ACI Worldwide(ACIW) - 2023 Q4 - Annual Results

Executive Summary & Business Outlook The company presents its strong 2023 financial results, strategic progress, and positive financial guidance for 2024 Q4 & Full Year 2023 Highlights ACI Worldwide reported strong financial performance for Q4 and the full year 2023, with significant growth in revenue, net income, and operating cash flow Q4 2023 Financial Highlights | Metric | Value | YoY Growth | | :--- | :--- | :--- | | Total Revenue | $477 million | 5% | | Total Recurring Revenue | $275 million | 7% | | Net Income | $123 million | 36% | | Total Adjusted EBITDA | $210 million | 8% | | Cash Flow from Operating Activities | $86 million | 107% | Full Year 2023 Financial Highlights | Metric | Value | YoY Growth (Adjusted) | | :--- | :--- | :--- | | Total Revenue | $1.45 billion | 5% | | Recurring Revenue | $1.1 billion | 8% | | Net Income | $122 million | 7% | | Total Adjusted EBITDA | $395 million | 10% | | Cash Flow from Operating Activities | $169 million | 18% | - The company repurchased 1 million shares for $28 million in 2023 and an additional 2 million shares for $62 million year-to-date in 2024, with $110 million remaining on the authorization[2][5] CEO's Strategic Commentary The CEO highlighted steady revenue growth, improving margins, and key appointments to support future SaaS and AI initiatives - Bank segment showed particular strength in real-time payments and anti-fraud product lines, with accelerating recurring revenue[3] - Biller business performed well, benefiting from new customer onboarding and interchange improvement efforts[3] - Two new board members, Katrinka McCallum and Juan Benitez, were appointed to support SaaS business expansion and artificial intelligence initiatives[3] 2024 Financial Guidance ACI Worldwide provided its financial outlook for Q1 and the full year 2024, projecting continued revenue and Adjusted EBITDA growth 2024 Financial Guidance | Metric | Full Year 2024 | Q1 2024 | | :--- | :--- | :--- | | Revenue Growth | 7% to 9% (constant currency) | N/A | | Revenue Range | $1.547 billion to $1.576 billion | $300 million to $310 million | | Adjusted EBITDA Range | $418 million to $428 million | $25 million to $30 million | | Adjusted EBITDA Margin | Net adjusted EBITDA margin expansion | N/A | Company Overview This section details ACI Worldwide's position as a global leader in real-time payments software and its core service offerings About ACI Worldwide ACI Worldwide provides mission-critical, real-time payments software to a global client base of corporations, fintechs, and financial institutions - ACI Worldwide is a global leader in mission-critical, real-time payments software[8] - The company's software solutions enable processing and managing digital payments, powering omni-commerce payments, presenting and processing bill payments, and managing fraud and risk[8] - ACI combines its global footprint with a local presence to drive the real-time digital transformation of payments and commerce[8] Detailed Financial Performance - Q4 2023 This chapter provides a detailed breakdown of the company's consolidated and segment-level financial results for the fourth quarter of 2023 Consolidated Financial Results (Q4 2023) In Q4 2023, ACI Worldwide achieved a 5% increase in total revenue, driven by growth across its service offerings and improved operational efficiency Q4 2023 Consolidated Financial Results | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $476.6 | $451.8 | 5.5% | | Software as a service and platform as a service | $223.2 | $205.8 | 8.5% | | License | $178.5 | $179.9 | -0.8% | | Maintenance | $51.6 | $48.9 | 5.5% | | Services | $23.2 | $17.2 | 34.9% | | Operating Income | $172.3 | $148.2 | 16.3% | | Net Income | $122.6 | $90.2 | 35.9% | | Adjusted EBITDA | $209.7 | $193.9 | 8.1% | | Cash Flow from Operating Activities | $85.7 | $41.4 | 107.0% | Segment Performance (Q4 2023) The Biller segment demonstrated strong growth in Q4 2023, while the Bank and Merchant segments also posted positive revenue improvements Q4 2023 Segment Performance | Segment | Revenue (in millions) | YoY Growth | Recurring Revenue (in millions) | YoY Growth | Adjusted EBITDA (in millions) | YoY Growth | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Banks | $254.9 | 3% | $58.2 | 8% | $188.2 | 1% | | Merchants | $43.0 | 4% | $37.9 | 2.2% | $17.5 | 2% | | Billers | $178.7 | 9% | $178.7 | 9% | $42.2 | 60% | - Biller segment's Adjusted EBITDA growth was driven by new customer onboarding and progress with interchange improvement programs[5] Recurring Revenue (Q4 2023) Total recurring revenue for Q4 2023 reached $274.8 million, marking a 7% increase driven by strong performance in the Bank and Biller segments Q4 2023 Recurring Revenue (in millions) | Category | Q4 2023 | Q4 2022 | YoY Change | | :--- | :--- | :--- | :--- | | SaaS and PaaS fees | $223.2 | $205.8 | 8.5% | | Maintenance fees | $51.6 | $48.9 | 5.5% | | Total Recurring Revenue | $274.8 | $254.7 | 7.9% | Q4 2023 Segment Recurring Revenue (in millions) | Segment | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Banks | $58.2 | $53.6 | | Merchants | $37.9 | $37.1 | | Billers | $178.7 | $164.0 | EPS Impact of Non-cash and Significant Transaction-related Items (Q4 2023) Adjusting for non-cash and significant transaction-related items, diluted EPS for Q4 2023 increased from $1.12 to $1.27 Q4 2023 EPS Impact of Non-cash and Significant Transaction-related Items | Metric | EPS Impact | $ in Millions (Net of Tax) | | :--- | :--- | :--- | | GAAP Net Income | $1.12 | $122.6 | | Adjustments: | | | | Significant transaction-related expenses | $0.01 | $1.1 | | Amortization of acquisition-related intangibles | $0.06 | $6.4 | | Amortization of acquisition-related software | $0.03 | $3.5 | | Non-cash stock-based compensation | $0.05 | $5.3 | | Diluted EPS adjusted for non-cash and significant transaction-related items | $1.27 | $138.9 | Detailed Financial Performance - Full Year 2023 This chapter reviews the company's consolidated financial results, segment performance, and capital management activities for the full year 2023 Consolidated Financial Results (Full Year 2023) For the full year 2023, ACI Worldwide reported growth in revenue, Adjusted EBITDA, and operating cash flow Full Year 2023 Consolidated Financial Results | Metric | FY 2023 (in millions) | FY 2022 (in millions) | YoY Change (Adjusted) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,452.6 | $1,421.9 | 5% | | Software as a service and platform as a service | $849.1 | $802.9 | 5.8% | | License | $321.2 | $348.1 | -7.7% | | Maintenance | $205.1 | $200.0 | 2.5% | | Services | $77.1 | $70.8 | 8.9% | | Operating Income | $220.4 | $203.8 | 8.1% | | Net Income | $121.5 | $142.2 | 7% | | Adjusted EBITDA | $395.4 | $373.4 | 10% | | Cash Flow from Operating Activities | $168.5 | $143.4 | 18% | Segment Performance (Full Year 2023) For the full year 2023, the Biller segment showed significant growth in both revenue and Adjusted EBITDA Full Year 2023 Segment Performance | Segment | Revenue (in millions) | FY 2022 Revenue (in millions) | Recurring Revenue (in millions) | FY 2022 Recurring Revenue (in millions) | Adjusted EBITDA (in millions) | FY 2022 Adjusted EBITDA (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Banks | $616.1 | $638.6 | $229.4 | $232.9 | $355.5 | $371.0 | | Merchants | $150.6 | $153.9 | $138.9 | $140.6 | $44.3 | $49.0 | | Billers | $685.9 | $629.4 | $685.9 | $629.4 | $142.3 | $107.4 | Recurring Revenue (Full Year 2023) Total recurring revenue for the full year 2023 grew by 8%, primarily driven by an increase in SaaS and PaaS fees Full Year 2023 Recurring Revenue (in millions) | Category | FY 2023 | FY 2022 | YoY Change | | :--- | :--- | :--- | :--- | | SaaS and PaaS fees | $849.1 | $802.9 | 5.8% | | Maintenance fees | $205.1 | $200.0 | 2.5% | | Total Recurring Revenue | $1,054.2 | $1,002.9 | 5.1% | Share Repurchase, Debt, and Cash Position (Full Year 2023) ACI Worldwide ended 2023 with a healthy cash position, reduced net debt leverage, and an active share repurchase program Key Financial Position Metrics (End of 2023) | Metric | Value | | :--- | :--- | | Cash on Hand | $164 million | | Debt Balance | $1 billion | | Net Debt Leverage Ratio | 2.2x (down from 2.4x) | - The company repurchased approximately 1 million shares for $28 million in 2023 and an additional 2 million shares for $62 million year-to-date in 2024[5] - There is $110 million remaining available on the share repurchase authorization[5] New Bookings (Full Year 2023) For the full year 2023, ACI Worldwide reported strong License and services bookings, indicating continued customer acquisition and expansion Full Year 2023 New Bookings (in millions) | Booking Type | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Annual recurring revenue (ARR) bookings | $73.5 | $109.7 | | License and services bookings | $239.2 | $204.7 | EPS Impact of Non-cash and Significant Transaction-related Items (Full Year 2023) Adjusting for non-cash and significant transaction-related items, diluted EPS for the full year 2023 increased from $1.12 to $1.86 Full Year 2023 EPS Impact of Non-cash and Significant Transaction-related Items | Metric | EPS Impact | $ in Millions (Net of Tax) | | :--- | :--- | :--- | | GAAP Net Income | $1.12 | $121.5 | | Adjustments: | | | | Gain on divestiture | — | — | | Significant transaction-related expenses | $0.19 | $21.1 | | Amortization of acquisition-related intangibles | $0.24 | $25.7 | | Amortization of acquisition-related software | $0.14 | $15.5 | | Non-cash stock-based compensation | $0.17 | $18.7 | | Diluted EPS adjusted for non-cash and significant transaction-related items | $1.86 | $202.5 | Non-GAAP Financial Measures & Reconciliations This section defines the non-GAAP financial measures used by the company and provides reconciliations to their nearest GAAP equivalents Definitions of Non-GAAP Measures ACI Worldwide utilizes several non-GAAP financial measures to provide additional insights into its underlying business performance - Adjusted EBITDA is defined as net income (loss) plus income tax expense (benefit), net interest income (expense), net other income (expense), depreciation, amortization, stock-based compensation, and significant transaction-related expenses[11] - Net Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by revenue net of pass-through interchange revenue[11] - Recurring Revenue includes revenue from software as a service (SaaS), platform as a service (PaaS) fees, and maintenance fees[12] Adjusted EBITDA Reconciliation The reconciliation of net income to Adjusted EBITDA highlights adjustments for non-cash and significant transaction-related expenses Adjusted EBITDA Reconciliation (Q4 2023 vs. Q4 2022, in millions) | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net income | $122.6 | $90.2 | | Plus: Income tax expense (benefit) | $31.5 | $42.8 | | Plus: Net interest expense | $16.1 | $12.8 | | Plus: Net other (income) expense | $2.1 | $2.4 | | Plus: Depreciation expense | $5.0 | $6.1 | | Plus: Amortization expense | $23.9 | $25.3 | | Plus: Non-cash stock-based compensation expense | $7.0 | $7.9 | | Adjusted EBITDA before significant transaction-related expenses | $208.2 | $187.5 | | Significant transaction-related expenses: | | | | CEO transition | — | $3.6 | | Cost reduction strategies | $1.3 | — | | European datacenter migration | $0.2 | $2.4 | | Other | — | $0.4 | | Adjusted EBITDA | $209.7 | $193.9 | Adjusted EBITDA Reconciliation (Full Year 2023 vs. Full Year 2022, in millions) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net income | $121.5 | $142.2 | | Plus: Income tax expense (benefit) | $26.1 | $64.5 | | Plus: Net interest expense | $64.3 | $40.6 | | Plus: Net other (income) expense | $8.5 | ($43.4) | | Plus: Depreciation expense | $23.7 | $23.2 | | Plus: Amortization expense | $98.6 | $104.1 | | Plus: Non-cash stock-based compensation expense | $24.5 | $29.8 | | Adjusted EBITDA before significant transaction-related expenses | $367.2 | $361.0 | | Significant transaction-related expenses: | | | | CEO transition | — | $3.6 | | Cost reduction strategies | $21.0 | — | | European datacenter migration | $2.8 | $5.8 | | Other | $4.4 | $3.0 | | Adjusted EBITDA | $395.4 | $373.4 | Consolidated Financial Statements This chapter presents the company's audited consolidated balance sheets, statements of operations, and statements of cash flows Consolidated Balance Sheets The consolidated balance sheets show ACI Worldwide's financial position at the end of 2023, with growth in total assets and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $164,239 | $124,981 | | Receivables, net | $452,337 | $403,781 | | Settlement assets | $723,039 | $540,667 | | Total current assets | $1,406,645 | $1,114,805 | | Goodwill | $1,226,026 | $1,226,026 | | Total Assets | $3,444,739 | $3,209,895 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Settlement liabilities | $721,164 | $539,087 | | Current portion of long-term debt | $74,405 | $65,521 | | Total current liabilities | $1,037,249 | $858,842 | | Long-term debt | $963,599 | $1,024,351 | | Total Liabilities | $2,120,442 | $2,016,708 | | Total Stockholders' Equity | $1,324,297 | $1,193,187 | Consolidated Statements of Operations The statements of operations detail ACI Worldwide's revenues and expenses, showing increased total revenues and operating income for Q4 and the full year 2023 Consolidated Statements of Operations Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $476,563 | $451,805 | $1,452,579 | $1,421,901 | | Cost of revenue | $181,689 | $178,699 | $719,211 | $696,071 | | Operating income | $172,316 | $148,223 | $220,408 | $203,835 | | Interest expense | ($19,845) | ($16,179) | ($78,486) | ($53,193) | | Net income | $122,616 | $90,228 | $121,509 | $142,177 | | Diluted EPS | $1.12 | $0.81 | $1.12 | $1.24 | Consolidated Statements of Cash Flows The statements of cash flows indicate strong cash generation from operating activities, which significantly increased in both Q4 and the full year 2023 Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net cash flows from operating activities | $85,743 | $41,415 | $168,517 | $143,381 | | Net cash flows from investing activities | ($7,250) | ($13,376) | ($37,777) | $60,246 | | Net cash flows from financing activities | ($63,779) | ($28,052) | ($111,552) | ($171,060) | | Net increase (decrease) in cash and cash equivalents | $15,287 | ($1,990) | $24,149 | $30,530 | | Cash and cash equivalents, end of period | $238,821 | $214,672 | $238,821 | $214,672 | Legal & Administrative Information This section provides details on the company's conference call, investor relations contacts, and important forward-looking statements Conference Call Details ACI Worldwide hosted a conference call on February 29, 2024, to discuss its fourth quarter and full year 2023 financial results - Management hosted a conference call on February 29, 2024, at 8:30 a.m. ET to discuss the financial results[7] - A real-time audio broadcast was accessible at **http://investor.aciworldwide.com/**[7](index=7&type=chunk) Investor Relations Contact Contact information for investor relations is provided for inquiries regarding the company's financial performance and strategy - Investor Relations contact: John Kraft, SVP, Head of Strategy and Finance, at 239-403-4627 or john.kraft@aciworldwide.com[9] Forward-Looking Statements & Risk Factors This press release contains forward-looking statements that are subject to various risks and uncertainties as detailed in SEC filings - Forward-looking statements are based on current expectations and involve risks and uncertainties, made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995[13] - Key forward-looking statements include positioning for 2024, benefits from customer onboarding, support from new board members for SaaS and AI expansion, pipeline strength, and 2024 financial guidance[14] - Risk factors include increased competition, business interruptions, security breaches, ability to attract talent, future acquisitions, divestitures, strategy implementation, impact of license conversions, international operating risks, and compliance with regulations[15]