Press release:

ACI Worldwide, Inc. Reports Financial Results for the Quarter Ended June 30, 2012

Thursday, July 26, 2012

(NAPLES, FL — July 26, 2012) — ACI Worldwide, Inc. (NASDAQ:ACIW), a leading international provider of payment systems, today announced financial results for the period ended June 30, 2012. We will hold a conference call on July 26, 2012, at 8:30 a.m. EDT to discuss this information. Interested persons may also access a real-time audio broadcast of the teleconference at www.aciworldwide.com/investors.

“We are very satisfied with our integration efforts of S1 during the last quarter and a half. We delivered on the initial cost synergies of $33 million and are progressing against an additional $20 million in planned synergies related to facilities consolidation and IT infrastructure rationalization. We expect that this second phase of identified margin improvements will enable us to achieve a more profitable 2013 and beyond,” said Chief Executive Officer Philip Heasley. “Importantly, the quarter also included critical customer and industry events in June in which we unveiled our combined product roadmaps. Today ACI offers the most comprehensive suite of solutions to address the complex needs of the global payments marketplace,” continued Mr Heasley.

Download full second quarter 2012 release

OPERATING HIGHLIGHTS

• Reaffirmation of full year guidance for non-GAAP Operating Income and Adjusted EBITDA
• Q2 GAAP revenue impacted by foreign exchange, deferred revenue adjustment from purchase accounting and timing of go-live events
• S1 integration ahead of schedule
• Unveiled combined product roadmaps to market and customers
• Total acquisition-related cost synergies now identified at $53 million in savings; $48 million in annualized run rate savings to be achieved by end of 2012
• Repurchased approximately 962,000 shares for $38 million in the quarter
 

FINANCIAL SUMMARY

2012 Guidance 

We are reiterating our 2012 full year guidance for non-GAAP Operating Income and Adjusted EBITDA ranges of $99-104 million and $165-170 million respectively. We are revising our revenue range to reflect both foreign exchange movement year-to-date as well as incremental purchase accounting adjustments.  Hence, guidance for the calendar year is as follows: GAAP Revenue to achieve a range of $683-693 million, non-GAAP Operating Income of $99-104 million and Adjusted EBITDA of $165-170 million. Guidance for the year excludes $31 million of acquisition related fees; inclusive of $16 million of professional fees and transaction-related expenses largely incurred in the first quarter as well as $15 million of facilities and IT infrastructure related costs identified during the second quarter.

Acquisition Synergies

Upon full implementation, ACI anticipates annualized savings of $53 million from the cost synergies effected. We expect to achieve an annualized run rate of $48 million in savings by the end of 2012 and attain an annualized run rate of $53 million in savings by the end of 2013. Year to date, ACI has spent $22.6 million on SG&A, Facilities and IT rationalization and anticipates spending a further $8.4 million on facilities and IT infrastructure exit costs during calendar year 2012.  

Sales  

Sales bookings in the quarter totaled $156.2 million. In the prior-year quarter sales bookings were $147.0 million. S1 contributed $39.2 million to sales in the quarter.  ACI organic sales variance is related to timing of large term extensions. Sales and projects were impacted during the quarter by customers waiting to make purchasing decisions pending the release of our combined product strategy that was unveiled in June. 

Backlog

Excluding negative foreign exchange translation of $23.5 million, 60-month backlog grew $12.8 million in the quarter. 60-month backlog as of June 30, 2012 was $2.306 billion.  12-month backlog decreased $12 million to $570 million as compared to $582 million at March 31, 2012. 12-month backlog was reduced by $6.2 million due to foreign exchange movements in the quarter.    

Revenue

GAAP revenue increased to $149.8 million or an increase of $36.4 million, or 32%, over prior-year quarter. The acquisition of S1 Corporation contributed $43.1 million of revenue in the second quarter. Organic revenue decreased as compared to prior-year quarter primarily due to the following factors: timing of non-recurring license and services revenue of approximately $10.0 million pushed out to the second half of the year as well as $3.0 million reduction due to foreign currency movements. Non-GAAP revenue increased $46.1 million, or 41%, over prior-year quarter. Non-GAAP revenue excludes the impact of $9.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements.

Operating Expenses

Excluding $7.6 million of S1 acquisition related one-time expenses related for IT-related infrastructure exit costs and severance expense, operating expenses increased $47.1 million compared to the prior year quarter due to the addition of $45.0 million of S1 expenses inclusive of $4.0 million of intangibles amortization.   Total GAAP operating expenses for the quarter were $157.7 million. 

Operating Income/Loss

Consolidated GAAP operating loss was $7.9 million for the quarter.   Non-GAAP operating income decreased $1.0 million, or 10%, compared to the prior-year quarter. Non-GAAP operating income excludes the $9.6 million deferred revenue adjustment due to purchase accounting as well as the impact of $7.6 million of one-time expenses related to IT-related infrastructure exit costs and severance.

Adjusted EBITDA

Adjusted EBITDA increased to $25.7 million, an improvement of $5.8 million, or 29%, compared to the prior year quarter. Adjusted EBITDA excludes the impact of $9.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements and $7.6 million of acquisition related one-time expenses. 

Liquidity

We had $149.6 million in cash on hand as of June 30, 2012.  The Company also paid $3.1 million in principal payments for the term credit facility during the second quarter 2012. During the second quarter, we repurchased 961,692 shares for $37.8 million. The remaining dollar value of shares authorized for purchase under the stock repurchase program was approximately $31.0 million.

Operating Free Cash Flow 

Operating free cash flow (“OFCF”) for the quarter was $(3.8) million, a decrease of $5.4 million as compared to the prior-year quarter.  

Other Expense

Other expense for the quarter was $3.0 million, a reduction of $3.1 million as compared to other income of $0.1 million in the prior-year quarter.  The variance was driven by higher interest expense of $2.5 million as well as negative foreign exchange variance of $0.6 million.     

Taxes

Income tax benefit in the quarter was $6.2 million, or a 57.1% effective tax rate, compared to income tax expense of $0.7 million, or a 6.7% rate, in the prior-year quarter.  The income tax benefit for the quarter ended June 30, 2012 was due to the beneficial impact of domestic losses at the U.S. tax rate offset by foreign income at lower tax rates.

Net Income (loss) and Diluted Earnings Per Share

Net loss for the quarter ended June 30, 2012 was $4.7 million, compared to net income of $9.8 million during the same period last year. 

Earnings (loss) per share for the quarter ended June 30, 2012 was $(0.12) per diluted share compared to $0.29 per diluted share during the same period last year.  Excluding the impact of $7.6 million of S1 acquisition related one-time expenses and the impact of $9.6 of million deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements, earnings per share was $0.16 per diluted share.

Weighted Average Shares Outstanding

Total diluted weighted average shares outstanding were 39.3 million for the quarter ended June 30, 2012 as compared to 34.3 million shares outstanding for the quarter ended June 30, 2011. The number of weighted average shares outstanding was increased by 5.8 million due to the issuance of shares related to the acquisition of S1 Corporation. 6.7 million options to purchase shares, restricted share awards, common stock warrants and contingently issuable shares were excluded from the diluted earnings per share computation as their effect would have been anti-dilutive.