%
• Total EBITDA grew 147% to $103 million¹
• Reiterating guidance for full-year 2023

MIAMI--(BUSINESS WIRE)-- ACI Worldwide (NASDAQ: ACIW), a global leader in mission-critical, real-time payments software, announced financial results today for the quarter ended September 30, 2023.

“We are pleased to report solid third quarter results,” said Thomas Warsop, President and CEO of ACI Worldwide. “Operational focus helped us exceed our overall financial targets. Our Bank segment continues to show encouraging trends, including 13% adjusted recurring revenue growth, and our Biller segment has materially accelerated as a result of new customer onboarding and our interchange improvement program. Further, we were able to sign some new contracts in our pipeline earlier than planned, which reduces risk in achieving our full-year expectations. Given our predictable renewal calendar, as well as newly signed customers scheduled for implementation, we are confident in reiterating guidance for this year, as well as for our revenue growth target of 7-9% in 2024.”

FINANCIAL SUMMARY

In Q3 2023, total revenue was $363 million, up 21% compared to the same period in 2022. Recurring revenue in Q3 grew 10% versus last year. Net income in the quarter was $38 million, up from $23 million last year. Total adjusted EBITDA in the quarter was $103 million, up 147% from Q3 2022. Percentage change comparisons are adjusted for FX and the Corporate Online Banking divestiture¹.

• Bank segment total revenue increased 42%, while Bank segment recurring revenue, consisting of maintenance and SaaS revenue, grew 13% and Bank segment adjusted EBITDA doubled to $91 million versus Q3 2022, after adjusting for FX and the divestiture¹. As previously discussed, the timing of larger license renewal events is heavily weighted to the back half of 2023.
• Merchant segment revenue and Merchant segment adjusted EBITDA were flat versus Q3 2022, adjusted for FX.
• Biller segment revenue increased 11% and Biller segment adjusted EBITDA increased 48% versus Q3 2022, driven by new customer onboarding and progress with our interchange improvement program.

ACI ended the quarter with $140 million in cash on hand and a debt balance of $1 billion, which represents a net debt leverage ratio of 2.4x, down from 2.9x last quarter. The company did not repurchase any shares in the quarter and has $200 million available on the share repurchase authorization.

REITERATING 2023 GUIDANCE

For the full year of 2023, the company expects 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. The company expects adjusted EBITDA to be in the range of $380 million to $395 million with net adjusted EBITDA margin expansion. This excludes one-time charges related to the move of the company’s European data centers to the public cloud and one-time costs to implement certain efficiency strategies.

1 Adjusted for foreign currency fluctuations and the divestiture of Corporate Online Banking in September 2022

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.

© Copyright ACI Worldwide, Inc. 2023.

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: New annual recurring revenue expected to be generated from new accounts, new applications, and add-on sales bookings contracts signed in the period.

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) our signing of some new contracts in our pipeline earlier than planned, which reduces risk in achieving our full year expectations, (ii) given our predictable renewal calendar, as well as newly signed customers scheduled for implementation, we are confident in reiterating guidance for this year, as well as for our revenue growth target of 7-9% in 2024, and (iii) our expectations for 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, consent orders and other compliance agreements, 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 CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands)
	September 30, 2023				December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	139,520			$	124,981
Receivables, net of allowances		370,766				403,781
Settlement assets		649,494				540,667
Prepaid expenses		32,176				28,010
Other current assets		34,754				17,366
Total current assets		1,226,710				1,114,805
Noncurrent assets
Accrued receivables, net		279,303				297,818
Property and equipment, net		41,098				52,499
Operating lease right-of-use assets		33,609				40,031
Software, net		105,324				129,109
Goodwill		1,226,026				1,226,026
Intangible assets, net		203,137				228,698
Deferred income taxes, net		75,448				53,738
Other noncurrent assets		64,173				67,171
TOTAL ASSETS	$	3,254,828			$	3,209,895
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	40,951			$	47,997
Settlement liabilities		648,956				539,087
Employee compensation		42,025				45,289
Current portion of long-term debt		74,350				65,521
Deferred revenue		61,438				58,303
Other current liabilities		77,910				102,645
Total current liabilities		945,630				858,842
Noncurrent liabilities
Deferred revenue		23,107				23,233
Long-term debt		987,221				1,024,351
Deferred income taxes, net		33,687				40,371
Operating lease liabilities		28,657				33,910
Other noncurrent liabilities		25,491				36,001
Total liabilities		2,043,793				2,016,708
Commitments and contingencies
Stockholders’ equity
Preferred stock		—				—
Common stock		702				702
Additional paid-in capital		708,506				702,458
Retained earnings		1,272,351				1,273,458
Treasury stock		(653,162	)			(665,771	)
Accumulated other comprehensive loss		(117,362	)			(117,660	)
Total stockholders’ equity		1,211,035				1,193,187
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,254,828			$	3,209,895

ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share amounts)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues
Software as a service and platform as a service	$	211,369			$	195,540			$	625,975			$	597,080
License		79,679				43,661				142,681				168,260
Maintenance		51,942				49,163				153,436				151,143
Services		20,025				18,227				53,924				53,613
Total revenues		363,015				306,591				976,016				970,096
Operating expenses
Cost of revenue (1)		177,625				171,753				537,522				517,372
Research and development		33,739				35,899				106,122				114,348
Selling and marketing		29,442				32,794				98,166				102,793
General and administrative		29,821				30,516				92,675				84,753
Depreciation and amortization		30,464				32,140				93,439				95,218
Total operating expenses		301,091				303,102				927,924				914,484
Operating income		61,924				3,489				48,092				55,612
Other income (expense)
Interest expense		(19,840	)			(14,336	)			(58,641	)			(37,014	)
Interest income		3,495				2,995				10,458				9,205
Other, net		1,084				41,545				(6,403	)			45,801
Total other income (expense)		(15,261	)			30,204				(54,586	)			17,992
Income (loss) before income taxes		46,663				33,693				(6,494	)			73,604
Income tax expense (benefit)		8,752				10,576				(5,387	)			21,655
Net income (loss)	$	37,911			$	23,117			$	(1,107	)		$	51,949
Income (loss) per common share
Basic	$	0.35			$	0.20			$	(0.01	)		$	0.45
Diluted	$	0.35			$	0.20			$	(0.01	)		$	0.45
Weighted average common shares outstanding
Basic		108,667				113,812				108,428				114,584
Diluted		108,933				114,348				108,428				115,211
(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)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Cash flows from operating activities:
Net income (loss)	$	37,911			$	23,117			$	(1,107	)		$	51,949
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation		5,631				6,044				18,722				17,052
Amortization		24,832				26,096				74,716				78,817
Amortization of operating lease right-of-use assets		2,699				2,807				9,190				8,296
Amortization of deferred debt issuance costs		923				1,136				3,415				3,435
Deferred income taxes		(2,566	)			(2,674	)			(25,207	)			(9,059	)
Stock-based compensation expense		6,822				7,126				17,537				21,884
Gain on divestiture		—				(38,452	)			—				(38,452	)
Other		1,857				1,359				2,168				2,483
Changes in operating assets and liabilities:
Receivables		(39,844	)			19,807				42,012				5,767
Accounts payable		(5,244	)			(1,728	)			(7,198	)			(3,047	)
Accrued employee compensation		1,749				6,329				(2,879	)			(3,872	)
Deferred revenue		(8,296	)			(11,899	)			4,404				(6,367	)
Other current and noncurrent assets and liabilities		(1,208	)			(4,865	)			(52,999	)			(26,920	)
Net cash flows from operating activities		25,266				34,203				82,774				101,966
Cash flows from investing activities:
Purchases of property and equipment		(3,380	)			(4,466	)			(7,956	)			(8,123	)
Purchases of software and distribution rights		(7,550	)			(7,656	)			(22,571	)			(18,394	)
Proceeds from divestiture		—				100,139				—				100,139
Net cash flows from investing activities		(10,930	)			88,017				(30,527	)			73,622
Cash flows from financing activities:
Proceeds from issuance of common stock		696				839				2,122				2,801
Proceeds from exercises of stock options		263				395				3,132				1,792
Repurchase of stock-based compensation awards for tax withholdings		(883	)			(18	)			(4,203	)			(5,820	)
Repurchases of common stock		—				(28,227	)			—				(90,934	)
Proceeds from revolving credit facility		20,000				25,000				75,000				85,000
Repayment of revolving credit facility		(6,000	)			(55,000	)			(51,000	)			(75,000	)
Repayment of term portion of credit agreement		(19,475	)			(49,606	)			(53,556	)			(70,825	)
Payments on or proceeds from other debt, net		(643	)			(737	)			(12,473	)			(10,106	)
Payments for debt issuance costs		—				—				(2,160	)			—
Net increase (decrease) in settlement assets and liabilities		19,452				24,659				(4,635	)			20,084
Net cash flows from financing activities		13,410				(82,695	)			(47,773	)			(143,008	)
Effect of exchange rate fluctuations on cash		(1,039	)			1,002				4,388				(60	)
Net increase in cash and cash equivalents		26,707				40,527				8,862				32,520
Cash and cash equivalents, including settlement deposits, beginning of period		196,827				176,135				214,672				184,142
Cash and cash equivalents, including settlement deposits, end of period	$	223,534			$	216,662			$	223,534			$	216,662
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	139,520			$	134,799			$	139,520			$	134,799
Settlement deposits		84,014				81,863				84,014				81,863
Total cash and cash equivalents	$	223,534			$	216,662			$	223,534			$	216,662

	Three Months Ended September 30,								Nine Months Ended September 30,
Adjusted EBITDA (millions)		2023				2022				2023				2022
Net income (loss)	$	37.9			$	23.1			$	(1.1	)		$	51.9
Plus:
Income tax expense (benefit)		8.7				10.6				(5.4	)			21.7
Net interest expense		16.4				11.3				48.2				27.8
Net other income (expense)		(1.1	)			(41.4	)			6.4				(45.8	)
Depreciation expense		5.6				6.0				18.7				17.1
Amortization expense		24.8				26.1				74.7				78.8
Non-cash stock-based compensation expense		6.8				7.1				17.5				21.9
Adjusted EBITDA before significant transaction-related expenses	$	99.1			$	42.8			$	159.0			$	173.4
Significant transaction-related expenses:
Cost reduction strategies		3.8				—				19.7				—
European datacenter migration		0.4				1.7				2.6				3.4
Other		0.1				1.2				4.4				2.6
Adjusted EBITDA	$	103.4			$	45.7			$	185.7			$	179.4
Revenue, net of interchange:
Revenue	$	363.0			$	306.6			$	976.0			$	970.1
Interchange		102.7				98.4				315.0				295.4
Revenue, net of interchange	$	260.3			$	208.2			$	661.0			$	674.7
Net Adjusted EBITDA Margin		40	%			22	%			28	%			27	%

	Three Months Ended September 30,						Nine Months Ended September 30,
Segment Information (millions)	2023			2022			2023			2022
Revenue
Banks	$	155.7		$	117.5		$	361.2		$	391.6
Merchants		36.3			35.6			107.6			113.1
Billers		171.0			153.5			507.2			465.4
Total	$	363.0		$	306.6		$	976.0		$	970.1
Recurring Revenue
Banks	$	58.2		$	57.3		$	171.2		$	179.3
Merchants		34.1			33.8			101.0			103.5
Billers		171.0			153.6			507.2			465.4
Total	$	263.3		$	244.7		$	779.4		$	748.2
Segment Adjusted EBITDA
Banks	$	91.0		$	49.8		$	167.3		$	184.7
Merchants		10.3			9.8			26.8			32.2
Billers		39.2			26.3			100.1			81.0

	Three Months Ended September 30,
	2023						2022
EPS Impact of Non-cash and Significant Transaction-related Items (millions)	EPS Impact			$ in Millions (Net of Tax)			EPS Impact				$ in Millions (Net of Tax)
GAAP net income (loss)	$	0.35		$	37.9		$	0.20			$	23.1
Adjusted for:
Gain on divestiture		—			—			(0.26	)			(29.2	)
Significant transaction-related expenses		0.03			3.3			0.02				2.2
Amortization of acquisition-related intangibles		0.06			6.4			0.06				6.7
Amortization of acquisition-related software		0.03			3.8			0.04				4.5
Non-cash stock-based compensation		0.05			5.2			0.05				5.4
Total adjustments	$	0.17		$	18.7		$	(0.09	)		$	(10.4	)
Diluted EPS adjusted for non-cash and significant transaction-related items	$	0.52		$	56.6		$	0.11			$	12.7

	Nine Months Ended September 30,
	2023								2022
EPS Impact of Non-cash and Significant Transaction-related Items (millions)	EPS Impact				$ in Millions (Net of Tax)				EPS Impact				$ in Millions (Net of Tax)
GAAP net income (loss)	$	(0.01	)		$	(1.1	)		$	0.45			$	51.9
Adjusted for:
Gain on divestiture		—				—				(0.25	)			(29.2	)
Significant transaction-related expenses		0.19				20.4				0.04				4.7
Amortization of acquisition-related intangibles		0.18				19.3				0.18				20.6
Amortization of acquisition-related software		0.11				12.0				0.12				14.1
Non-cash stock-based compensation		0.12				13.3				0.14				16.6
Total adjustments	$	0.60			$	65.0			$	0.23			$	26.8
Diluted EPS adjusted for non-cash and significant transaction-related items	$	0.59			$	63.9			$	0.68			$	78.7

	Three Months Ended September 30,						Nine Months Ended September 30,
Recurring Revenue (millions)	2023			2022			2023			2022
SaaS and PaaS fees	$	211.4		$	195.5		$	626.0		$	597.1
Maintenance fees		51.9			49.2			153.4			151.1
Recurring Revenue	$	263.3		$	244.7		$	779.4		$	748.2

Annual Recurring Revenue (ARR) Bookings (millions)	Three Months Ended September 30,						TTM Ended September 30,
	2023			2022			2023			2022
ARR bookings	$	20.5		$	30.3		$	84.9		$	93.0

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231102363165/en/

Investor Relations:

John Kraft

SVP, Head of Strategy and Finance

239-403-4627 / john.kraft@aciworldwide.com

Source: ACI Worldwide

FAQ

What are the financial highlights of ACI Worldwide in Q3 2023?

ACI Worldwide experienced a 21% growth in total revenue, with net income increasing by 64% to $38 million. Total EBITDA also grew significantly, rising by 147% to $103 million.

What is the stock ticker symbol for ACI Worldwide?

The stock ticker symbol for ACI Worldwide is NASDAQ: ACIW.

Does ACI Worldwide provide guidance for full-year 2023?

Yes, ACI Worldwide reiterates its guidance for full-year 2023.