ACI Worldwide, Inc. · NASDAQ:ACIW
ACI Worldwide — Transaction Systems Architects — Investor Presentation (December 2006)
49 slides from ACI Worldwide's investor presentation, Dec 18, 2006
Slide 1: Transaction Systems Architects Investor Overview
VERSION 2.0 9-14-06 Transaction Systems Architects Investor Overview December 2006 Exhibit 99.1
Slide 2: Safe Harbor For Forward-Looking Statements
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
Slide 3: Investment Considerations
Investment Considerations • Leader in Global Payments Software and Solutions – Customers include ~ 60% of the top global banks that use rd party payments software and 9 of the top 20 global retailers • Long-Term Blue-Chip Customer Base – Average 18-year relationship with top ten customers • Signific
Slide 4: Investment Considerations (cont’d)
Investment Considerations (cont’d) • New Opportunity With Software as a Service Business Model – Significantly expands potential opportunity • Leadership Advantages in Areas of Focus – 30 years of providing leading payments processing solutions – Approximately 12% of annual revenue invested in produ
Slide 5: Business Overview
Business Overview Global business with long and successful operating history • Leader in global enterprise electronic payment software and solutions – Gold standard for single-message format payments – Listed on the NASDAQ (ticker: TSAI) – Member of the S&P MidCap 400 and Russell 2000 • Operates thr
Slide 6: Company History
Company History Over 30 years of delivering market leading e-payments solutions Founded as custom development firm First international sale Went public on NASDAQ as ACI Purchased by US West Purchased by Tandem Computers TSA IPO and Secondary Offering Proactive Risk Manager product launch First produ
Slide 7: TSA Business Strategy
TSA Business Strategy Management has developed a strong vision for the Industry • Globalization – Extend geographic reach – Global infrastructure will drive efficiencies • Filling in the payments “supply chain” – Build, buy, partner • Software as a Service – Alternative mechanisms for offering payme
Slide 8: Continuation of the Strategy
Continuation of the Strategy Phil Heasley joins as CEO Acquisition • Payments software • Added customers • Integration completed Acquisition • Payments software • Entered Germany, access to new products, initiated offshore efforts • Integration on schedule (Q2‘05) (Q3‘05) Announced global realignmen
Slide 9: An End-to-End Payments Architecture
An End-to-End Payments Architecture TSA solutions can be deployed in-house or used as Software as a Service
Slide 10: Solutions Overview
Solutions Overview Portfolio of products that provide end-to-end e-payments solutions architecture • BASE24/BASE24-es – Gold standard for online e-payment processing – Strong in ATM and POS markets – Customers process over 60 billion transactions per year – BASE24-es opens up the IBM-centric and ope
Slide 11: Where TSA’s Solutions Fit – Wholesale Payments
Where TSA’s Solutions Fit – Wholesale Payments TSA facilitates multiple processing models and straight-through processing National Payment Network SWIFT Wholesale Bank (e.g. BofA, Wachovia, PNC) Domestic Bank Corporate Treasurer or Individual e.g.. FEDWIRE, CHIPS, LVTS, CHAPS) Foreign Bank Corporate
Slide 12: Where TSA’s Solutions Fit – Consumer Payments
Where TSA’s Solutions Fit – Consumer Payments TSA offers services at every point in the payment flow Regional Network National Network ATM Retailer (e.g. Target, Safeway, The Gap, Winn Dixie) Acquiring Institution (e.g. BofA, Citibank, US Bank) Regional Network Issuing Institution (e.g. BofA, Citiba
Slide 13: TSA Industry Focus
TSA Industry Focus Dynamic industry with significant potential for growth • Top 2000 world banks • Top 500 global retailers • Top 200 global and regional payment processors • Software as a Service – Designed to expand addressable market to lower tiers – P&H acquisition is catalyst
Slide 14: TSA’s Footprint
TSA’s Footprint 9 of the top 20 global retailers, and 33 of the top 100 U.S. retailers 11 of the top 15 U.S. banks running the ACI Wholesale Payments System, and 23 of the top 500 world banks 12 of the top 25 U.S. banks running the Web Cash Manager Suite (with P&H) 116 of the top 500 world banks run
Slide 15: Blue-Chip Customer Base
Blue-Chip Customer Base Processors/Switchers Retailers Financial Institutions Long term relationships with blue chip customer base
Slide 16: 3-Dimensional Licensing Model – Key Elements
3-Dimensional Licensing Model – Key Elements Attractive financial model tied to transaction volumes and contractually recurring revenue • Term (no perpetual licenses) – Typical term is 5 years – Leverages longevity of customer relationship • Feature/function – Pricing by module (TSA has thousands of
Slide 17: Value-Added Services
Value-Added Services ~50% of TSA’s revenue comes from maintenance and services • Maintenance provided to license customers – 15-20% of license amount and include annual CPI adjustments – Includes periodic product updates in addition to usual product support • Professional services include design, de
Slide 18: TSA’s Next Growth Opportunities
TSA’s Next Growth Opportunities TSA is well positioned to capitalize on significant growth opportunities • Tier 1 banks where IBM is the preference – Increases opportunity by 2-3 times • Tier 2 banks and retailers – Via Software as a Service – Via open-systems platforms (Unix, Windows, Linux) • Expa
Slide 19: TSA’s Acquisition Strategy
TSA’s Acquisition Strategy Disciplined acquisition strategy focused on integration • Focus is product extension, geographic expansion and delivery • Purchase of S2 Systems (product extension) – Adds technology and expertise • Purchase of eps Electronic Payment Systems AG (geographic, product extensi
Slide 20: Industry Overview
Industry Overview * * *
Slide 21: Market Trends
Market Trends Long-term electronic payments volume growth is superior to software spend growth and GDP • Electronic payment volumes still increasing, especially debit – Movement towards single-message format • Focus on increasing payments productivity • Growing fraud losses and a focus on enterprise
Slide 22: Global Electronic Payments
Global Electronic Payments Electronic Payments Top 210 Billion & Double by 2010 Transaction Growth Compound Annual Growth Rate, 2004 to 2009 12.9% 13.1% 13.1% 10.5% -3.3% 10.3% 3.2% Electronic Retail Payments Retail Transfers Wholesale Checks Total Non-Cash Real GDP Global Payment Transactions Trans
Slide 23: Top Countries – Electronic Payments
Top 15 Countries – Electronic Payments ** ** ** ** ** ** ** ** ** Countries where TSA’s presence is limited Source: 2006 ACI Payments Market Forecast Electronic Payments - Top 15 Countries Total Transactions (millions) % of World Transactions % of World Real GDP % of World TSA revenue United States
Slide 24: Top Growing Countries – Electronic Payments
Top 15 Growing Countries – Electronic Payments ** Countries where TSA’s presence is limited ** ** ** ** ** ** ** ** Source: 2006 ACI Payments Market Forecast Electronic Payments - Growth 2004 to 2009 Top 15 Countries Change in Transactions (millions) Compound Annual Growth Transactions Compound Annu
Slide 25: Today’s Payment Systems are Under Pressure
Today’s Payment Systems are Under Pressure Heavy Volumes Increased Cost/Age Regulatory Change Increased Risk Emerging Solutions ARC Check Conversion Web and Telephone Payments Mobile Payments Proximity Payments Stored Value Cards EMV Emerged Solutions Traditional Solutions PayPal Biometrics
Slide 26: Why is Convergence Coming?
Why is Convergence Coming? TSA is well positioned as the premier provider of end-to-end payments solutions • Banks face cost issues – Competitive pressures – Ongoing mandate compliance • Risk management issues – Authentication (ACI core competency) – SEPA, operational fraud, AML • Time-to-market nee
Slide 27: Multiple, Redundant “Payment Engines”
Platform Platform Platform Platform Platform Platform Multiple, Redundant “Payment Engines” Banks and processors are beginning to consolidate their payment systems Wire Settle Switch Platform ACH Platform Risk Card Platform Wire Settle Switch Platform ACH Platform Risk Card Platform
Slide 28: Slide 28
Slide 29: Providing an “Enterprise Payments Hub”
Reconciliation G/L DDA Check ACH Wire Providing an “Enterprise Payments Hub” Teller Call Center Web Site IVR Mobile Enterprise-based services increase overall efficiency and help reduce risk Payment Systems Reconciliation G/L DDA Check ACH Debit Card Wire Payments Database Teller Call Center Web Sit
Slide 30: Financial Overview
Financial Overview
Slide 31: Summary TSA Historical Financials – Revenue
Summary TSA Historical Financials – Revenue $348.1 $313.2 $292.8 $277.3 $0.0 $100.0 $200.0 $300.0 $400.0 ($ millions)
Slide 32: Revenue Mix
Revenue Mix Fiscal 2006 Revenue of $348.1 million Highly recurring and geographically diverse revenue streams Services 16% Monthly License Fees 20% Maintenance 30% Facilities Management 4% Initial License Fees 30% Asia/Pacific 10% EMEA 38% United States 34% Americas Int'l 18% Non-Recurring Recurring
Slide 33: Summary TSA Historical Financials – EBITDA
Summary TSA Historical Financials – EBITDA* 0 10 20 30 40 50 21.9% 16.0% 21.7% 21.6% 18.0% $62.5 $67.9 $63.7 $44.4 $0.0 $25.0 $50.0 $75.0 EBITDA EBITDA Margin 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% *Fiscal 2006 includes class action settlement of $8.5 million and $5.7 million of special expenses. EBITDA
Slide 34: Backlog Overview
Backlog Overview* 60-Month Backlog – $1.24 billion 12-Month Backlog – $291 million Backlog provides significant visibility into future operating results * As of 9/30/06, includes P&H backlog net of accounting adjustment, month backlog of $25 million and month backlog of $135 million Americas 54% EME
Slide 35: Fiscal 2007 Guidance
Fiscal 2007 Guidance • Revenue Guidance for fiscal 2007 is expected to be in the range of $430 million to $442 million – P&H Revenue expected to be $39 million to $41 million • Earnings per share guidance for fiscal 2007 is expected to be in the range of $1.46* to $1.61* – P&H is expected to be dilu
Slide 36: Conclusion
Conclusion • TSA is the category leader in global electronic payments software and solutions • Long-term blue-chip customer base • Significant recurring revenue base • Large contracted backlog • Strong cash flow generation • Leadership advantages in areas of focus • Positive industry fundamentals •
Slide 37: www.tsainc.com
www.tsainc.com
Slide 38: Financial Appendix A
Financial Appendix A • Sales-to-revenue discussion • Backlog analysis • Valuation considerations
Slide 39: Sales-to-Revenue Mechanics
Sales-to-Revenue Mechanics • Sales order mix (license fees, maintenance, services, ASP, etc.) and delivery or other acceptance provisions drive revenue recognition • Key attributes are type of sale, contract terms and payment terms • Maintenance and facilities management or ASP (P&H Solutions) reven
Slide 40: TSA Sales Cycle by Type of Deal
TSA Sales Cycle by Type of Deal Note – TSA expenses sales commissions when the deal is signed (paid later) Sales cycle ranges from 90 to 450 days Core solution renewal rates are in excess of 97% New accounts Major new applications Capacity upgrades with existing customers Add-ons for existing custom
Slide 41: Sales-to-Revenue Flow
Sales-to-Revenue Flow P&H Solutions 12-Month and 60-Month Backlog (1) Current Period Revenue Traditional Term Renewals No add-ons: Revenue recognized monthly over term, depending on payment terms. Balance in 12- and 60-month backlog. Term License Renewals (with add-ons or new product) Revenue recogn
Slide 42: General Payment Terms
General Payment Terms • Paid monthly, quarterly or annually Maintenance • Paid as performed Services • 50% of up-front payment at contract signing • 50% of up-front payment at shipment or acceptance • Periodic payments for maintenance or ongoing license fees (monthly, quarterly, annually) once syste
Slide 43: TSA Backlog/Revenue Correlation
TSA Backlog/Revenue Correlation TSA’s current 12 month ($291.5M) (1) and 60 month ($1.24B) (1) backlogs support long-term growth objectives and recurring nature of revenue reduces the risk profile of the business 2007 2008 2009 2010 2011 Revenue Breakdown Estimates Operational View of Revenue Breakd
Slide 44: Valuation Considerations of 60-month Backlog
Valuation Considerations of 60-month Backlog Long-term recurring nature of TSA’s business and significant backlog represent a compelling and differentiated value proposition for long-term investors and should be considered when valuing the company. Split backlog and gap fill into two components over
Slide 45: Forward-Looking Statements
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 discu
Slide 46: Forward-Looking Statements (continued)
Forward-Looking Statements (continued) All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in the Company’s filings with the Securities and Exchange Commission. For a detailed discussion of these risk factors, parties that are relying on the forward-
Slide 47: Forward-Looking Statements (continued)
Forward-Looking Statements (continued) Backlog Estimates The Company’s 12-month and 60-month backlog estimates are based on the Company’s judgment about future events which, as described above, involve a number of risks and uncertainties. The Company estimates backlog using the methodology described
Slide 48: Non-GAAP Financial Measure
Non-GAAP Financial Measure Non GAAP Financial Measure This presentation includes earnings per share guidance on an adjusted, non-GAAP basis. TSA is presenting this non-GAAP guidance to provide more transparency to its earnings, focusing on operations before selected non-cash items. The Company belie
Slide 49: www.tsainc.com
www.tsainc.com
Transaction Systems Architects — Investor Presentation (December 2006) on 6ix