ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended September 30, 2024

OMAHA, Neb.--(BUSINESS WIRE)--ACI Worldwide (NASDAQ: ACIW), an original innovator in global payments technology, announced financial results today for the quarter ended September 30, 2024.

"We are very pleased with our third quarter results and the continued positive momentum in the business. We saw particular strength within our Bank and Merchant segments and are once again raising our full-year outlook," said Thomas Warsop, president and CEO of ACI Worldwide. "This year the team has done a tremendous job signing renewal contracts earlier in the year. This initiative is enabling our commercial team to spend more time on prospects and winning new business, which has allowed us to outperform our forecasts. Further, signing these new contracts earlier in the year helps reduce the heavy seasonality we have historically seen and simply reduces the risk of attaining our full-year financial guidance.

"Our pipelines remain strong across our segments, and we are well-positioned for future growth as we continue to invest in innovation, execute on our strategy, and deliver value to our customers and shareholders."

"Our cash flow from operating activities increased 114% over Q3 last year and we exited the quarter with net debt leverage ratio of 1.6x adjusted EBITDA, with approximately $650 million in liquidity," said Scott Behrens, chief financial officer of ACI Worldwide. "Our strong cash flow growth and our lowest leverage in over a decade, combined with our improved outlook for 2024 and our expectations for continued strength in 2025, enable us to reduce our long-term stated leverage target from 2.5x to 2.0x. We will continue to maintain a disciplined, long-term focused capital allocation strategy that balances re-investment in the business, accretive M&A and share repurchases, while maintaining a strong balance sheet with ample liquidity and financial flexibility."

FINANCIAL SUMMARY

In Q3 2024, revenue was $452 million, up 24% from Q3 2023. Net income was $81 million, up 115% from $38 million in Q3 2023. Adjusted EBITDA in Q3 2024 was $167 million, up 61% from Q3 2023. Cash flow from operating activities in Q3 2024 was $54 million, up 114% from $25 million in Q3 2023.

• Bank segment revenue increased 43% in Q3 2024 and Bank segment adjusted EBITDA increased 69% versus Q3 2023.

• Merchant segment revenue increased 38% in Q3 2024 and Merchant segment adjusted EBITDA increased 159% versus Q3 2023.

• Biller segment revenue increased 5% in Q3 2024 and Biller segment adjusted EBITDA decreased 21%. Q3 2023 included certain one-time non-recurring margin benefits that did not recur in Q3 2024.

ACI ended Q3 2024 with $178 million in cash on hand and a debt balance of $1 billion, which represents a net debt leverage ratio of 1.6x adjusted EBITDA.

During the quarter the company repurchased approximately 200,000 shares for $8 million in capital and year-to-date 2024 has repurchased approximately 4 million shares for $128 million in capital. At the end of the quarter, the company had $372 million remaining available on the share repurchase authorization.

RAISING 2024 GUIDANCE

For the full year of 2024, we are raising our guidance for both revenue and adjusted EBITDA. We now expect revenue to be in the range of $1.567 billion to $1.601 billion, up from the range of $1.557 billion to $1.591 billion. We now expect adjusted EBITDA to be in the range of $433 million to $448 million, up from the range of $423 million to $438 million.

CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS

Today, management will host a conference call at 8:30 a.m. 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 [phone] and conference code 3153574.

About ACI Worldwide

ACI Worldwide, an original innovator in global payments technology, delivers transformative software solutions that power intelligent payments orchestration in real time so banks, billers, and merchants can drive growth, while continuously modernizing their payment infrastructures, simply and securely. With nearly 50 years of trusted payments expertise, we combine our global footprint with a local presence to offer enhanced payment experiences to stay ahead of constantly changing payment challenges and opportunities.

© Copyright ACI Worldwide, Inc. 2024.

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) the continued positive momentum in the business, (ii) our pipelines remain strong across our segments, and we are well-positioned for future growth as we continue to invest in innovation, execute on our strategy, and deliver value to our customers and shareholders, (iii) we will continue to maintain a disciplined, long-term focused capital allocation strategy that balances re-investment in the business, accretive M&A and share repurchases, while maintaining a strong balance sheet with ample liquidity and financial flexibility (iv) target leverage and full-year 2024 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 and the Middle East, 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, 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, 2024				December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	177,860			$	164,239
Receivables, net of allowances		424,518				452,337
Settlement assets		428,479				723,039
Prepaid expenses		31,878				31,479
Other current assets		22,865				35,551
Total current assets		1,085,600				1,406,645
Noncurrent assets
Accrued receivables, net		338,977				313,983
Property and equipment, net		31,441				37,856
Operating lease right-of-use assets		29,181				34,338
Software, net		90,313				108,418
Goodwill		1,226,026				1,226,026
Intangible assets, net		172,310				195,646
Deferred income taxes, net		64,674				58,499
Other noncurrent assets		54,463				63,328
TOTAL ASSETS	$	3,092,985			$	3,444,739
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	47,912			$	45,964
Settlement liabilities		428,080				721,164
Employee compensation		42,806				53,892
Current portion of long-term debt		34,910				74,405
Deferred revenue		68,550				59,580
Other current liabilities		75,036				82,244
Total current liabilities		697,294				1,037,249
Noncurrent liabilities
Deferred revenue		19,315				24,780
Long-term debt		959,387				963,599
Deferred income taxes, net		38,439				40,735
Operating lease liabilities		23,601				29,074
Other noncurrent liabilities		25,319				25,005
Total liabilities		1,763,355				2,120,442
Commitments and contingencies
Stockholders' equity
Preferred stock		-				-
Common stock		702				702
Additional paid-in capital		725,724				712,994
Retained earnings		1,499,530				1,394,967
Treasury stock		(791,353	)			(674,896	)
Accumulated other comprehensive loss		(104,973	)			(109,470	)
Total stockholders' equity		1,329,630				1,324,297
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	3,092,985			$	3,444,739

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,
		2024				2023				2024				2023
Revenues
Software as a service and platform as a service	$	223,367			$	211,369			$	674,498			$	625,975
License		157,429				79,679				252,984				142,681
Maintenance		47,559				51,942				144,046				153,436
Services		23,397				20,025				69,722				53,924
Total revenues		451,752				363,015				1,141,250				976,016
Operating expenses
Cost of revenue (1)		197,351				177,625				591,696				537,522
Research and development		37,660				33,739				108,063				106,122
Selling and marketing		28,691				29,442				83,992				98,166
General and administrative		33,949				29,821				84,942				92,675
Depreciation and amortization		31,515				30,464				86,710				93,439
Total operating expenses		329,166				301,091				955,403				927,924
Operating income		122,586				61,924				185,847				48,092
Other income (expense)
Interest expense		(18,356	)			(19,840	)			(55,837	)			(58,641	)
Interest income		3,871				3,495				11,833				10,458
Other, net		(823	)			1,084				(1,692	)			(6,403	)
Total other income (expense)		(15,308	)			(15,261	)			(45,696	)			(54,586	)
Income (loss) before income taxes		107,278				46,663				140,151				(6,494	)
Income tax expense (benefit)		25,851				8,752				35,588				(5,387	)
Net income (loss)	$	81,427			$	37,911			$	104,563			$	(1,107	)
Income (loss) per common share
Basic	$	0.78			$	0.35			$	0.99			$	(0.01	)
Diluted	$	0.77			$	0.35			$	0.98			$	(0.01	)
Weighted average common shares outstanding
Basic		104,770				108,667				105,651				108,428
Diluted		106,018				108,933				106,552				108,428
(1) The cost of revenue excludes charges for depreciation and amortization.

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,
		2024				2023				2024				2023
Cash flows from operating activities:
Net income (loss)	$	81,427			$	37,911			$	104,563			$	(1,107	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation		7,804				5,631				14,999				18,722
Amortization		23,711				24,832				71,711				74,716
Amortization of operating lease right-of-use assets		2,338				2,699				7,337				9,190
Amortization of deferred debt issuance costs		659				923				2,257				3,415
Deferred income taxes		(3,745	)			(2,566	)			(2,229	)			(25,207	)
Stock-based compensation expense		11,346				6,822				30,165				17,537
Other		2,247				1,857				180				2,168
Changes in operating assets and liabilities:
Receivables		(95,899	)			(39,844	)			3,699				42,012
Accounts payable		(4,091	)			(5,244	)			758				(7,198	)
Accrued employee compensation		8,759				1,749				(11,125	)			(2,879	)
Deferred revenue		(6,433	)			(8,296	)			1,884				4,404
Other current and noncurrent assets and liabilities		25,885				(1,208	)			8,067				(52,999	)
Net cash flows from operating activities		54,008				25,266				232,266				82,774
Cash flows from investing activities:
Purchases of property and equipment		(3,509	)			(3,380	)			(8,463	)			(7,956	)
Purchases of software and distribution rights		(4,154	)			(7,550	)			(23,178	)			(22,571	)
Net cash flows from investing activities		(7,663	)			(10,930	)			(31,641	)			(30,527	)
Cash flows from financing activities:
Proceeds from issuance of common stock		732				696				2,129				2,122
Proceeds from exercises of stock options		1,202				263				1,954				3,132
Repurchase of stock-based compensation awards for tax withholdings		(2,960	)			(883	)			(9,299	)			(4,203	)
Repurchases of common stock		(7,996	)			-				(127,670	)			-
Proceeds from revolving credit facility		20,000				20,000				184,000				75,000
Repayment of revolving credit facility		(25,000	)			(6,000	)			(177,000	)			(51,000	)
Proceeds from term portion of credit agreement		-				-				500,000				-
Repayment of term portion of credit agreement		(9,375	)			(19,475	)			(547,823	)			(53,556	)
Payments on or proceeds from other debt, net		(630	)			(643	)			(9,299	)			(12,473	)
Payments for debt issuance costs		-				-				(5,141	)			(2,160	)
Net increase (decrease) in settlement assets and liabilities		23,855				19,452				17,704				(4,635	)
Net cash flows from financing activities		(172	)			13,410				(170,445	)			(47,773	)
Effect of exchange rate fluctuations on cash		(1,621	)			(1,039	)			(331	)			4,388
Net increase in cash and cash equivalents		44,552				26,707				29,849				8,862
Cash and cash equivalents, including settlement deposits, beginning of period		224,118				196,827				238,821				214,672
Cash and cash equivalents, including settlement deposits, end of period	$	268,670			$	223,534			$	268,670			$	223,534
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	177,860			$	139,520			$	177,860			$	139,520
Settlement deposits		90,810				84,014				90,810				84,014
Total cash and cash equivalents	$	268,670			$	223,534			$	268,670			$	223,534

	Three Months Ended September 30,								Nine Months Ended September 30,
Adjusted EBITDA (millions)		2024				2023				2024				2023
Net income (loss)	$	81.4			$	37.9			$	104.6			$	(1.1	)
Plus:
Income tax expense (benefit)		25.9				8.7				35.6				(5.4	)
Net interest expense		14.5				16.4				44.0				48.2
Net other (income) expense		0.8				(1.1	)			1.7				6.4
Depreciation expense		7.8				5.6				15.0				18.7
Amortization expense		23.7				24.8				71.7				74.7
Non-cash stock-based compensation expense		11.3				6.8				30.2				17.5
Adjusted EBITDA before significant transaction-related expenses	$	165.4			$	99.1			$	302.8			$	159.0
Significant transaction-related expenses:
Cost reduction strategies		1.2				3.8				4.3				19.7
European datacenter migration		-				0.4				-				2.6
Other		0.3				0.1				1.0				4.4
Adjusted EBITDA	$	166.9			$	103.4			$	308.1			$	185.7
Revenue, net of interchange:
Revenue	$	451.8			$	363.0			$	1,141.3			$	976.0
Interchange		117.1				102.7				353.6				315.0
Revenue, net of interchange	$	334.7			$	260.3			$	787.7			$	661.0
Net Adjusted EBITDA Margin		50	%			40	%			39	%			28	%

	Three Months Ended September 30,						Nine Months Ended September 30,
Segment Information (millions)		2024			2023			2024			2023
Revenue
Banks	$	222.0		$	155.7		$	471.1		$	361.2
Merchants		50.2			36.3			123.9			107.6
Billers		179.6			171.0			546.3			507.2
Total	$	451.8		$	363.0		$	1,141.3		$	976.0
Recurring Revenue
Banks	$	55.6		$	58.2		$	167.1		$	171.2
Merchants		35.7			34.1			105.1			101.0
Billers		179.6			171.0			546.3			507.2
Total	$	270.9		$	263.3		$	818.5		$	779.4
Segment Adjusted EBITDA
Banks	$	153.9		$	91.0		$	274.8		$	167.3
Merchants		26.7			10.3			52.7			26.8
Billers		30.9			39.2			99.1			100.1
Note: Amounts may not recalculate due to rounding.

	Three Months Ended September 30,
	2024						2023
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	$	0.77		$	81.4		$	0.35		$	37.9
Adjusted for:
Significant transaction-related expenses		0.04			4.5			0.03			3.3
Amortization of acquisition-related intangibles		0.05			5.4			0.06			6.4
Amortization of acquisition-related software		0.03			3.4			0.03			3.8
Non-cash stock-based compensation		0.08			8.6			0.05			5.2
Total adjustments	$	0.20		$	21.9		$	0.17		$	18.7
Diluted EPS adjusted for non-cash and significant transaction-related items	$	0.97		$	103.3		$	0.52		$	56.6

	Nine Months Ended September 30,
	2024						2023
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)	$	0.98		$	104.6		$	(0.01	)		$	(1.1	)
Adjusted for:
Significant transaction-related expenses		0.07			7.4			0.19				20.4
Amortization of acquisition-related intangibles		0.17			18.1			0.18				19.3
Amortization of acquisition-related software		0.09			10.1			0.11				12.0
Non-cash stock-based compensation		0.21			22.9			0.12				13.3
Total adjustments	$	0.54		$	58.5		$	0.60			$	65.0
Diluted EPS adjusted for non-cash and significant transaction-related items	$	1.52		$	163.1		$	0.59			$	63.9

	Three Months Ended September 30,						Nine Months Ended September 30,
Recurring Revenue (millions)		2024			2023			2024			2023
SaaS and PaaS fees	$	223.4		$	211.4		$	674.5		$	626.0
Maintenance fees		47.5			51.9			144.0			153.4
Recurring Revenue	$	270.9		$	263.3		$	818.5		$	779.4

New Bookings (millions)	Three Months Ended September 30,						TTM Ended September 30,
		2024			2023			2024			2023
Annual recurring revenue (ARR) bookings	$	11.1		$	20.5		$	59.3		$	84.9
License and services bookings		67.0			54.1			281.5			224.5
Note: Amounts may not recalculate due to rounding.

Contacts

For more information contact:

Investor Relations
John Kraft
SVP, Head of Strategy and Finance
239-403-4627 / [e-mail]