Aci Worldwide, Inc. · NASDAQ:ACIW
Aci Worldwide — Q3 2007 Earnings Presentation
41 slides from Aci Worldwide's earnings presentation, Dec 17, 2007
Slide 1: September 30, 2007 Quarterly Results, IBM Strategic Alliance Update
September 30, 2007 Quarterly Results IBM Strategic Alliance Update December 17, 2007
Slide 2: Safe Harbor For Forward-Looking Statements
2 This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forwardlooking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forwardlook
Slide 3: Agenda
3 • Phil Heasley, Chief Executive Officer – IBM Alliance • Richard Launder, President, Global Operations – 3rd Quarter Sales and Services Overview • Mark Vipond, President, Global Product – 3rd Quarter Overview of Operations • Henry Lyons, Chief Financial Officer – 3rd Quarter Financial Overview • Q
Slide 4: Phil Heasley, Chief Executive Officer
Phil Heasley Chief Executive Officer
Slide 5: IBM Strategic Alliance
5 IBM Strategic Alliance • Formalized a selling, marketing and implementation agreement with IBM for retail and wholesale payments solutions • Initial term of five years • ACI to enhance and optimize its software on IBM's industry-leading System z mainframe platform • Dedicated teams to sell ACI sol
Slide 6: Market Potential
6 Market Potential • IBM is the #1 technology and services provider to banks worldwide – 25 of Top 25 global banks use System z • 95% of Top 500 banks are IBM clients – Hundreds of System z clients have no ACI software today • 170 of the world's top 200 banks still use "homegrown" retail payments so
Slide 7: Benefits to ACI
7 Benefits to ACI • Accelerates and strengthens ACI's strategy to deliver optimized end-to-end payments solutions – Supports deep platform and application integration to drive operational excellence – Aided by IBM's economic and intellectual capital • Enables extensive collaboration with a world-cla
Slide 8: Business Operations Review, Richard Launder
8 September 30, 2007 Quarter Richard Launder, President, Global Operations Business Operations Review
Slide 9: IBM Deal Ramifications
9 IBM Deal Ramifications • Increase our sales bandwidth (dedicated IBM sales teams) • IBM endorsement of ACI products will increase sales • Should increase our success in moving ‘in house’ systems that run on Z to ACI • Will increase pace of customers moving to Base-24 epsTM from Base 24 classic
Slide 10: Sales Exceeded Expectations
10 Sales Exceeded Expectations • Significant sales closed, particularly considering it was the summer quarter – Sale of Payments Manager to a UK Bank – Sale of PRM to a major US Bank – Sale of SCM to several customers in Mid East • Sales % heading directly to backlog vs. GAAP revenue – About 20% of
Slide 11: Geographic Performance in the Quarter
11 Geographic Performance in the Quarter • Seeing larger deals, not so many pots and pans • Larger transactions are across geographies with heavy concentration in the EMEA markets • Weakness at the Enterprise Banker Group due to the delay of the P&H integration (which is now underway) $660 $44 Mexic
Slide 12: Business Activity Overview
12 Business Activity Overview September 30, 2007 Quarter • New Client/New application business: – YTD 2006 v YTD 2007: • 29 customers who purchased 37 products in 2006 for an average deal size of $424k versus • 40 customers who purchased 67 product applications in 2007 for an average deal size of $3
Slide 13: Products Generating Market Interest
13 Products Generating Market Interest • ACI On Demand • Smart Chip Manager in EMV markets • SEPA generating interest in wholesale products • BASE24-eps continues to deliver against its goals – Emerging markets – In house
Slide 14: Business Operations Review, Mark Vipond
14 September 30, 2007 Quarter Mark Vipond, President, Global Product Business Operations Review
Slide 15: IBM Transaction: Product Implications
15 IBM Transaction: Product Implications • Enablement of ACI Solutions with z Series and IBM Bluestack alters product roadmaps • Reduction of platform and system software supported by ACI solutions • Elevation of Risk Management in ACI/IBM's solution value • Path to "preferred" status for ACI Wholes
Slide 16: ACI Customers by Geography/Product Q3 2007
16 Product Customers Payment Engines Retail Banking Wholesale Banking TOTAL Banking United States 67 93 24 46 60 1 291 Canada/Latin America 57 2 19 12 31 0 121 EMEA 142 6 58 54 85 4 349 Asia/Pacific 82 12 24 28 71 1 218 Total 348 113 125 140 247 6 979 Retail United States 58 0 2 3 24 0 87 Canada/Lat
Slide 17: ACI Customers by Region, Industry and Solution Set
17 ACI Customers by Region, Industry and Solution Set – September 30, 2007 • ACI customers use an average of 2.7 products • Twelve new customers added in quarter ended September 30, 2007 • Total of 815 ACI customers • Total of 2,174 products deployed • Customers in 85 countries
Slide 18: ACI Product Solution Update
18 ACI Product Solution Update • Retail Payment Solutions – BASE24-eps customers – Legacy solution support • Wholesale Payment Solutions – Enterprise Banker – Trade Finance • Risk Management Solutions – Fraud Detection update – Case Management • Payments Management – Integration of product solutions
Slide 19: Key Areas of Focus
19 Key Areas of Focus • ACI On Demand – Implementing first BASE24, BASE24-eps and MTS systems – Extending service quality • Services Growth Opportunity – Increased demand worldwide – Focus on rates and profitability • Strategic Partner Update – IBM & ACI announced collaboration in September to suppo
Slide 20: Harvesting ACI's Backlog
20 Harvesting ACI’s Backlog • What is impacting conversion of sales/backlog to revenue? – Complexity and growth of multi-product deployments is increasing and elongating projects (e.g. Faster Payments in the U.K.) – Conscious decision to eliminate capacity upgrades and paid-upfront deals that are no
Slide 21: Financials Review, Henry Lyons
21 Financials Review September 30, 2007 Quarter Henry Lyons, Chief Financial Officer
Slide 22: Key Takeaways from the Quarter
22 Key Takeaways from the Quarter . Sales . Sequential 60-month Backlog Growth of $32 million in the quarter . $89 million growth in 60-month backlog YTD . Sequential deferred revenue growth of $4.5 million . YTD deferred revenue growth of $26.1 million . OFCF growth of $1.6 million in the quarter,
Slide 23: Interplay of Revenue and Backlog
23 Interplay of Revenue and Backlog • “Rev-log” in line but anticipated to be more weighted towards backlog ~ CY 2007 Guidance CY 2007 Rev - Log 60 Mo. Backlog $1,290 - $1,300 Revenue $390 - $400 Previous Guidance
Slide 24: OFCF Full Year 2007
24 OFCF Full Year 2007 • Pressure caused by revenue shortfall and timing/terms of discrete deals $31.2 MM $50 - $55 MM - 10.0 20.0 30.0 40.0 50.0 60.0 YTD OFCF OFCF Guidance Previous OFCF Guidance
Slide 25: Other Financial Issues
25 Other Financial Issues • Tax work ongoing • SFAS 133 loss on a derivative instrument • Employee related costs of $3.1 million for the quarter and $4.9 million YTD
Slide 26: Appendix Items
Appendix Items
Slide 27: Operating Free Cash Flow
27 Operating Free Cash Flow ($ millions) 0.7 Employee-related restructuring costs $12.5 $1.6 Operating Free Cash Flow (0.5) (1.3) Less capital expenditures -- 3.7 Net after-tax cash payments associated with stock option Selected non-recurring items: $13.0 ($1.5) Net cash provided by operating activi
Slide 28: 60-Month Backlog
28 60-Month Backlog ($ millions) $1,078 $1,226 $1,270 $1,302 Backlog 60-Month 8 0 0 0 Divestitures 20 154 175 158 Acquisitions $1,050 $1,072 $1,095 $1,144 ACI Organic Backlog breakout $1,078 $1,226 $1,270 $1,302 Backlog 60-Month 125 122 132 134 Asia/Pacific 424 433 485 508 EMEA $529 $671 $653 $660 A
Slide 29: Revenues by Channel
29 Revenues by Channel ($ millions) $88.2 $84.7 Revenues 11.1 10.1 Asia/Pacific 31.0 31.0 EMEA $46.1 $43.7 Americas 14.6 13.5 Americas International $31.5 $30.2 United States Revenues: 2006 2007 Quarter Ended September 30,
Slide 30: Monthly Recurring Revenue
30 Monthly Recurring Revenue ($ millions) $47.0 $55.8 Monthly Recurring Revenue 3.4 8.4 Processing Services 27.7 31.3 Maintenance fees $16.0 $16.1 Monthly license fees 2006 2007 Quarter Ended September 30,
Slide 31: Deferred Revenue
31 Deferred Revenue ($ millions) $95.4 $99.4 $122.8 $127.3 Total Deferred Revenue $16.6 $20.4 $25.7 $30.3 Long Term Deferred Revenue 16.6 20.4 22.7 26.9 ACI Organic $0.0 $0.0 $3.0 $3.4 Acquisitions $78.8 $79.0 $97.1 $97.0 Short Term Deferred Revenue 78.3 74.5 87.3 88.7 ACI Organic $0.5 $4.5 $9.8 $8.
Slide 32: Deferred Expenses
32 Deferred Expenses ($ millions) $5.9 $3.9 $6.3 $7.4 Total Deferred Expenses 5.9 3.9 6.2 7.2 ACI Organic $0.0 $0.0 $0.1 $0.2 Acquisitions 2006 2006 2007 2007 June 30, September 30, June 30, September 30, Quarter Ended
Slide 33: Organic vs. Acquired Business Performance
33 Organic vs. Acquired Business Performance ($ millions) -- -- ($1.5) -- Stock Options -- -- 0.5 -- Other Employee $1.1 $4.5 $92.6 $84.7 2007 Quarter $3.1 $0.5 6.9 ($3.5) Net Change -- -- (8.5) -- Shareholder Lawsuit Settlement -- -- 2.6 -- Employee Related Costs -- -- 2.9 -- Intangible Amortizatio
Slide 34: Share repurchase program
34 Share repurchase program • Total Open Market Shares Repurchased: – Calendar Year to Date 2007--1,622,386 • September 2007 quarter – 992,814 • Subsequent to September quarter*– 166,472 – Total Shares Repurchased in Program since 2005 -- 4,409,729 • CY 2007 Average Price per Share (open market): $2
Slide 35: Non-GAAP Financial Measures
35 Non-GAAP Financial Measures • ACI is presenting operating free cash flow, which is defined by our net cash provided by operating activities, adjusted for one-time items, minus capital expenditures. We utilize this non-GAAP financial measure, and believe it is useful to investors, as an indicator
Slide 36: Non-GAAP Financial Measures
36 Non-GAAP Financial Measures • License and facilities management arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experi ences. • Non-recurring license arrangements are assumed to renew as recurring revenue streams. • Foreign currency ex
Slide 37: Forward-Looking Statements
37 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 the
Slide 38: Forward-Looking Statements (continued)
38 Forward-Looking Statements (continued) The risks identified in the Company’s filings with the Securities and Exchange Commission include: • Risks associated with the restatement of the Company’s financial statements; • Risks associated with not having current financi al information available one
Slide 39: Forward-Looking Statements (continued)
39 Forward-Looking Statements (continued) • Risks associated with the Company’s offshore software development activities, which may put its intellectual property at risk; • Risks associated with security breaches or computer viruses, which could disrupt delivery of services and damage the Company’s
Slide 40: Forward-Looking Statements (continued): Backlog
40 Forward-Looking Statements (continued) Backlog • 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: – Maintenance fees are assumed to exist for t
Slide 41: Every Second. Every Day.
MI EVERY SECOND. EVERY DAY.