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ACI Worldwide Inc Reports Financial Results for the Quarter and Year Ended December 31 2012

Thursday, February 28, 2013

Interested persons may access a real-time audio broadcast of the teleconference at www.aciworldwide.com/investors or use the following numbers for dial in participation:  US/Canada: (866) 914-7436, International/Local:  +1 (817) 385-9117.   Please provide your name, the conference name ACI Worldwide, Inc. and conference code 98146721. There will be a replay available for two weeks on (855) 859-2056 for US/Canada Dial-In and +1 (404) 537- 3406 for International/Local Dial-In participants.

“We closed out a transitional 2012 with record revenues, sales bookings and earnings,” said Chief Executive Officer Philip Heasley. “With the S1 integration substantially complete, we are excited to enter 2013 well positioned to accelerate our growth objectives. Further, the proposed acquisition of Online Resources will add a highly strategic electronic bill payment platform to the ACI suite of products, enabling us to be the Universal Payments Platform company”, continued Mr. Heasley.

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FINANCIAL SUMMARY

Sales 

Sales bookings in the quarter totaled $309 million, an increase of $138 million, or 81%, over prior year quarter. Sales net of term extensions in the quarter totaled $198 million, an increase of $81 million, or 69%, over the prior-year quarter. S1 contributed $81 million to sales in the quarter. Historical ACI sales increased $57 million, or 33%, over prior year quarter sales bookings of $171 million.

For the year 2012, sales totaled $766 million, an increase of $210 million, or 38%, as compared with $556 million last year. S1 contributed $189 million to sales for the year.

Backlog

60-month backlog increased $49 million in the quarter to $2.416 billion as compared to $2.367 billion as of September 30, 2012.  12-month backlog increased $12 million to $596 million as compared to $584 million at September 30, 2012.

Revenue

GAAP revenue increased to $224.1 million, an increase of $89.1 million, or 66%, over prior-year quarter.  Historical ACI revenue increased $40.7 million, or 30%, and S1 contributed $48.4 million of revenue in the fourth quarter. Non-GAAP revenue was $227.7 million, an increase of $92.7 million, or 69%, over prior year quarter. Non-GAAP revenue excludes the impact of $3.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements.

Revenue for the full year 2012 was $666.6 million, an increase of $201.5 million, or 43%. Historical ACI revenue increased $39.6 million, or 8.5%, and S1 contributed $161.9 million of revenue to the full year. Non-GAAP revenue was $689.0 million, an increase of $223.9 million, or 48%, over prior year.

Operating Expenses

Excluding $4.4 million and $3.2 million of S1 acquisition related one-time expenses incurred in the quarters ended December 31, 2012 and 2011, respectively, operating expenses increased $49.3 million compared to the prior year quarter primarily due to the addition of $42.7 million of S1 operating expenses, inclusive of $4.0 million of intangibles amortization.  Total GAAP operating expenses for the quarter were $148.6 million.

Excluding $31.5 million and $6.7 million of S1 acquisition related one-time expenses incurred in the years ended December 31, 2012 and 2011, respectively, operating expenses increased of $168.6 million, or 43%, primarily from the addition of $159 million of S1 operating expenses, inclusive of $13.9 million of intangible amortization.  Total GAAP operating expenses were $592.2 for the full year 2012.  Historical ACI operating expense growth was led primarily by higher deferred cost recognition upon project go-lives.

Operating Income

Consolidated GAAP operating income was $75.5 million for the quarter.  Non-GAAP operating income totaled $83.6 million, an increase of $43.4 million, or 108%, above the prior-year quarter. Non-GAAP operating income excludes the $3.6 million deferred revenue adjustment due to purchase accounting as well as the impact of $4.4 million of acquisition-related one-time expenses.

Operating income for the full year 2012 was $74.4 million, versus $66.2 million for the full year 2011.   Excluding the $22.5 million deferred revenue adjustment due to purchase accounting as well as the impact of $31.5 million of acquisition-related one-time expenses, operating income increased $55.4 million, or 76%, to $128.3 million.

Adjusted EBITDA

Adjusted EBITDA increased to $101.1 million, an improvement of $49.2 million, or 95%, compared to the prior year quarter. Adjusted EBITDA excludes the impact of $3.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements and $4.4 million of acquisition related one-time expenses.

Full year 2012 Adjusted EBITDA was $191.4 million, an increase of $78.9 million, or 70%, as compared to $112.6 million for full year 2011.

Liquidity

We ended the year with $76.3 million in cash on hand as of December 31, 2012.  During the quarter, we repaid $20.7 million in refundable liability to IBM upon termination of our Alliance and $10.4 million in debt. We ended the quarter with a debt balance of $374.3 million. As of December 31, 2012, we had up to $62 million of unused borrowings under our Revolving Credit Facility.

Operating Free Cash Flow

Operating free cash flow (“OFCF”) for the quarter and full year 2012 was $23.6 million, and $23.5 million, respectively, both impacted by back-end timing of sales bookings and revenue during the year. OFCF for the quarter and full year 2011 was $30.0 million, and $67.2 million, respectively

Other Expense

Other expense for the quarter was $1.5 million, an increase of $0.5 million as compared to other expense of $1.0 million in the prior-year quarter.
 
Other expense for the full year 2012 was $9.1 million as compared to other expense of $1.9 million for the full year 2011. The increase was primarily the result of $8.0 million of increased interest expense due to increased borrowings partially offset by a gain of $1.6 million on the shares of S1 stock previously held as available-for-sale.

Taxes

Income tax expense in the quarter was $24.3 million, or a 33% effective tax rate, compared to income tax expense of $12.1 million, or a 34% effective tax rate in the prior year quarter. Income tax expense for the year ended December 2012 was $16.4 million, or a 25% effective tax rate, as compared to $18.5 million, or a 29% effective tax rate, for the prior year ended December 2011. The year-over-year decrease in the effective tax rate was largely due to the mix of lower domestic earnings at the U.S. tax rate offset by higher foreign income at lower tax rates.

Net Income and Diluted Earnings Per Share

Net income for the quarter ended December 31, 2012 was $49.7 million, compared to net income of $23.9 million during the same period last year.

GAAP earnings per share for the quarter was $1.24 per diluted share compared to $0.70 per diluted share during the same period last year.  Excluding the tax-adjusted impact of $4.4 million of S1 acquisition related one-time expenses and the impact of $3.6 of million deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements, earnings per share was $1.37 per diluted share, versus $0.76 per share last year, up 81%.

GAAP earnings per share for the year ended December 2012 was $1.22 compared to $1.34 per diluted share for the year ended December 2011.  Excluding the tax-adjusted impact of $31.5 million of S1 acquisition related one-time expenses and the impact of $22.5 of million deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements, earnings per share was $2.10 per diluted share, versus $1.47 per share last year, up 43%. 

Weighted Average Shares Outstanding

Total diluted weighted average shares outstanding were 39.9 million for the year ended December 31, 2012 as compared to 34.2 million shares outstanding for the year ended December 31, 2011. The number of weighted average shares outstanding was increased by 5.9 million due to the issuance of shares related to the acquisition of S1 Corporation.

2013 Guidance

ACI is guiding on three metrics for calendar year 2013. On an organic basis, we currently expect to achieve revenue in a range of $765-$785 million, operating income of $150-$160 million and Adjusted EBITDA of $230-$240 million.

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Contact details

John Kraft
Vice President, Investor Relations & Strategic Analysis
ACI Worldwide
239-403-4627
john.kraft@aciworldwide.com

Notes to editors

About ACI Worldwide

ACI Worldwide powers electronic payments and banking for more than 1,750 financial institutions, retailers and processors around the world. ACI software enables $13 trillion in payments each day, processing transactions for more than 250 of the leading global retailers, and 18 of the world’s 20 largest banks. Through our integrated suite of software products and hosted services, we deliver a broad range of solutions for payments processing, card and merchant management, online banking, mobile, branch and voice banking, fraud detection, and trade finance. To learn more about ACI and the reasons why our solutions are trusted globally, please visit www.aciworldwide.com. You can also find us on www.paymentsinsights.com or on Twitter @ACI_Worldwide.

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 our growth objectives will accelerate in 2013 partly as a result of the substantial completion of the S1 integration; (ii) expectations that the addition of Online Resources’ electronic bill payment platform (through our pending acquisition of Online Resources Corporation) will enable us to be recognized as the “universal payments platform company”; and (iii) expectations regarding 2013 financial guidance related to revenue, operating income and adjusted EBITDA.

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 performance of our strategic product, BASE24-eps, demand for our products, restrictions and other financial covenants in our credit facility, consolidations and failures in the financial services industry, customer reluctance to switch to a new vendor, the accuracy of management’s backlog estimates, the maturity of certain products, our strategy to migrate customers to our next generation products, ratable or deferred recognition of certain revenue associated with customer migrations and the maturity of certain of our products, failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate project completion estimates, volatility and disruption of the capital and credit markets and adverse changes in the global economy, our existing levels of debt, impairment of our goodwill or intangible assets, litigation, future acquisitions, strategic partnerships and investments, risks related to the expected benefits to be achieved in the proposed transaction with Online Resources, 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 compliance with privacy regulations, the protection of our intellectual property in intellectual property litigation, 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, and volatility in our stock price.  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, Registration Statement on Form S-4, and subsequent reports on Forms 10-Q and 8-K.