Aci Worldwide, Inc. · NASDAQ:ACIW
Aci Worldwide — Investor Day (November 2013)
87 slides from Aci Worldwide's investor day presentation, Nov 14, 2013
Slide 1: ACI Investor Day 2013
ACI INV ESTOR DAY 2013 UNIVERSAL PAYMENTS.
Slide 2: Safe Harbor for Forward-Looking Statements
Private Securities Litigation Reform Act of 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
Slide 3: Corporate Vision and Strategy
Corporate Vision and Strategy Phil Heasley President & CEO November 14, 2013
Slide 4: Corporate Marketing
Corporate Marketing Carl Gustin SVP, Chief Marketing Officer November 14, 2013
Slide 5: ACI Business Plan Models
PRODUCT INNOVATION OPERATIONAL EXCELLENCE CUSTOMER INTIMACY ACI Business Plan Models Differentiation, value, gold standard – leading solutions Highest efficiency, lowest cost, high value and flexible solutions Low attrition, high satisfaction, maximize margins Corporate Marketing
Slide 6: ACI Business Plan Models: Global Markets, ACI On Demand, Customer Management
PRODUCT INNOVATION OPERATIONAL EXCELLENCE CUSTOMER INTIMACY ACI Business Plan Models Global Markets ACI On Demand Customer Management Corporate Marketing
Slide 7: Market Profile: Sizing
Market Profile: Sizing IDC analysis shows ACI is in about a $20B market, growing to about $26B in 2018, a projected CAGR of 7-8%* Biller market for EBPP services represents a new significant opportunity for ACI of ~$6B (bottom-up analysis) Per IDC data, ACI share does not exceed 10% in any segment A
Slide 8: Market Profile: Competition
Market Profile: Competition CORE – Traditional competitors operating closely to ACI in certain regions e.g. OpenWay, Clear2Pay, Alaric TANGENTIAL – Significant industry players, occasional customer, might be a threat SECONDARY – Larger competitors, occasionally customers Corporate Marketing
Slide 9: Market Profile: Competition
Market Profile: Competition FUNDTECH ACTIMIZE ALARIC LUSIS OPENWAY IBM VISA MASTERCARD SAP CSC JACK HENRY LOGICA BPC DOVETAIL C2P BOTTOMLINE FIS FISERV Corporate Marketing
Slide 10: Market Profile Summary
Market Profile Summary • Category growing at about 7-8% overall.* • ACI growing at a mid to high single digit rate overall. • ACI is gaining share with fastest growth in AOD (hosted SaaS solutions). • IDC projects growth rates to maintain trajectory through 2018. *Variability of data due to segment
Slide 11: Market Trends: Macro and Business of Payments
Market Trends MACRO THE BUSINESS OF PAYMENTS Corporate Marketing • Return to normal growth for global economy not yet realized. • Emerging economies no longer simply “emerging”. • FI’s under pressure to overhaul their business models. • Online, real-time and ubiquitous access will transform Retail a
Slide 12: Market Trends: Market Pressures and Technology
Market Trends MARKET PRESSURES TECHNOLOGY Corporate Marketing • Consumer expectations changing dramatically. • Global regulation continues to pressure ACI customers’ margins. • FI’s SOA and ISO2022 are the architectural preference of the technology buyer. • Expensive legacy systems in maintenance mo
Slide 13: Strategic Imperatives
Online, real-time transcends all other trends. Hosting, SaaS, and various Cloud alternatives will continue to develop. Value Proposition to replace legacy systems must be clear and compelling. FI’s must become price-makers, not price-takers. Processors are in a race to the bottom in fees they can ch
Slide 14: Strategic Imperatives
Online, real-time transcends all other trends. Hosting, SaaS, and various Cloud alternatives will continue to develop. Value Proposition to replace legacy systems must be clear and compelling. Strategic Imperatives FI’s must become price-makers, not price-takers. Processors are in a race to the bott
Slide 15: The UP Advantage – Before
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels The UP Advantage – BEFORE • Massive customization needs • High cost of maintenance • Slow time-to-market • Difficulty achieving differentiation Today’s financial institutions are burdened with integration tasks: Corporate
Slide 16: The UP Advantage – Before
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels The UP Advantage – BEFORE • Complex systems • Little control • Little choice • Inflexible Integration:
Slide 17: The UP Advantage – After
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels The UP Advantage – AFTER UNIVERSAL PAYMENTS • Lower unit costs • Speed time-to-market • Increase global readiness • Enable data mining and cross-sell opportunities • Controlled migration Universal Payments aligns with exis
Slide 18: The UP Advantage – After
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels The UP Advantage – AFTER WHY • Control • Choice • Flexibility • Peace of mind HOW WHAT UNIVERSAL PAYMENTS
Slide 19: The UP Advantage – Reactions
The UP Advantage – REACTIONS ACI positioned to lead the enterprise payments space… Best in class payments engine… We see the future with UP… We develop and integrate services quickly (with UP) while saving costs… Peter Elliot, Head of Solutions Design, Vocalink Vincent Querrette, BNPP CEB TowerGroup
Slide 20: The UP Brand: Go to Market Plan
The UP Brand: Go to Market Plan WHY Control, Choice, Flexibility & Peace-of-mind HOW Universal Payments WHAT Strategic Products (BASE24-eps, PRM, MTS, Mobility, Universal Online Banking, etc.) Corporate Marketing
Slide 21: The UP Brand: Go to Market Plan
The UP Brand: Go to Market Plan
Slide 22: The UP Brand: Go to Market Plan
The UP Brand: Go to Market Plan
Slide 23: ACI Investor Day 2013
ACI INVESTOR DAY 2013 Corporate Marketing MCI UNIVERSAL PAYMENTS
Slide 24: No one unleashes the promise and power of payment systems like ACI
No one unleashes the promise and power of payment systems like ACI. NO ONE. Corporate Marketing
Slide 25: Application Development
Application Development Tony Scotto EVP, Application Development November 14, 2013
Slide 26: ACI Application Development Overview
• Responsible for timely delivery of product and customer development projects • Average of 346 projects per month (132 product, 214 customer) • • Team members in 19 countries • • More than 18% of revenue applied to R&D OVERVIEW INVESTMENT SCALE 1,650 application development professionals primary de
Slide 27: UP Overview
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels UP Overview • Lower unit costs • Speed time-to-market • Increase global readiness • Enable data mining and cross-sell opportunities • Reduce maintenance costs ACI Universal Payments aligns with existing and target infrastr
Slide 28: UP Technical Differentiators
Support for all payment types Service-oriented architecture Flexible service orchestration Common payment object (Payment Information Model) UP Technical Differentiators
Slide 29: Customer Benefits of Control, Choice and Flexibility
Customer Benefits of Control, Choice and Flexibility • Utilize and leverage existing investments: renovation does not equal replacement • Get to market more quickly: up to 50% faster • Reduce operations and maintenance costs: up to 40% savings • Future-proof investment: embrace continued industry di
Slide 30: UP Use Case: Person-to-Person and Mobile Payments
“[ACI] has increased our agility as a company and improved our ability to respond effectively to changing market conditions and increasing customer demands like mobile payments.” – Rafick Cassim, business manager, self service at Absa UP Use Case PERSON-TO-PERSON (P2P) AND MOBILE PAYMENTS CHALLENGE
Slide 31: UP Use Case: Wholesale Banking Examples
“After a rigorous evaluation process, we found that ACI uniquely provides a robust, scalable and flexible payments infrastructure to manage all of our payments needs.” - leading Middle Eastern Bank UP Use Case WHOLESALE BANKING EXAMPLES CHALLENGES RESULTS • Capitalize on new revenue opportunities •
Slide 32: UP Use Case: UK Faster Payments
UP Use Case UK FASTER PAYMENTS RESULTS • Reduces settlement to 30 minutes • UP orchestration enables any-to-any payments • Clear and immediate financial visibility CHALLENGE Real-time Payments Solution • Replace traditional 3-day settlement process with real- time settlement
Slide 33: Summary: UP Vision Realized Today
• UP deployed within ACI products • Customers achieving significant benefits • Talent, scale and investment to drive continued innovation Summary UP VISION REALIZED TODAY
Slide 34: Universal Payments. ACI Investor Day 2013
UNIVERSAL PAYMENTS. ACI INVESTOR DAY 2013
Slide 35: Global Markets
Global Markets Dan Frate EVP, Global Markets and Products November 14, 2013
Slide 36: Developing Long-Term Value
Winning business develops growing backlog Managing maintenance for profitability Recurring revenue through hosting operations Developing Long-Term Value
Slide 37: Opportunity for ACI: Noncash Transaction Volumes
Opportunity for ACI North America Europe Asia Pacific Latin America Middle East & Africa TRENDS IN NONCASH TRANSACTION VOLUMES NONCASH TRANSACTION VOLUMES (IN MILLIONS) BY REGION, 2005-2016 (E) Source: CEB TowerGroup Payment Database (TGPD), 2011
Slide 38: Opportunity for ACI: Solutions per Customer
Average ACI Customer 2.5 Products Opportunity for ACI SOLUTIONS PER ACI CUSTOMER # of Existing Customers in the Top Banks and Retailers 5+ Products Goal:
Slide 39: ACI Worldwide: A Global Payments Company
ACI Worldwide: A Global Payments Company Canada 1 locations USA 14 locations Latin America 2 locations Brazil 1 location Africa 2 locations Continental Europe 3 locations Northern Europe 3 locations Australia & New Zealand 2 locations North Asia 2 locations ASEAN 2 locations South Asia 2 locations M
Slide 40: ACI Universal Payments: Solutions Across the Payments Value Chain
CONSUMER/BUSINESS ACI Universal Payments SOLUTIONS ACROSS THE PAYMENTS VALUE CHAIN DEBIT CREDIT WIRE SWIFT FRAUD AML BILL PAYMENT POS ACQUIRING PAYMENT TYPES PAPER BILLS/ CHECKS MOBILE ONLINE BRANCH POS ATM CHANNELS
Slide 41: Global Payment Trends Driving Customer Needs
Global Payment Trends Driving Customer Needs
Slide 42: Payment Channel Solutions
An omni-channel platform for handling all the engagement points with consumers – from branch to online to mobile. Payment Channel Solutions A complete business and wholesale banking solution Mobile, Online, Trade, and Payments Win new clients in fast-paced Asian business market Kaisikornbank Driving
Slide 43: Payment Engine Solutions
Enabling consumer payments securely from cards to mobile Payment Engine Solutions A complete business and wholesale banking solution Mobile, Online, Trade, and Payments Driving fraud rates below 5 basis points Turning tough regulations into competitive advantage Enabling innovation to win new custom
Slide 44: Retailer Solutions
LEADING CONSUMER ELECTRONICS PROVIDER Security and control over multi-channel retail payments Bringing the POS to the consumer to maximize satisfaction Managing payments across 12 retail store brands Retailer Solutions
Slide 45: Biller Solutions
Complete biller solutions from mobile to online to physical to drive up electronic payments Biller Solutions
Slide 46: UP Ahead of the Industry
ACI Universal Payments UP AHEAD OF THE INDUSTRY • Significant growth opportunity • Unparalleled global distribution • Leading integrated payments solutions
Slide 47: ACI On Demand
ACI On Demand David Morem EVP, ACI On Demand November 14, 2013
Slide 48: ACI On Demand (AOD) Overview
AOD provides Software-as-a-Service (SaaS) hosted payment systems featuring the ACI UP product portfolio financial institutions, retailers and billers quick service restaurants in the world • Large financial institutions and retailers • Community banks and credit unions • Billers OVERVIEW INVESTMENT
Slide 49: AOD Advantages Over On-Premise Operations
• Lower up-front investment, more consistent costs • Faster time to market • Reduced operational and regulatory burden AOD Advantages Over On-Premise Operations • Operational excellence • Protection from code issues • Faster time to service restoration • Security and risk management
Slide 50: Retail Payments Use Case: Large Fast Food Retailer
for one of the world’s largest fast food retailers (14,200 stores, 60,000 tills) Retail Payment Solution RESULTS • billion transactions in last year • Transaction processing up 31% over last 2 years • Mobile handheld processing for in-store queue busting Retail Payments Use Case LARGE FAST FOOD RETA
Slide 51: Growth from 10% to 40% of ACI Revenues
Growth Growth from 10% to 40% of ACI revenues POST OPAY APPLICATIONS SUPPORTED POST OPAY STAFF POST OPAY REVENUE $45M $110M $260M $400M POST OPAY CUSTOMERS
Slide 52: Major Growth Opportunities
EBPP: Grow market share and vertical reach in Electronic Bill Presentment and Payment market SOLUTIONS: Grow revenue and reach with targeted, high-value solutions Major Growth Opportunities
Slide 53: ACI Biller Market Opportunity
• Displacing in-house solutions is largest source of ACI growth in biller-direct • 80% of transactions are processed by billers in-house today • 3.7 billion payments per year are processed in-house • Compliance, efficiency and speed to market are driving growth in outsourcing ACI Biller Market Oppor
Slide 54: EBPP Growth Highlights: Acquisition of Online Resources
Acquisition of Online Resources EBPP Growth Highlights 25% 20% 15% 10% 5% 0% ONLINE RESOURCES GREW TRANSACTIONS AT MORE THAN DOUBLE INDUSTRY RATE Biller Direct Industry Online Resources Biller Direct Source: Aite Group, 2013 • Industry’s fastest growing biller direct provider • 600+ customers • $60
Slide 55: EBPP Growth Highlights: Acquisition of Official Payments
OFFICAL PAYMENTS LEADS INDUSTRY IN NUMBER OF CUSTOMERS Acquisition of Official Payments – US Internal Revenue Service – 23 state governments, Puerto Rico and the District of Columbia – Municipal utilities – Higher education institutions Source: Aite Group, 2013 EBPP Growth Highlights • $9+ billion i
Slide 56: Vertical Market Opportunities
Online Resources Official Payments Future Opportunities Federal, State & Local Municipal Utilities Higher Education Real Property Taxes Consumer Finance (Mortgage, card, auto, other loans) Insurance Utilities ARM (Collection agencies, debt buyers) Healthcare Charities International Telecom (TV, phon
Slide 57: EBPP Use Case: Large U.S. Mortgage Lender
One-time and recurring payments, and consolidated remittances across Web, IVR and call center Integrated Bill Payments EBPP Use Case LARGE U.S. MORTGAGE LENDER RESULTS CHALLENGE • Reduce high costs associated with paper-based payments • Integration of remittance channels • 73% of payments received e
Slide 58: ACI Universal Payments: Solutions Across the Value Chain
ACI Universal Payments SOLUTIONS ACROSS THE VALUE CHAIN DEBIT CREDIT WIRE SWIFT FRAUD AML BILL PAYMENT POS ACQUIRING PAYMENT TYPES PAPER BILLS/ CHECKS MOBILE ONLINE BRANCH POS ATM CHANNELS
Slide 59: Solutions Use Case: The Palmetto Bank
Integrated mobile, online and voice banking solution Community Bank Competes with Big Banks Solutions Use Case THE PALMETTO BANK RESULTS CHALLENGE • Ability to compete with big bank offerings for online and mobile solutions • Difficulty keeping up with security, redundancy and compliance concerns •
Slide 60: Summary
• High-growth, high margin part of ACI business • Source of recurring revenue • Operational excellence • EBPP represents key opportunity for growth and vertical expansion • Solutions focus to develop deeper, bigger relationships Summary
Slide 61: Customer Management and Maintenance
Customer Management and Maintenance Carolyn Homberger SVP, Customer Management November 14, 2013
Slide 62: What is Customer Management and Maintenance?
Our focus What is Customer Management and Maintenance? Brand Relationship Products & Solutions • Profitability management • Customer satisfaction • Customer loyalty and retention
Slide 63: Customer Management and Maintenance: Profitability Management
Maintenance and Premium Customer Support (PCS) Extended Support Services (ESS) • Post-implementation support • 100% recurring revenue comprised of standard and premium customer support • Expenses are driven by: - Production support - Software mandates - Customer management shared services (billing,
Slide 64: Customer Management and Maintenance: Customer Satisfaction
Customer Management and Maintenance CUSTOMER SATISFACTION Customer satisfaction driven by world-class SLA performance
Slide 65: Customer Management and Maintenance: Loyalty and Retention
Customer Management and Maintenance CUSTOMER LOYALTY & RETENTION Customer loyalty drivers… • “Cares about customers” and “Ease of doing business” • Solutions and innovation • Operational excellence $3,112 9-30-13 LOW SINGLE DIGIT ATTRITION AND IMPROVING (millions) 60-month backlog Customer Managemen
Slide 66: Customer Management and Maintenance: Growth
Organic License Fee & Maintenance Growth • High electronic transaction growth rates • Add-on sales Cross-Sell • UP & solutions focus • 2X products / customer Migration to Strategic Products • Best-in-class migration tools Premium Customer Support • Customized support – annual system reviews, etc. •
Slide 67: Summary
• Focus on profitability … high margin, high predictability • 100% satisfaction with every customer interaction • An experience that “delights” driving customer loyalty and retention Summary Customer Management and Maintenance
Slide 68: Financials
Financials Scott Behrens Executive Vice President Chief Financial Officer November 14, 2013
Slide 69: Bookings Growth Leads to Large Backlog
$293 $315 $330 $501 $552 LTM 9-30-13 ACI Sales, Net of Term Extensions (SNET) ACI Term Extensions $425 $525 $556 $766 $813 SNET 19% CAGR $132 $210 $226 $265 $261 • Renewal rates across ACI products >96% • >95% of our contracts are transaction-based SALES BOOKINGS Bookings Growth Leads to Large Backl
Slide 70: ACI's Financial Summary
18% 21% 24% 28% 27% ACI’s Financial Summary 2009 – LTM 9/30/2013 $814 $73 $88 $113 $191 $223 LTM 9-30-13 NON-GAAP REVENUE LTM 9-30-13 ADJUSTED EBITDA Adjusted EBITDA % Margin 20% CAGR 35% CAGR +900 bps (millions) (millions) • No customer accounts for >3% of revenue • LTM 9/30/13 revenue geographic m
Slide 71: Strong Recurring Revenue Growth
Ongoing Services, Implementations, Increased Capacity Sales & Other Recurring Revenue: Hosting, Maintenance & License Fees (Paid Monthly, Quarterly or Annually) >70% Recurring Revenue and Growing STRONG RECURRING REVENUE GROWTH • Recurring revenue has increased in dollar amount and as a percent of r
Slide 72: Economic Value of Existing Customer Base is Growing
Transaction growth (both in SaaS revenue and incremental capacity licenses) Price increases Annual CPI increases 60-month backlog (recurring only) Financials Economic Value of Existing Customer Base is Growing
Slide 73: Low Cap Ex and Strong Cash Flow
Low Cap Ex and Strong Cash Flow $30 $63 $67 $24 $106 LTM 9-30-13 OPERATING FREE CASH FLOW LTM 9-30-13 $10 $13 $19 $17 $22 CAPITAL EXPENDITURES 3% 3% 4% 2% 3% Low capital expenditures needed to maintain existing client base ACI consistently generates strong free cash flow • NOLs starting to contribut
Slide 74: Efficient Use of Cash
$355m $1090m HISTORICAL USE OF CASH/BORROWINGS SINCE 2005 CUMULATIVE SHARE REPURCHASES Average price $29.96/share • $108 million remains authorized • Current leverage ratio 2.8x *2012 Includes $30m in IBM warrant purchases Cumulative Amount Purchased ($millions) Cumulative Shares (millions) Efficien
Slide 75: Pro Forma Non-GAAP Revenue Bridge
Pro Forma Non-GAAP Revenue Bridge Pro Forma *(millions) Represents low end of guidance Stub additions normalize for full year contribution • Normalized 2013 revenue mix: • 40% Hosting (SaaS), 24% Maintenance and 36% License & Services • 75% recurring revenue $883 $30 $122 $1035 ORCC Stub OPAY Stub F
Slide 76: Pro Forma Adjusted EBITDA Bridge
Pro Forma Adjusted EBITDA Bridge $12 $5 $291 ORCC Stub and incremental synergies S1 Synergies Pro Forma $257 OPAY Stub and synergies $17 *(millions) Represents low end of guidance Stub additions normalize for full year contribution Financials
Slide 77: Financial Summary – Five Year Targets
Summary 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 Financials
Slide 78: High Quality Software Model Drives Superior Performance
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
Slide 79: ACI Investor Day 2013
ACI INV ESTOR DAY 2013 UNIVERSAL PAYMENTS.
Slide 80: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 ORCC and S1 and significant transaction related expenses, as we
Slide 81: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-GAAP Revenue (millions) Q4 2012 9 months 9-30-13 LTM 9-30-13 Revenue $ $ $ $ $ $ $ Deferred revenue fair value adjustment - - - Non-GAAP revenue $ $ $ $ $ $ $ Adjusted EBITDA (millions) Q4 2012 9 months 9-30-13 LTM 9-30-13 Net income (loss) $ $ $ $ $ $ $ Plus: Income
Slide 82: Reconciliation of Operating Free Cash Flow
Reconciliation of Operating Free Cash Flow (millions) Q4 2012 9 months 9-30-13 LTM 9-30-13 Net cash provided (used) by operating activities $ $ $ (9) $ $ $ $ Net after-tax payments associated with employee-related actions - - - Net after-tax payments associated with facility closures - - - Net after
Slide 83: ACI Investor Day 2013
G ACI INVESTOR DAY 2013
Slide 84: Non-GAAP Financial Measures
Non-GAAP Financial Measures ACI is also presenting operating free cash flow, which is defined as net cash provided by operating activities, plus net after-tax payments associated with employee-related actions and facility closures, net after-tax payments associated with significant transaction relat
Slide 85: Backlog Estimates
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
Slide 86: Forward-Looking Statements
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,” “
Slide 87: Forward-Looking Statements Risk Factors
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