Core Insights - The Zacks Computer Software industry is positioned to benefit from the global digital transformation, particularly through cloud transition and advancements in AI and machine learning [1][3][4] Industry Overview - The Zacks Computer Software industry encompasses companies providing software applications in AI, cloud computing, digital media, customer relationship management, cybersecurity, and more [2] Trends Influencing the Industry - Increased enterprise spending on AI and cloud computing is expected to drive growth, with a projected 14.2% growth in software by 2025 due to generative AI hardware upgrades [3][4] - The demand for cybersecurity software is rising due to increased cyber threats, leading to a focus on cloud security and performance monitoring tools [5] Macroeconomic Factors - Global macroeconomic challenges and supply chain volatility are concerns, with potential impacts on software pricing and spending, particularly among small and medium-sized businesses [6] Industry Performance - The Zacks Computer Software industry ranks 135, placing it in the bottom 45% of over 246 Zacks industries, indicating dull near-term prospects [7][8] - The industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500, declining 2% over the past year while the S&P 500 and sector increased by 10.5% and 10.4%, respectively [9] Valuation Metrics - The industry is currently trading at a forward 12-month P/E ratio of 28.19X, higher than the S&P 500's 20.92X and the sector's 24.25X [11] Company Highlights - **ACI Worldwide (ACIW)**: Expected revenue growth of 10% in 2024, with adjusted EBITDA of $466 million up 18% and cash flow from operations up 113% [14][15] - **Open Text Corporation (OTEX)**: Focused on cloud, security, and AI, with fiscal 2025 earnings projected at $3.86 per share [18] - **Microsoft (MSFT)**: Dominates the PC software market with over 73% market share, fiscal 2025 earnings expected at $13.08 per share, indicating a year-over-year growth of 10.9% [20][22]

Core Viewpoint - ACI Worldwide (ACIW) is experiencing solid improvement in earnings estimates, which is likely to positively impact its stock price momentum [1][2]. Earnings Estimates - The current quarter's earnings estimate for ACI Worldwide is projected at $0.33 per share, reflecting a significant increase of +230% compared to the same quarter last year [5]. - Over the past 30 days, the Zacks Consensus Estimate for ACI Worldwide has risen by 283.33%, with no negative revisions reported [5]. - For the full year, the expected earnings per share is $2.73, indicating a year-over-year growth of +3.41% [6]. - The consensus estimate for the current year has increased by 5.77% due to two upward revisions and no negative changes [7]. Analyst Sentiment - There is strong agreement among analysts in raising earnings estimates for ACI Worldwide, contributing to a more favorable outlook [3]. - The Zacks Rank system currently rates ACI Worldwide as 1 (Strong Buy), indicating a positive sentiment among analysts [8]. Stock Performance - ACI Worldwide shares have appreciated by 8% over the past four weeks, suggesting investor confidence in the company's earnings growth prospects [9].

Market Overview - The S&P 500 and Nasdaq are in correction territory, down over 10% from recent peaks, as investors react to tariff uncertainties and their potential impact on the global economy [1] - Wall Street is awaiting the Federal Reserve's interest-rate decision and comments from Jay Powell [1] Investment Opportunities - There are numerous value stocks available for purchase, particularly given the strong earnings outlook for the S&P 500 [2] - ACI Worldwide is highlighted as a must-buy tech stock due to its strong value and growth potential [7][8] Stock Screening Methodology - The screening process focuses on stocks with Zacks Rank 1 (Strong Buy) or 2 (Buy), P/E ratios under the industry median, and P/S ratios under the industry median [5][9] - The screen also considers quarterly earnings rates above the industry median and utilizes a blend of upgrades and estimate revisions to identify the top seven stocks [6] ACI Worldwide Performance - ACI Worldwide has a significant client base, including over 6,000 organizations and 1,000 large financial institutions, processing billions of transactions daily [10] - The company achieved 10% sales growth in 2024 and 42% adjusted earnings growth, with projections of 7% revenue growth and 9% higher sales in 2025 [11] - ACI's consensus earnings estimate for FY26 increased by 10% since February 27, contributing to its Zacks Rank 1 [12] Stock Valuation - ACI Worldwide's stock has increased by 450% over the past 25 years, outperforming the Zacks Tech Sector's 415% growth [12] - Despite recent performance, ACIW trades 11% below its November records and 20% below its average Zacks price target, indicating potential for further appreciation [15]

Earnings Presentation Q4 2024 February 27, 2025 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 ...

Financial Data and Key Metrics Changes - Total revenue for 2024 was $1.6 billion, up 10% from 2023, exceeding previous guidance [7][24] - Adjusted EBITDA for the year grew 18% to $466 million, with an adjusted EBITDA margin of 41%, representing over 300 basis points of margin expansion [8][24] - Cash flow from operating activities was $359 million, more than double the previous year [8][25] - Total debt outstanding decreased by over $100 million to $932 million, with a net debt leverage ratio of 1.5x [25][26] Business Line Data and Key Metrics Changes - The Bank segment revenue increased by 14% with an adjusted EBITDA margin of 61% [24][25] - The Merchant segment revenue grew by 10% with an adjusted EBITDA margin of 42% [24][25] - The Biller segment revenue was up 6%, with adjusted EBITDA margin at 51% [24][25] Market Data and Key Metrics Changes - The company reported strong bookings momentum, with ARR bookings in Q4 up more than 20% over Q4 2023 [20] - A significant new contract was signed in the Asia Pacific region, yielding over $50 million in first quarter revenue [21][26] Company Strategy and Development Direction - The company combined the Bank and Merchant segments into a new business called Payment Software to streamline operations and enhance synergies [11][12] - The focus remains on the development and rollout of the next-generation payments hub, Kinetic, with a launch expected in 2025 [17][80] - The company aims to improve customer satisfaction and operational efficiency through a general manager structure [50][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, citing a strong start to the year and a healthy pipeline [10][30] - The company is optimistic about long-term profitable growth and delivering significant shareholder value [31][32] Other Important Information - The company repurchased nearly 4 million shares, representing approximately 4% of shares outstanding, with $373 million remaining on the repurchase authorization [26] - The company is focused on reducing seasonality by signing contracts earlier in the year [9][29] Q&A Session Summary Question: Comments on net revenue dynamics within Biller - Management indicated that the decline in EBITDA was primarily due to certain one-time margin benefits in 2023 that did not recur in 2024 [35][36] Question: Details on the competitive takeaway in the first quarter - The competitive takeaway involved a flagship issuing and acquiring solution for a large bank that was not previously using the company's products [38][39] Question: Impetus for the reorganization and expected benefits - The reorganization aimed to create accountability and streamline operations, with expectations of improved customer satisfaction and internal efficiency [48][54] Question: Factors influencing adjusted EBITDA guidance - The high end of the EBITDA range would be driven by successful new license deals, while the lower end could result from a less favorable mix of revenue sources [71][73] Question: Insights on the sales environment and renewals - Management noted a positive sales environment, with a focus on modernization and proven technology as key drivers for customer decisions [78][80]

Core Insights - ACI Worldwide reported a revenue of $453.04 million for the quarter ended December 2024, reflecting a decrease of 4.9% year-over-year, while EPS was $1.08 compared to $1.27 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $450.75 million by 0.51%, and the EPS surpassed the consensus estimate of $0.79 by 36.71% [1] Revenue Breakdown - Revenue from Banks was $230.80 million, exceeding the average estimate of $220.85 million [4] - Revenue from Billers was $180.20 million, slightly below the average estimate of $185.40 million [4] - Revenue from Merchants was $42 million, also falling short of the average estimate of $44.50 million [4] Stock Performance - ACI Worldwide's shares have declined by 5.8% over the past month, compared to a 2.2% decline in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Performance - Total revenue for the year ended December 31, 2024, increased by $141.7 million, or 10%, compared to 2023[211]. - Total revenue for the year ended December 31, 2024, was $1,594.3 million, an increase of 9.8% compared to $1,452.6 million in 2023[238]. - The Banks segment revenue increased by $85.8 million, reaching $701.9 million in 2024, while the Merchants segment revenue rose by $15.3 million to $165.9 million[238][239]. - Adjusted EBITDA for the Banks segment increased by $70.0 million to $425.5 million, while the Merchants segment saw an increase of $25.2 million to $69.5 million[238][239]. - Net income for the year ended December 31, 2024, was $203.1 million, an increase of $81.6 million, or 67%, compared to 2023[210]. Revenue Breakdown - SaaS and PaaS revenue increased by $48.8 million, or 6%, during the year ended December 31, 2024, compared to 2023[213]. - License revenue increased by $91.1 million, or 28%, during the year ended December 31, 2024, compared to 2023[216]. - Maintenance revenue decreased by $14.3 million, or 7%, during the year ended December 31, 2024, compared to 2023[219]. - Services revenue increased by $16.1 million, or 21%, during the year ended December 31, 2024, compared to 2023[221]. Backlog and Commitments - ACI Worldwide reported a total 60-month backlog of $6.706 billion as of December 31, 2024, reflecting an increase from $6.520 billion as of December 31, 2023[207]. - Committed backlog increased to $2.413 billion as of December 31, 2024, up from $2.178 billion as of December 31, 2023[207]. Operating Expenses - Total operating expenses increased by $54.0 million, or 4%, during the year ended December 31, 2024, compared to 2023[222]. - Cost of revenue increased by $72.6 million, or 10%, during the year ended December 31, 2024, compared to 2023[226]. - General and administrative expenses increased by $24.4 million, or 28%, for the year ended December 31, 2024, primarily due to higher personnel costs[236]. - R&D expense increased by $5.9 million, or 4%, during the year ended December 31, 2024, compared to 2023[228]. Cash Flow and Liquidity - Cash flow from operating activities was $358.7 million for the year ended December 31, 2024, a 113% increase from $168.5 million in 2023[252]. - Total liquidity as of December 31, 2024, was $744.5 million, up from $538.1 million in 2023, driven by increased cash and availability under the revolving credit facility[243]. Share Repurchase and Debt - The company repurchased 3,946,537 shares for $128.5 million during the year ended December 31, 2024, with a total repurchase amount to date of approximately $1.1 billion[247]. - The company had approximately $0.9 billion of debt outstanding as of December 31, 2024, including $532.5 million under its Credit Facility and $400.0 million in 2026 Notes[285]. - The Credit Facility had a floating interest rate of 6.21% as of December 31, 2024, while the 2026 Notes carried a fixed interest rate of 5.750%[285]. Tax and Investment Activities - The effective tax rate for the year ended December 31, 2024, was approximately 19%, compared to 18% in 2023, influenced by operations in foreign jurisdictions[235]. - Cash used in investing activities was $45.1 million in 2024, compared to $37.8 million in 2023, reflecting increased investments in software and equipment[254]. Strategic Focus and Partnerships - ACI Worldwide is actively pursuing growth through acquisitions, seeking candidates that can enhance solution breadth and provide access to new markets[200]. - ACI Worldwide's omni-commerce strategy aims to provide seamless payment experiences across various channels, capitalizing on the trend of contactless payments and integrated shopping experiences[198]. - ACI Worldwide's strategic partnerships with major players like Mastercard and Microsoft position it as a leader in real-time payments and cloud solutions[194][195]. Technology and Innovation - The company is focusing on cloud technology to enhance scalability and reduce technical risks, enabling faster innovation and improved operating economics[195][196]. - The adoption of open banking and Request to Pay (RTP) in the U.S. is expected to drive innovation and improve customer experience in the payments landscape[199]. - ACI Worldwide's revenue growth is driven by increasing digital payment transaction volumes and the adoption of real-time payments, with Asia Pacific being the largest regional market for real-time payments[193][194]. Financial Reporting and Revenue Recognition - The company recognizes revenue from SaaS and PaaS arrangements over the term of the arrangement, with fixed consideration recognized over time and variable consideration recognized as usage occurs[266]. - The company assesses the significance of financing components in software license arrangements based on the ratio of license fees paid over time to total license fees[265]. - The company applies judgment in determining customers' ability and intention to pay, considering factors such as creditworthiness and economic conditions[267]. Other Financial Metrics - Interest expense decreased by $6.0 million, or 8%, during the year ended December 31, 2024, compared to 2023[233]. - A hypothetical 10% increase or decrease in effective interest rates would impact interest income by $0.3 million annually based on cash investments[284]. - The company's intangible assets, excluding goodwill, were $165.4 million, down from $195.6 million in 2023[270]. - The company's goodwill remained stable at $1.2 billion as of December 31, 2024, with no reporting units deemed at risk of impairment[272]. - Performance share awards for 2024 and 2023 are based on adjusted EBITDA metrics and revenue growth rates, with a potential payout of up to 200%[275]. - The company has not entered into any foreign currency hedging transactions, relying instead on natural hedges through local currency revenue contracts[283].

Financial Performance - Total revenue for 2024 was $1.594 billion, representing a 10% increase from 2023[4] - Net income for 2024 was $203 million, up 67% compared to 2023[4] - Adjusted EBITDA for 2024 was $466 million, an 18% increase from 2023[4] - Cash flow from operating activities in 2024 was $359 million, up 113% from 2023[4] - Total revenues for 2024 reached $1,594.3 million, a 9.8% increase from $1,452.6 million in 2023[20] - Net income for 2024 was $203.1 million, compared to $121.5 million in 2023, representing a 67.2% increase[20] - Adjusted EBITDA for 2024 was $465.7 million, up from $395.4 million in 2023, reflecting a 17.7% growth[23] - Cash flows from operating activities for 2024 were $358.7 million, significantly higher than $168.5 million in 2023, marking an increase of 112.5%[22] - GAAP net income for the year 2024 was $203.1 million, resulting in an EPS of $1.91, a significant increase from $121.5 million and an EPS of $1.12 in 2023[25] - Total adjustments for the year 2024 were $77.1 million, leading to an adjusted EPS of $2.64, compared to $81.0 million in adjustments and an adjusted EPS of $1.86 in 2023[25] Segment Performance - The bank segment revenue increased by 14% and adjusted EBITDA grew by 20% compared to 2023[6] - The merchant segment revenue grew by 10% and adjusted EBITDA increased by 57% compared to 2023[6] - Revenue from the Banks segment for 2024 was $701.9 million, up from $616.1 million in 2023, a growth of 13.9%[23] - The company reported a total of $898.0 million in SaaS and PaaS fees for the year 2024, an increase from $849.1 million in 2023[25] Future Outlook - For 2025, the company expects revenue growth in the range of 7% to 9%, translating to $1.685 billion to $1.715 billion[8] - The company anticipates adjusted EBITDA for 2025 to be in the range of $480 million to $495 million[8] Cash and Debt Management - The company ended 2024 with $216 million in cash and a debt balance of $933 million, resulting in a net debt leverage ratio of 1.5x adjusted EBITDA[7] - Total cash and cash equivalents at the end of 2024 were $265.0 million, an increase from $238.8 million at the end of 2023[22] Shareholder Actions - ACI repurchased approximately 3.9 million shares for $128 million in capital during 2024[7] Operating Metrics - Operating income decreased to $308.1 million in 2024 from $220.4 million in 2023, a decline of 39.7%[20] - The company reported a net adjusted EBITDA margin of 41% for 2024, compared to 38% in 2023[23] Revenue Streams - The company experienced a decrease in license revenue to $412.3 million in 2024 from $321.2 million in 2023, a decline of 28.4%[20] - Recurring revenue for Q4 2024 was $270.2 million, slightly down from $274.8 million in Q4 2023, while total recurring revenue for the year increased to $1,088.7 million from $1,054.2 million[25] - Annual recurring revenue (ARR) bookings for Q4 2024 were $35.2 million, up from $28.8 million in Q4 2023, indicating a growth of approximately 22.2%[25] - License and services bookings for Q4 2024 reached $115.1 million, compared to $106.5 million in Q4 2023, reflecting a growth of about 4.9%[25] Non-Cash Expenses - Non-cash stock-based compensation for Q4 2024 was $8.8 million, up from $5.3 million in Q4 2023, indicating a rise of approximately 66.0%[24] - Amortization of acquisition-related intangibles for the year 2024 was $23.3 million, slightly down from $25.7 million in 2023[25]

Company Performance - ACI Worldwide reported quarterly earnings of $1.08 per share, exceeding the Zacks Consensus Estimate of $0.79 per share, but down from $1.27 per share a year ago, representing an earnings surprise of 36.71% [1] - The company posted revenues of $453.04 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.51%, but down from $476.56 million year-over-year [2] - ACI Worldwide has surpassed consensus EPS estimates for the last four quarters and has also topped consensus revenue estimates four times during the same period [2] Stock Performance and Outlook - ACI Worldwide shares have declined approximately 2.6% since the beginning of the year, while the S&P 500 has gained 1.3% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.16 on revenues of $342.3 million, and for the current fiscal year, it is $2.61 on revenues of $1.72 billion [7] Industry Context - The Computer - Software industry, to which ACI Worldwide belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, which may impact the stock's performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5][6]

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