ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended September 30, 2022

Q3 Highlights

Revenue of $307 million, up 1% adjusted for FX and Corporate Online Banking divestiture, versus Q3 2021

Net income of $23 million

Repurchased 1.2 million shares

Reaffirming full-year 2022 revenue guidance on a constant currency basis

MIAMI--(BUSINESS WIRE)--ACI Worldwide (NASDAQ: ACIW), a global leader in mission-critical, real-time payments software, announced financial results today for the quarter ending September 30, 2022. ACI delivered revenue of $307 million and adjusted EBITDA of $46 million. New ARR¹ bookings were up 35% versus Q3 2021 and up 40% on a year-to-date basis.

“In the third quarter, we again delivered revenue in line with guidance and saw notable bookings success across all segments, providing visibility into future revenue growth,” said Odilon Almeida, president and CEO of ACI Worldwide. “However, inflationary pressures on the interchange component of our Biller segment and foreign exchange rates are impacting our EBITDA in the near term. Our actions to mitigate the impact of these pressures, especially the Biller interchange component, are beginning to pay off. Despite these challenging market conditions, we are pleased to maintain our full-year revenue guidance on a constant currency basis.”

Almeida continued, “The disciplined execution of ACI’s three-pillar strategy remains intrinsic to our performance and provides the flexibility to invest in growth and return capital to shareholders through share repurchases. Our continued strong new ARR bookings and new business momentum across our segments enhance our confidence in our accelerating growth trajectory. We are also on track to launch our next-generation, real-time payments cloud platform in 2023, driving new growth across our business segments.”

FINANCIAL SUMMARY

In Q3 2022, revenue was $307 million, down 3%, or up 1% compared to Q3 2021 adjusted for FX and the divestiture of ACI’s Corporate Online Banking division, which was completed in September. Adjusted EBITDA in Q3 was $46 million, down 38%, compared to Q3 2021, or 36% adjusted for FX and the divestiture². Net adjusted EBITDA margin in Q3 2022 was 22%, or 21% adjusted for FX and the divestiture². Q3 new ARR bookings of $30 million were up 35% compared to Q3 2021 and up 40% year to date.

• Bank segment revenue declined 11%, or 4% adjusted for FX and the divestiture²; segment adjusted EBITDA decreased 26%, or 23% adjusted for FX and the divestiture², versus Q3 2021.
• Merchant segment revenue decreased 9%, or 3% adjusted for FX; segment adjusted EBITDA was down 31%, or 26% adjusted for FX, versus Q3 2021.
• Biller segment revenue grew 5% and segment adjusted EBITDA was down 18%, versus Q3 2021.

ACI ended the quarter with $135 million cash on hand and a debt balance of $1 billion, representing a net debt leverage ratio of 2.3x. The company has repurchased 3.2 million shares for $91 million year-to-date. As of September 30, 2022, ACI has $125 million remaining on its share repurchase authorization and expects to use approximately 50% of its cash flow to complete additional share repurchases over the remainder of the year.

REITERATING REVENUE GUIDANCE FOR 2022 ON A CONSTANT CURRENCY BASIS

On a constant currency basis, ACI is reiterating its full-year 2022 guidance provided on September 1, 2022. The company is adjusting its revenue guidance only to account for FX fluctuations. ACI expects 2022 revenue to be in a range of $1.39 billion to $1.405 billion.

Despite the solid revenue performance, FX and inflation are pressuring EBITDA in the near term. The impact of inflation is limited to the interchange component of the company’s Biller segment. As a result, ACI expects full-year 2022 adjusted EBITDA to be in the range of $365 million to $380 million.

CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS

Today, management will host a conference call at 8:00 AM ET to discuss these results. Interested persons may access a real-time teleconference webcast at http://investor.aciworldwide.com/ or use the following number for dial-in participation: toll-free 1 [phone]; Conference ID: 3153574. Please provide your name and the conference name of ACI Worldwide, Inc.

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, financial disruptors and merchants to process and manage digital payments, power omni-commerce payments, present and process bill payments, and address 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. 2022.

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) expectations regarding notable bookings success across all segments, providing visibility into future revenue growth, (ii) expectations regarding inflationary pressures on the interchange component of our Biller segment and foreign exchange rates impacting our EBITDA in the near term, (iii) expectations that our actions to mitigate the impact of these pressures, especially the biller interchange component, are beginning to pay off, (iv) expectations that our continued strong new ARR bookings and new business momentum across our segments enhance our confidence in our accelerating growth trajectory, (v) expectations that the launch of our next generation real-time payments cloud platform will drive new growth across our business segments and (vi) expectations regarding 2022 revenue 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, 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, implementation and success of our three-pillar 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, 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 regulations, our involvement in investigations, lawsuits and other expense and time-consuming legal proceedings, exposure to unknown tax liabilities, 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, the COVID-19 pandemic, and events outside of our control including natural disasters, wars, and outbreaks of disease. 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, 2022			December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	134,799		$	122,059
Receivables, net of allowances		302,301			320,405
Settlement assets		727,754			452,396
Prepaid expenses		29,766			24,698
Other current assets		16,342			17,876
Total current assets		1,210,962			937,434
Noncurrent assets
Accrued receivables, net		248,285			276,164
Property and equipment, net		54,328			63,050
Operating lease right-of-use assets		37,916			47,825
Software, net		134,942			157,782
Goodwill		1,226,026			1,280,226
Intangible assets, net		235,053			283,004
Deferred income taxes, net		55,454			50,778
Other noncurrent assets		60,174			62,478
TOTAL ASSETS	$	3,263,140		$	3,158,741
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	38,227		$	41,312
Settlement liabilities		727,237			451,575
Employee compensation		43,637			51,379
Current portion of long-term debt		60,603			45,870
Deferred revenue		53,163			84,425
Other current liabilities		75,107			79,594
Total current liabilities		997,974			754,155
Noncurrent liabilities
Deferred revenue		22,440			25,925
Long-term debt		947,750			1,019,872
Deferred income taxes, net		30,465			36,122
Operating lease liabilities		32,235			43,346
Other noncurrent liabilities		34,060			34,544
Total liabilities		2,064,924			1,913,964
Commitments and contingencies
Stockholders’ equity
Preferred stock		—			—
Common stock		702			702
Additional paid-in capital		697,763			688,313
Retained earnings		1,183,230			1,131,281
Treasury stock		(555,753	)		(475,972	)
Accumulated other comprehensive loss		(127,726	)		(99,547	)
Total stockholders’ equity		1,198,216			1,244,777
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,263,140		$	3,158,741

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,
		2022			2021			2022			2021
Revenues
Software as a service and platform as a service	$	195,540		$	191,456		$	597,080		$	583,530
License		43,661			54,454			168,260			110,383
Maintenance		49,163			53,519			151,143			159,037
Services		18,227			17,485			53,613			50,819
Total revenues		306,591			316,914			970,096			903,769
Operating expenses
Cost of revenue (1)		171,753			158,712			517,372			476,811
Research and development		35,899			35,248			114,348			104,791
Selling and marketing		32,794			33,413			102,793			90,211
General and administrative		30,516			29,717			84,753			89,429
Depreciation and amortization		32,140			31,845			95,218			95,434
Total operating expenses		303,102			288,935			914,484			856,676
Operating income		3,489			27,979			55,612			47,093
Other income (expense)
Interest expense		(14,336	)		(11,208	)		(37,014	)		(33,943	)
Interest income		2,995			2,834			9,205			8,553
Other, net		41,545			(1,088	)		45,801			(1,036	)
Total other income (expense)		30,204			(9,462	)		17,992			(26,426	)
Income before income taxes		33,693			18,517			73,604			20,667
Income tax expense (benefit)		10,576			4,753			21,655			2,347
Net income	$	23,117		$	13,764		$	51,949		$	18,320
Income per common share
Basic	$	0.20		$	0.12		$	0.45		$	0.16
Diluted	$	0.20		$	0.12		$	0.45		$	0.15
Weighted average common shares outstanding
Basic		113,812			117,512			114,584			117,574
Diluted		114,348			118,540			115,211			118,817

(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,
	2022					2021				2022					2021
Cash flows from operating activities:
Net income	$	23,117				$		13,764		$	51,949				$	18,320
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		6,044						5,130			17,052					15,838
Amortization		26,096						28,250			78,817					84,528
Amortization of operating lease right-of-use assets		2,807						2,752			8,296					7,752
Amortization of deferred debt issuance costs		1,136						1,168			3,435					3,525
Deferred income taxes		(2,674	)					(2,184	)		(9,059	)				(11,742	)
Stock-based compensation expense		7,126						6,367			21,884					20,790
Gain on divestiture		(38,452	)					—			(38,452	)				—
Other		1,359						(463	)		2,483					(27	)
Changes in operating assets and liabilities:
Receivables		19,807						(20,801	)		5,767					55,953
Accounts payable		(1,728	)					(2,540	)		(3,047	)				(5,080	)
Accrued employee compensation		6,329						7,261			(3,872	)				(1,140	)
Deferred revenue		(11,899	)					10,042			(6,367	)				10,339
Other current and noncurrent assets and liabilities		(4,865	)					(9,248	)		(26,920	)				(54,573	)
Net cash flows from operating activities		34,203						39,498			101,966					144,483
Cash flows from investing activities:
Purchases of property and equipment		(4,466	)					(4,893	)		(8,123	)				(12,968	)
Purchases of software and distribution rights		(7,656	)					(4,389	)		(18,394	)				(20,041	)
Proceeds from divestiture		100,139						—			100,139					—
Net cash flows from investing activities		88,017						(9,282	)		73,622					(33,009	)
Cash flows from financing activities:
Proceeds from issuance of common stock		839						878			2,801					2,526
Proceeds from exercises of stock options		395						208			1,792					7,252
Repurchase of stock-based compensation awards for tax withholdings		(18	)					(37	)		(5,820	)				(14,833	)
Repurchases of common stock		(28,227	)					—			(90,934	)				(39,411	)
Proceeds from revolving credit facility		25,000						—			85,000					—
Repayment of revolving credit facility		(55,000	)					(25,000	)		(75,000	)				(55,000	)
Repayment of term portion of credit agreement		(49,606	)					(9,737	)		(70,825	)				(29,212	)
Payments on or proceeds from other debt, net		(737	)					(1,915	)		(10,106	)				(10,187	)
Net decrease in settlement assets and liabilities		24,659						22,611			20,084					(55,470	)
Net cash flows from financing activities		(82,695	)					(12,992	)		(143,008	)				(194,335	)
Effect of exchange rate fluctuations on cash		1,002						472			(60	)				84
Net increase (decrease) in cash and cash equivalents		40,527						17,696			32,520					(82,777	)
Cash and cash equivalents, including settlement deposits, beginning of period		176,135						164,909			184,142					265,382
Cash and cash equivalents, including settlement deposits, end of period	$	216,662				$		182,605		$	216,662				$	182,605
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	134,799				$		141,482		$	134,799				$	141,482
Settlement deposits		81,863						41,123			81,863					41,123
Total cash and cash equivalents	$	216,662				$		182,605		$	216,662				$	182,605
			Three Months Ended September 30,							Nine Months Ended September 30,
Adjusted EBITDA (millions)			2022				2021			2022							2021
Net income			$	23.1			$	13.8		$			51.9				$	18.3
Plus:
Income tax expense				10.6				4.7					21.7					2.3
Net interest expense				11.3				8.4					27.8					25.4
Net other income (expense)				(41.4	)			1.1					(45.8	)				1.0
Depreciation expense				6.0				5.1					17.1					15.9
Amortization expense				26.1				28.2					78.8					84.5
Non-cash stock-based compensation expense				7.1				6.4					21.9					20.8
Adjusted EBITDA before significant transaction-related expenses			$	42.8			$	67.7		$			173.4				$	168.2
Significant transaction-related expenses:
Employee related actions				—				4.4					—					8.1
European datacenter migration				1.7				—					3.4					—
Divestiture transaction related				1.2				—					2.6					—
Other				—				1.6					—					2.5
Adjusted EBITDA			$	45.7			$	73.7		$			179.4				$	178.8
Revenue, net of interchange:
Revenue			$	306.6			$	316.9		$			970.1				$	903.8
Interchange				98.4				87.8					295.4					262.6
Revenue, net of interchange			$	208.2			$	229.1		$			674.7				$	641.2
Net Adjusted EBITDA Margin				22	%			32	%				27	%				28	%

	Three Months Ended September 30,				Nine Months Ended September 30,
Segment Information (millions)	2022		2021		2022		2021
Revenue
Banks	$	117.5	$	131.7	$	391.6	$	341.7
Merchants		35.6		39.0		113.1		115.1
Billers		153.5		146.2		465.4		447.0
Total	$	306.6	$	316.9	$	970.1	$	903.8
Recurring Revenue
Banks	$	57.3	$	63.6	$	179.3	$	189.6
Merchants		33.8		35.2		103.5		106.0
Billers		153.6		146.2		465.4		446.9
Total	$	244.7	$	245.0	$	748.2	$	742.6
Segment Adjusted EBITDA
Banks	$	49.8	$	67.6	$	184.7	$	159.3
Merchants		9.8		14.2		32.2		42.0
Billers		26.3		32.0		81.0		100.6

	Three Months Ended September 30,
	2022						2021
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	$	0.20		$	23.1		$	0.12	$	13.8
Adjusted for:
Gain on divestiture		(0.26	)		(29.2	)		—		—
Significant transaction-related expenses		0.02			2.2			0.04		4.5
Amortization of acquisition-related intangibles		0.06			6.7			0.06		7.0
Amortization of acquisition-related software		0.04			4.5			0.05		6.0
Non-cash stock-based compensation		0.05			5.4			0.04		4.8
Total adjustments	$	(0.09	)	$	(10.4	)	$	0.19	$	22.3
Diluted EPS adjusted for non-cash and significant transaction-related items	$	0.11		$	12.7		$	0.31	$	36.1

	Nine Months Ended September 30,
	2022						2021
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	$	0.45		$	51.9		$	0.15	$	18.3
Adjusted for:
Gain on divestiture		(0.25	)		(29.2	)		—		—
Significant transaction-related expenses		0.04			4.7			0.07		8.0
Amortization of acquisition-related intangibles		0.18			20.6			0.18		21.1
Amortization of acquisition-related software		0.12			14.1			0.16		19.1
Non-cash stock-based compensation		0.14			16.6			0.13		15.8
Total adjustments	$	0.23		$	26.8		$	0.54	$	64.0
Diluted EPS adjusted for non-cash and significant transaction-related items	$	0.68		$	78.7		$	0.69	$	82.3

	Three Months Ended September 30,				Nine Months Ended September 30,
Recurring Revenue (millions)	2022		2021		2022		2021
SaaS and PaaS fees	$	195.5	$	191.5	$	597.1	$	583.5
Maintenance fees		49.2		53.5		151.1		159.1
Recurring Revenue	$	244.7	$	245.0	$	748.2	$	742.6

Annual Recurring Revenue* (ARR) Bookings (millions)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
ARR bookings	$	30.3	$	22.4	$	69.5	$	49.7

^{_________________________________
1} “ARR”' is annual recurring revenue expected to be generated from new accounts, new applications and add-on sales bookings contracts signed in the quarter

² Corporate Online Banking divestiture