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ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended September 30, 2011

Thursday, October 27, 2011

“This quarter we released more projects from our backlog into current period revenue which demonstrates our continued success in project completions. The strong implementation rate in services projects results in higher future recurring revenue for our business,” said Chief Executive Officer Philip Heasley. “Additionally, we have reached an agreement to acquire S1 Corporation and believe that together we will create a leader in the global enterprise payments industry. The combined company’s enhanced scale, breadth and additional capabilities will better serve the entire spectrum of global financial institutions, processors and retailers.”

Financial Summary

Sales

Sales bookings in the quarter totaled $115.1 million, which is relatively flat as compared to $116.7 million in the September 2010 quarter, excluding the impact of a global account signing in prior-year quarter.          

Backlog

As of September 30, 2011, our estimated 60-month backlog was $1.612 billion, an increase of $46 million as compared to $1.566 billion at December 31, 2010. Foreign exchange translation accounted for the reduction in backlog from the second to the third quarter of 2011. As of September 30, 2011, our 12-month backlog was $398 million, an increase of $17 million as compared to $381 million for the quarter ended December 31, 2010.

Revenue

Revenue was $112.1 million in the quarter ended September 30, 2011, an increase of $15.1 million, or 16%, over the prior-year quarter revenue. The growth in 2011 revenue over the prior-year quarter was driven by project completions; specifically, higher initial license fees of $6.4 million, or 74%, and higher services revenue of $8.3 million, or 54%. 

Operating Expenses

Operating expenses were $100.9 million in the September 2011 quarter compared to $89.6 million in the September 2010 quarter, an increase of $11.3 million, or 13%. Operating expense growth was led primarily by increased sales & marketing and research & development expenses as well as by $3.4 million of professional fees related to the S1 acquisition.

Operating Income

Operating income was $11.3 million in the September 2011 quarter, an increase of approximately $3.9 million, or 53%, as compared to operating income of $7.4 million in the September 2010 quarter.

Adjusted EBITDA

Adjusted EBITDA rose to $20.7 million in the September 2011 quarter, an increase of $4.7 million, or 29%, as compared to Adjusted EBITDA of $16.0 million in the September 2010 quarter.

Liquidity

We had $179.7 million in cash on hand as of September 30, 2011.  On September 29, 2011, we entered into a five year senior secured revolving credit facility with Wells Fargo Bank, National Association providing for an aggregate principal amount not to exceed $100 million.  The interest rate in effect at September 30, 2011 was 1.74%.

Operating Free Cash Flow

Operating free cash flow (“OFCF”) for the quarter was $24.5 million, a decrease of $2.1 million over the September 2010 quarter.  Operating free cash flow year to date 2011 is $38.4 million as compared to Operating free cash flow of $34.6 million at this time in prior-year.

Other Expense

Other expense for the quarter was $0.3 million, an improvement of $1.5 million compared to other expense of $1.8 million in the September 2010 quarter.  The variance was led by a positive $1.4 million change in foreign exchange translation.  

Taxes

Income tax expense in the quarter was $0.5 million, or a 4.4% effective tax rate, compared to $3.3 million in the prior-year quarter.  The income tax expense for the quarter ended September 30, 2011 was favorably impacted by the release of a $3.1 million liability related to the transfer of certain intellectual property rights from US to non-US entities. 

Net Income and Diluted Earnings Per Share

Net income for the quarter ended September 30, 2011 was $10.5 million, compared to net income of $2.3 million during the same period last year, an improvement of $8.2 million.

Earnings per share for the quarter ended September 30, 2011 was $0.31 per diluted share compared to $0.07 per diluted share during the same period last year.  The improvement was largely due to stronger operating income and a lower effective tax rate.

Weighted Average Shares Outstanding

Total diluted weighted average shares outstanding were 34.3 million for the quarter ended September 30, 2011 as compared to 33.5 million shares outstanding for the quarter ended September 30, 2010.

2011 Guidance  

We are reiterating our annual guidance based upon what we are seeing in our business markets to date. Hence, guidance for calendar year is as follows: Revenue to achieve a range of $450-460 million, Operating Income of $65-69 million and Adjusted EBITDA of $101-104 million. Guidance for the year excludes the impact of professional fees and transaction-related expenses associated with the acquisition of S1 Corporation.

S1 Transaction 

On October 3, 2011 ACI announced the execution of a definitive agreement to acquire S1 Corporation. Under the agreement, ACI will acquire S1 for a blended value of $9.55 per share as of September 30, 2011, consisting of $6.62 per share in cash and 0.1064 shares of ACI common stock per S1 share, assuming full proration. The transaction is subject to satisfaction of customary closing conditions.

ACI has obtained commitments from Wells Fargo Securities, LLC to arrange, and Wells Fargo Bank, National Association to provide, subject to certain conditions, senior bank financing consisting of up to $450 million under a proposed new secured credit facility, comprising of a $200 million senior secured term loan and a $250 million senior secured revolving credit facility for financing the cash component of the consideration to be paid to S1’s stockholders in connection with the transaction agreement.

Contact details

Tamar Gerber, Vice President, Investor Relations & Financial Communications
ACI Worldwide
+1 646 348 6706
invrel@aciworldwide.com

Notes to editors

About ACI Worldwide

ACI Worldwide powers electronic payments for more than 800 financial institutions, retailers and processors around the world, with its broad and integrated suite of electronic payment software. More than 90 billion times each year, ACI’s solutions process consumer payments. On an average day, ACI software manages more than US$12 trillion in wholesale payments. And for more than 160 organizations worldwide, ACI software helps to protect their customers from financial crime. To learn more about ACI and understand why we are trusted globally, please visit www.aciworldwide.com. You can also find us on www.paymentsinsights.com or on Twitter @ACI_Worldwide.