Aci worldwide, inc. reports financial results for the quarter ended march 31, 2023
Miami--(business wire)--aci worldwide (nasdaq: aciw), the global leader in mission-critical, real-time payments software, announced financial results today for the quarter ended march 31, 2023. “first quarter results were consistent with our expectations and reflect our team’s solid execution in what remains an uncertain economic environment,” said thomas warsop, interim president and ceo of aci worldwide. “in particular, the actions taken in our biller business, including those addressing the inflation-driven interchange headwinds, have helped to drive meaningful growth in that segment.” warsop continued, “looking to the rest of the year, we are energized by new opportunities across our businesses, particularly in real-time payments and cloud-based technologies, and we are confident we have the right strategy in place to capitalize on them. our renewal calendar and implementation pipeline provide us with confidence we are on track to deliver our outlook for full-year 2023 and to achieve our revenue growth target of 7-9% by 2024.” financial summary in q1 2023, total revenue was $290 million, down 5% adjusted for fx and the divestiture. recurring revenue grew 9%, adjusting for fx and the divestiture. net loss was $32 million. total adjusted ebitda in the quarter was $25 million compared to $68 million in q1 2022. new arr2 bookings for the quarter were $11 million and new arr bookings for the trailing twelve months (ttm) were $100 million, which was up 8% from the ttm ending march 2022. bank segment revenue decreased 24% and bank segment adjusted ebitda decreased 58%, versus q1 2022, adjusted for fx and the divestiture. as previously discussed, the timing of larger renewal events is heavily back-half weighted in 2023. merchant segment revenue decreased 12% and merchant segment adjusted ebitda decreased 53% on a constant currency basis, versus q1 2022, resulting primarily from the continued transition from non-recurring license fees to recurring saas revenues and by investments that are expected to accelerate growth. biller segment revenue increased 11% and biller segment adjusted ebitda increased 12%, versus q1 2022, driven by new customer onboarding and progress with our interchange improvement program. aci ended the quarter with $142 million in cash on hand and a debt balance of $1 billion, which represents a net debt leverage ratio of 2.9x. the company did not repurchase any shares in the quarter, but 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. the company expects revenue to be between $300 million and $310 million and adjusted ebitda of $35 million to $45 million in q2 2023. 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. ceo search after reviewing and meeting with a number of promising candidates for the permanent ceo position, the board is in the final stages of the selection process and expects to complete the search in the upcoming weeks. 1 corporate online banking divestiture 2 “arr”' is annual recurring revenue expected to be generated from new bookings signed in the period, including new accounts, new applications and add-on sales 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: 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) looking to the rest of the year, we are energized by new opportunities across our businesses, particularly in real time payments and cloud-based technologies, and we are confident we have the right strategy in place to capitalize on them, (ii) our renewal calendar and implementation pipeline provide us with confidence we are on track to deliver our outlook for full-year 2023 and to achieve our revenue growth target of 7-9% by 2024, (iii) q2 2023 and full year 2023 revenue and adjusted ebitda financial guidance, and (iv) after reviewing and meeting with a number of promising candidates for the permanent ceo position, the board is in the final stages of the selection process and expects to complete the search in the upcoming weeks. 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, 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) march 31, 2023 december 31, 2022 assets current assets cash and cash equivalents $ 142,412 $ 124,981 receivables, net of allowances 342,765 403,781 settlement assets 413,343 540,667 prepaid expenses 34,017 28,010 other current assets 21,499 17,366 total current assets 954,036 1,114,805 noncurrent assets accrued receivables, net 270,332 297,818 property and equipment, net 48,327 52,499 operating lease right-of-use assets 38,374 40,031 software, net 119,801 129,109 goodwill 1,226,026 1,226,026 intangible assets, net 220,540 228,698 deferred income taxes, net 63,345 53,738 other noncurrent assets 66,020 67,171 total assets $ 3,006,801 $ 3,209,895 liabilities and stockholders’ equity current liabilities accounts payable $ 47,170 $ 47,997 settlement liabilities 412,800 539,087 employee compensation 29,834 45,289 current portion of long-term debt 70,443 65,521 deferred revenue 69,999 58,303 other current liabilities 70,664 102,645 total current liabilities 700,910 858,842 noncurrent liabilities deferred revenue 21,639 23,233 long-term debt 1,010,938 1,024,351 deferred income taxes, net 38,679 40,371 operating lease liabilities 32,026 33,910 other noncurrent liabilities 34,982 36,001 total liabilities 1,839,174 2,016,708 commitments and contingencies stockholders’ equity preferred stock — — common stock 702 702 additional paid-in capital 701,040 702,458 retained earnings 1,241,150 1,273,458 treasury stock (661,223) (665,771) accumulated other comprehensive loss (114,042) (117,660) total stockholders’ equity 1,167,627 1,193,187 total liabilities and stockholders’ equity $ 3,006,801 $ 3,209,895 aci worldwide, inc. and subsidiaries condensed consolidated statements of operations (unaudited and in thousands, except per share amounts) three months ended march 31, 2023 2022 revenues software as a service and platform as a service $ 204,930 $ 194,562 license 18,331 60,285 maintenance 50,103 51,418 services 16,312 16,815 total revenues 289,676 323,080 operating expenses cost of revenue (1) 178,554 166,286 research and development 37,118 37,807 selling and marketing 35,435 34,608 general and administrative 31,382 25,875 depreciation and amortization 31,539 30,838 total operating expenses 314,028 295,414 operating income (loss) (24,352) 27,666 other income (expense) interest expense (18,892) (10,894) interest income 3,505 3,159 other, net (3,395) 2,250 total other income (expense) (18,782) (5,485) income (loss) before income taxes (43,134) 22,181 income tax expense (benefit) (10,826) 6,691 net income (loss) $ (32,308) $ 15,490 income (loss) per common share basic $ (0.30) $ 0.13 diluted $ (0.30) $ 0.13 weighted average common shares outstanding basic 108,156 115,287 diluted 108,156 116,098 (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 march 31, 2023 2022 cash flows from operating activities: net income (loss) $ (32,308) $ 15,490 adjustments to reconcile net income (loss) to net cash flows from operating activities: depreciation 6,131 4,981 amortization 25,408 26,508 amortization of operating lease right-of-use assets 2,767 2,716 amortization of deferred debt issuance costs 1,115 1,153 deferred income taxes (10,382) (3,367) stock-based compensation expense 5,301 7,958 other (290) 601 changes in operating assets and liabilities: receivables 88,960 9,660 accounts payable (1,308) (2,748) accrued employee compensation (15,593) (19,138) deferred revenue 10,202 9,949 other current and noncurrent assets and liabilities (39,935) (24,889) net cash flows from operating activities 40,068 28,874 cash flows from investing activities: purchases of property and equipment (2,258) (2,280) purchases of software and distribution rights (6,481) (6,207) net cash flows from investing activities (8,739) (8,487) cash flows from financing activities: proceeds from issuance of common stock 707 906 proceeds from exercises of stock options 78 1,022 repurchase of stock-based compensation awards for tax withholdings (3,001) (5,537) repurchases of common stock — (37,860) proceeds from revolving credit facility 50,000 40,000 repayment of revolving credit facility (45,000) (10,000) repayment of term portion of credit agreement (14,606) (9,738) payments on or proceeds from other debt, net (5,670) (4,186) net decrease in settlement assets and liabilities (2,834) (605) net cash flows from financing activities (20,326) (25,998) effect of exchange rate fluctuations on cash 2,557 (2,464) net decrease in cash and cash equivalents 13,560 (8,075) cash and cash equivalents, including settlement deposits, beginning of period 214,672 184,142 cash and cash equivalents, including settlement deposits, end of period $ 228,232 $ 176,067 reconciliation of cash and cash equivalents to the consolidated balance sheets cash and cash equivalents $ 142,412 $ 114,754 settlement deposits 85,820 61,313 total cash and cash equivalents $ 228,232 $ 176,067 three months ended march 31, adjusted ebitda (millions) 2023 2022 net income (loss) $ (32.3) $ 15.5 plus: income tax expense (benefit) (10.8) 6.7 net interest expense 15.4 7.7 net other income (expense) 3.4 (2.3) depreciation expense 6.1 5.0 amortization expense 25.4 26.5 non-cash stock-based compensation expense 5.3 8.0 adjusted ebitda before significant transaction-related expenses $ 12.5 $ 67.1 significant transaction-related expenses: cost reduction strategies $ 8.3 $ — european datacenter migration 1.0 — other 3.1 0.5 adjusted ebitda $ 24.9 $ 67.6 revenue, net of interchange: revenue $ 289.7 $ 323.1 interchange 106.2 93.2 revenue, net of interchange $ 183.5 $ 229.9 net adjusted ebitda margin 14 % 29 % three months ended march 31, segment information (millions) 2023 2022 revenue banks $ 88.0 $ 132.2 merchants 34.8 41.0 billers 166.9 149.9 total $ 289.7 $ 323.1 recurring revenue banks $ 55.6 $ 61.3 merchants 32.5 34.8 billers 166.9 149.9 total $ 255.0 $ 246.0 segment adjusted ebitda banks $ 24.7 $ 64.7 merchants 6.5 14.7 billers 29.6 26.4 three months ended march 31, 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) $ (0.30) $ (32.3) $ 0.13 $ 15.5 adjusted for: significant transaction-related expenses 0.09 9.5 — 0.4 amortization of acquisition-related intangibles 0.06 6.4 0.06 7.0 amortization of acquisition-related software 0.04 4.4 0.04 5.0 non-cash stock-based compensation 0.04 4.0 0.05 6.0 total adjustments $ 0.23 $ 24.3 $ 0.15 $ 18.4 diluted eps adjusted for non-cash and significant transaction-related items $ (0.07) $ (8.0) $ 0.28 $ 33.9 three months ended march 31, recurring revenue (millions) 2023 2022 saas and paas fees $ 204.9 $ 194.6 maintenance fees 50.1 51.4 recurring revenue $ 255.0 $ 246.0 annual recurring revenue (arr) bookings (millions) three months ended march 31, ttm ended march 31, 2023 2022 2023 2022 arr bookings $ 11.4 $ 21.1 $ 100.1 $ 92.9
