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| 8-K - FORM 8-K - ACI WORLDWIDE, INC. | d721297d8k.htm |
 ACI Worldwide
(ACIW) Investor Conferences
Spring/Summer 2014
Exhibit 99.1 |
 MEETS THE CHALLENGE OF CHANGE
2
Private Securities Litigation Reform Act of 1995
Safe Harbor For Forward-Looking Statements
This presentation contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
forward-looking statements are made pursuant to safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. A discussion
of these forward-looking statements and
risk
factors
that
may
affect
them
is
set
forth
at
the
end
of
this
presentation.
The Company assumes no obligation to update any forward-looking statement in
this presentation, except as required by law. |
 About
ACI Worldwide •
High
quality
products
and
services
drive
strong
renewal
rates
on
a
large
installed user base of over 5,000 customers
•
Long-term, blue-chip, geographically diverse customer base with low
customer concentration
•
Subscription-based model drives recurring revenue and provides stability
and predictability to our operations
•
Large contractual backlog provides earnings visibility and allows our
management to optimally manage the size and infrastructure of the
business
•
Leading payments transformation with Universal Payments (UP)
•
Management team has an established track record of operational
excellence and significant industry experience
2013
Pro Forma Revenue
$1023 Million
2013
Pro Forma Adjusted EBITDA
$273 Million
3/31/2014
60-Month Backlog
$3.9 Billion
Founded in 1975,
ACI is a leading provider
of electronic payments
and transaction banking
software solutions for
financial institutions,
retailers, processors and
billers worldwide
3
MEETS THE CHALLENGE OF CHANGE
Note: Pro Forma Revenue is presented on a Non-GAAP basis that adds back the Deferred
Revenue Fair Value Adjustment. Pro Forma Adjusted EBITDA excludes transaction and
litigation expenses. Both metrics are presented on a pro forma basis for the ORCC
and OPAY acquisitions. |
 Global
Distribution and Customer Base: The Leader in the Mega and Large FIs
Market Headquarters Regional
Offices Distributors
AMERICAS
1,950+ customers
EMEA
500+ customers
ASIA/PACIFIC
150+ customers
5,000+ customers in over 80
countries rely on ACI solutions
Customers: ~ 180
processors globally
Customers: ~ 290
retailers globally
Customers: 3600+
US billers
18 of the top 20 and 67 of the top 100 global banks are customers
~ 4,500
employees in 36 countries
4
MEETS THE CHALLENGE OF CHANGE |
 MEETS THE CHALLENGE OF CHANGE
ACI is a Leading Provider of Electronic Payments and
Transaction Banking Solutions
•
Tools to prevent payment transaction
fraud and enterprise financial crimes
•
Case management
Fraud
•
Internet-based electronic bill payment and
presentment (EBPP)
•
Transaction-based, hosted services for
banks and billers
•
Automated collection application
Bill Pay / Collections
•
Consumer and Business Internet Banking,
Mobile, Trade Finance and Branch
Automation sold to large banks globally as
license or hosted subscription services
•
Consumer and small biz Internet and
mobile banking sold to US community FIs
and credit unions as hosted, subscription
Online Banking
•
Software sold to global banks that enables
the providing of treasury services to large
corporates
•
High value wire transfers, Low Value Bulk
Payments and SWIFT messaging
Wholesale Payments
•
Software sold directly to banks and
payment processors
•
Solutions help authenticate, authorize,
acquire, clear and settle electronic
consumer payments
•
Payments acquiring and authorization
solution for retailers
Retail Payments
1
Financial
Insights
-
Worldwide
Payments
Market
Sizing
2012
and
3
Party
Consultant
Note: Revenue figures represent Pro Forma FY 2013 GAAP Revenue on a pro forma basis for the
ORCC and OPAY acquisitions. ACI Product Family Revenue %
Highlights
In a highly fragmented
market, we control 6% of
the market spend
Software facilitates over
120 billion consumer
transactions per year;
scales to thousands per
second
~1/3 of all domestic SWIFT
transactions
Enables over $13 trillion in
payments each day
Software designed for
“Five nines availability”
2/3 of all Fed
wires
5
1
rd |
 MEETS THE CHALLENGE OF CHANGE
Diverse Customer Base of Top Global Banks, Processors, Billers and
Retailers Provide Significant Cross Sell Opportunities
FY 2013 Revenue by Customer
No single customer represents more than 3% of
consolidated revenue
On average, customers use 3 ACI products or less
representing a large cross sell opportunity
6 |
 MEETS THE CHALLENGE OF CHANGE
Attractive trends will drive growth opportunities for ACI
1
Source:
Financial
Insights
-
Worldwide
Payments
Market
Sizing
2012
and
3rd
Party
Consultant
2
Source: McKinsey “Dynamic Changes in the Global Payments Industry”,
2012 Industry
Dynamics
2
Market
Sizing
1
•
Shift from paper to electronic
•
Compounding regulatory requirements
•
Revenue and profitability pressures
•
Complexity from globalization
FIs looking to transform their businesses by:
•
Driving down unit costs
•
Launching new products quicker
•
Reducing risks
•
Improving customer satisfaction and loyalty
•
Vendor Consolidation
•
Total addressable market is ~$20bn in 2013 and growing 7-8% overall
•
~50% of addressable market is in-sourced (homegrown) applications
•
Global transaction volume growth expected to be 9% CAGR through 2020
•
Increasing fraud costs
•
Convergence of payments; real-time
•
Legacy systems increasingly difficult to
update
Favorable Industry and Customer Trends
7
Customer Trends |
 MEETS THE CHALLENGE OF CHANGE
Strategy to Drive Superior Performance
Continued Focus on Control, Profitability and Growth
•
Continue to increase recurring revenue base
•
Expand customer relationships by cross-selling (on average customers use 3 ACI
products or less)
•
Lead payments transformation with Universal Payments delivering
technology- enabled efficiencies
•
Expand geographically
Growth
Drivers
•
Expand margins through operating leverage and process-driven operating
philosophy •
Realize cost synergies derived from recent acquisitions
Continuous
Improvements to
Drive Margin
Expansion
•
Buy, build or partner to fill-in product gaps or expand customer base
•
Recent acquisitions have added product, scale and market breadth
ORCC acquisition provided ACI with a full-service Bill Payment platform for
Online Banking and Billers
OPAY acquisition expanded bill payment reach into key new verticals incl.
Federal, State & Local government, taxes and higher education
Disciplined
Acquisition /
Investment Strategy
8 |
 FINANCIAL OVERVIEW |
 MEETS THE CHALLENGE OF CHANGE
$3,910
$1,566
$1,617
$2,416
$3,861
2010
2011
2012
2013
3/31/14 LTM
2010
2011
2012
2013
Q1 2014
SNET 20%+ CAGR
$315
$330
$501
$600
$646
Renewal rates across ACI products >96%
>95% of our contracts are transaction-based
NET NEW SALES BOOKINGS
HISTORICAL 60-MONTH BACKLOG
26% CAGR
(millions)
(millions)
Bookings Growth Leads to Large Backlog
Provides Revenue and Earnings Visibility
10 |
 MEETS THE CHALLENGE OF CHANGE
$1,070
$418
$465
$689
$871
$295
$88
$113
$191
$239
2010
2011
2012
2013
2014E
NON-GAAP REVENUE
2010
2011
2012
2013
2014E
ADJUSTED EBITDA
31%
21%
24%
28%
29%
Adjusted EBITDA
% Net Margin
26% CAGR
35% CAGR
(millions)
(millions)
2013 revenue geographic mix: 63% Americas, 26% EMEA and 11% Asia/Pacific
ACI’s
Financial
Summary,
2010
–
2014
Notes:
2014E represents midpoint of guidance range
11
Net Margin based on net revenues, or gross revenues adjusted for $38 million in pass through
interchange fees |
 MEETS THE CHALLENGE OF CHANGE
STRONG RECURRING REVENUE GROWTH
•
All components of non recurring revenue are seasonally stronger in the latter half
of the year •
Monthly recurring revenue is predictable and less seasonal
>70% Recurring Revenue
12
$0
$60
$120
$180
$240
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2009
2010
2011
2012
2013
2014
Monthly Recurring Revenue: SaaS Subscriptions & Transactions, Maintenance and
License Fees (Paid Monthly, Quarterly only)
Non Recurring Revenue: Ongoing Implementations, Services, Capacity Sales and
Annual License Fees |
 MEETS THE CHALLENGE OF CHANGE
SaaS Subscriptions and Transactions Contribution Growth
2009 segment contribution
2013 segment contribution
•
SaaS Subscriptions & Transactions have grown from ~10% to over 40%
•
Overall monthly recurring revenues have grown from ~60% to over 70%
•
Note: 2013 percentages based normalized for ORCC and OPAY
13
SaaS
subscriptions &
transactions
41%
Maintenance
24%
Services
12%
Initial licenses
fees
14%
Monthly license
fees
9%
SaaS
subscriptions &
transactions,
10%
Maintenance,
32%
Services,
20%
Initial licenses
fees, 20%
Monthly
license fees,
18%
Monthly recurring segments
Non recurring segments |
 MEETS THE CHALLENGE OF CHANGE
$30
$63
$67
$24
$151
2009
2010
2011
2012
2013
OPERATING FREE CASH FLOW
2009
2010
2011
2012
2013
$10
$13
$19
$17
$33
CAPITAL EXPENDITURES
3%
3%
4%
3%
4%
% of Non-GAAP Revenue
Low capital expenditures needed to maintain
existing client base
ACI generates strong free cash flow
(millions)
(millions)
Low Cap Ex and Strong Cash Flow
14
•
NOLs starting to contribute and cash taxes
much lower than GAAP |
 MEETS THE CHALLENGE OF CHANGE
CUMULATIVE SHARE REPURCHASES
Average price $32.58/share
$138 million remains authorized
*YTD 2014 data as of March 31, 2014
2012 Includes $30m in IBM warrant purchases
Efficient Use of Cash -
Aggressive Share Repurchases
$409m
$1090m
15
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
CY
2005
CY
2006
CY
2007
CY
2008
CY
2009
CY
2010
CY
2011
CY
2012
CY
2013
YTD
2014
Cumulative Amount Purchased ($ millions)
Cumulative Shares (millions) |
 MEETS THE CHALLENGE OF CHANGE
2014 Guidance
Guidance
Key Metrics
2014 Guidance
Low
High
Non-GAAP Revenue
$1,060
$1,080
Adjusted EBITDA
$290
$300
$s in millions
16
These metrics exclude approximately $13-$15 million in one-time
integration related expenses and $2 million of deferred revenue
adjustment Guidance assumes estimates for non-cash purchase accounting
adjustments, intangible valuations and deferred revenue haircut
Notes
Q2
revenue
expected
to
be
in
the
range
of
$240
-
$250
million
Sales, net of term extension, growth in the upper single digits
Revenue and margin phasing by quarter consistent with seasonal history
|
 MEETS THE CHALLENGE OF CHANGE
Financial Summary –
Five Year Targets
•
Organic revenue growth –
Mid to upper single digits
•
Adjusted EBITDA margin –
100 bps expansion per year
•
Operating free cash flow –
Track adjusted EBITDA growth
•
Sales net of term extension growth –
High single digits
17 |
 MEETS THE CHALLENGE OF CHANGE
High Quality Software Model Drives Superior Performance
•
Leading market position
•
High retention and renewal rates
•
Pricing power and large barriers to entry
•
Significant recurring revenue
•
Scalable model with improving margin
•
Low cash investment required
•
Strong cash flow and balance sheet
•
Value enhancing capital allocation
18 |
 MEETS THE CHALLENGE OF CHANGE
To supplement our financial results presented on a GAAP basis, we use the
non-GAAP measure indicated in the tables, which exclude certain business
combination accounting entries related to the acquisitions of Official Payments, Online Resources and S1 and significant transaction
related expenses, as well as other significant non-cash expenses such as
depreciation, amortization and share-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 of viewing 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:
Non-GAAP Financial Measures
19
•
Non-GAAP revenue: revenue plus deferred revenue that would have been recognized in the normal
course of business by S1 and Online Resources if not for GAAP purchase accounting
requirements. Non-GAAP revenue should be considered in addition to, rather than as a
substitute for, revenue.
•
Non-GAAP operating income: operating income (loss) plus deferred revenue that would have been
recognized in the normal course of business by S1 and Online Resources if not for GAAP purchase
accounting requirements and significant transaction related expenses. Non- GAAP
operating income should be considered in addition to, rather than as a substitute for, operating income.
•
Adjusted EBITDA: net income (loss) plus income tax expense, net interest income (expense), net other
income (expense), depreciation, amortization and non-cash compensation, as well as deferred
revenue that would have been recognized in the normal course of business by S1 and Online
Resources if not for GAAP purchase accounting requirements and significant transaction related expenses. Adjusted EBITDA
should be considered in addition to, rather than as a substitute for, operating income. |
 MEETS THE CHALLENGE OF CHANGE
Adjusted EBITDA (millions)
2010
2011
2012
2013
Net income (loss)
27
$
46
$
49
$
64
$
Plus:
Income tax expense (benefit)
22
18
16
29
Net interest expense
1
1
10
27
Net other expense
4
1
-
3
Depreciation expense
6
8
13
19
Amortization expense
20
21
38
51
Non-cash compensation expense
8
11
15
14
Adjusted EBITDA
88
106
141
207
Deferred revenue fair value adjustment
-
-
22
6
Employee related actions
-
-
11
11
Facility closure costs
-
-
5
2
IT exit costs
-
-
3
-
Other significant transaction related
expenses
-
7
9
13
Adjusted EBITDA excluding significant
transaction related expenses
88
$
113
$
191
$
239
$
Non-GAAP Financial Measures
20
Non-GAAP Revenue (millions)
2010
2011
2012
2013
Revenue
418
$
465
$
667
$
865
$
Deferred revenue fair value adjustment
-
-
22
6
Non-GAAP revenue
418
$
465
$
689
$
871
$ |
 MEETS THE CHALLENGE OF CHANGE
ACI is also presenting operating free cash flow, which is defined as net cash
provided by operating activities, plus payments associated with the cash
settlement of acquisition related options and significant acquired opening balance sheet liabilities, plus net after-tax payments associated
with employee-related actions and facility closures, net after-tax payments
associated with significant transaction related expenses, net after-tax
payments
associated
with
IBM
IT
outsourcing
transition
and
termination,
and
less
capital
expenditures.
Operating
free
cash
flow
is
considered
a non-GAAP financial measure as defined by SEC Regulation G. We utilize
this non-GAAP financial measure, and believe it is useful to
investors,
as
an
indicator
of
cash
flow
available
for
debt
repayment
and
other
investing
activities,
such
as
capital
investments
and
acquisitions.
We utilize operating free cash flow as a further indicator of operating performance
and for planning investing activities. Operating free cash flow
should
be
considered
in
addition
to,
rather
than
as
a
substitute
for,
net
cash
provided
by
operating
activities.
A
limitation
of
operating
free
cash
flow
is
that
it
does
not
represent
the
total
increase
or
decrease
in
the
cash
balance
for
the
period.
This
measure
also
does
not
exclude
mandatory debt service obligations and, therefore, does not represent the residual
cash flow available for discretionary expenditures. We believe that
operating free cash flow is useful to investors to provide disclosures of our operating results on the same basis as that used by our
management.
Non-GAAP Financial Measures
21
Reconciliation of Operating Free Cash Flow
(millions)
2009
2010
2011
2012
2013
Net cash provided (used) by operating
activities
44
$
81
$
83
$
(9)
$
138
$
Net after-tax payments associated with
employee-related actions
3
-
-
6
10
Net after-tax payments associated with facility
closures
-
-
-
3
1
Net after-tax payments associated with
significant transaction related expenses
-
-
4
9
18
Net after-tax payments associated with cash
settlement of acquisition related options
-
-
-
10
10
Payments associated with acquired opening
balance sheet liabilties
-
-
-
-
5
Net after-tax payments associated with IBM IT
Outsourcing Transition
1
1
1
2
Plus IBM Alliance liability repayment
-
-
-
21
-
Less capital expenditures
(10)
(13)
(19)
(17)
(33)
Less IBM Alliance technical enablement
expenditures
(7)
(6)
(2)
-
-
Operating Free Cash Flow
30
$
63
$
67
$
24
$
151
$ |
 MEETS THE CHALLENGE OF CHANGE
ACI also includes backlog estimates, which include all software license fees,
maintenance fees and services specified in executed contracts, as well as
revenues from assumed contract renewals to the extent that we believe recognition of the related revenue will occur within the
corresponding backlog period. We have historically included assumed renewals
in backlog estimates based upon automatic renewal provisions in the executed
contract and our historic experience with customer renewal rates. Backlog is
considered a non-GAAP financial measure as defined by SEC Regulation G. Our 60-month backlog estimate represents expected
revenues from existing customers using the following key assumptions:
Estimates of future financial results are inherently unreliable.
Our backlog estimates require substantial judgment and are based on a number of
assumptions as described above. These assumptions may turn out to be
inaccurate or wrong, including for reasons outside of management’s
control. For example, our customers may attempt to renegotiate or terminate their
contracts for a number of reasons, including mergers, changes in their
financial condition, or general changes in economic conditions in the customer’s industry or geographic location, or we may
experience delays in the development or delivery of products or services specified
in customer contracts which may cause the actual renewal rates and amounts
to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue
actually
recognized
in
future
periods.
Accordingly,
there
can
be
no
assurance
that
contracts
included
in
backlog
estimates
will
actually
generate
the specified revenues or that the actual revenues will be generated within the
corresponding 60-month period. Backlog should be considered in addition
to, rather than as a substitute for, reported revenue and deferred revenue.
Non-GAAP Financial Measures
22
•
Maintenance fees are assumed to exist for the duration of the license term for
those contracts in which the committed maintenance term is less than the
committed license term. •
License, facilities management, and software hosting arrangements are assumed to
renew at the end of their committed term at a rate consistent with our
historical experiences. •
Non-recurring
license
arrangements
are
assumed
to
renew
as
recurring
revenue
streams.
•
Foreign currency exchange rates are assumed to remain constant over the
60-month backlog period for those contracts stated in currencies other
than the U.S. dollar. •
Our pricing policies and practices are assumed to remain constant over the
60-month backlog period. |
 MEETS THE CHALLENGE OF CHANGE
This presentation 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
presentation include, but are not limited to, statements regarding: (i)
expectations regarding 2014 financial guidance, including non-GAAP revenue, adjusted EBITDA, and net new sales bookings;
(ii) expectations regarding Q2 2014 revenue;
(iii) expectations regarding five year targets, including future increases in
organic revenue, adjusted EBITDA margin, operating free cash flow, and sales
net of term extension. Forward-Looking Statements
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 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. 23 |
 |