ACI Worldwide (NASDAQ:ACIW), a leading international provider of software for electronic payment systems, today announced financial results for the period ending June 30, 2007.
"We believe that the continued growth in operating free cash flow underscores our effort to build and deliver long-term economic value in our business," stated Chief Executive Officer Philip G. Heasley. "Our results in the June quarter demonstrated the progress of our strategic emphasis upon cross-selling products to our existing accounts and we were encouraged by the growth of multi-product users within the quarter. In the March and June quarterly results, we demonstrated growth in both our backlog and in our deferred revenue compared to last year. In pursuit of the growth and expansion of our Asian direct distribution network we purchased Stratasoft in Malaysia, a long time ACI partner."
Notable new business during the quarter included:
- A multi-product contract signed with a bank in Brazil for ACI Proactive Risk Manager, and ACI Automated Case Management systems.
- A BASE24-eps(TM) capacity contract signed with a top 40 global bank.
- Seven new customers signed; including new users of ACI Enterprise Banker On Demand and of Proactive Risk Manager.
- Thirty one new applications added to existing customer relationships ranging from ACI Retail Commerce Server to PRM Enterprise Risk and Simulation Services for Enterprise Testing.
Operating Free Cash Flow
Operating free cash flow was $11.7 million compared to $2.3 million for the June 2006 quarter. The drivers of our operating free cash flow were solid contracting, billings and collections.
As of June 30, 2007, our estimated 60-month backlog was $1.270 billion, compared to $1.244 billion as of March 31, 2007 and compared to $1.078 billion as of June 30, 2006. As of June 30, 2007, our 12-month backlog was $317 million, as compared to $307 million for the quarter ended March 31, 2007 and $257 million for the quarter ended June 30, 2006. The sequential growth of $26 million in our 60-month backlog was comprised of ACI organic growth of $23 million and $3 million from our acquired companies.
Revenue was $98.1 million in the quarter ended June 2007, an increase of $13.3 million or 16 percent over the prior year period revenue of $84.8 million. $13.0 million of the increase was due to acquired companies' revenue while $0.3 million was attributable to ACI's organic business. Sequentially, our deferred revenue increased slightly at $1.1 million compared to a sequential decrease of $5.2 million in the June 2006 quarter, reflecting the business' emphasis on selling longer term products and services to both new and existing customers, thus resulting in lengthier revenue recognition cycles.
Excluding expenses of $15.5 million related to acquisitions, $4.7 million related to the review of historical stock option practices and vested share option settlement, and $1.3 million related to non-recurring employee costs, organic operating expenses for the quarter rose $2.5 million on a year over year basis. The rise in operating expense was primarily driven by a $1.4 million swing in deferred expenses and $0.7 million related to investments in Ireland and in Romania. Including the impact of these items, operating expenses were $93.2 million in the June 2007 quarter compared to $69.2 million in the June 2006 quarter.
Other Income and Expense
Other expense for the quarter was $2.0 million, compared to other income of $1.4 million in the June 2006 quarter. The decrease in other income resulted from the following factors: a loss on foreign exchange, a reduction of cash and cash equivalents due to the funding of the share repurchase program which also impacted interest income received, and interest expense paid on the outstanding credit facility.
The elongation of our revenue recognition cycle, combined with several non-recurring charges, has resulted in lower pre-tax earnings. The impact of the $0.5 million fixed charge related to the transfer of intellectual property rights to Ireland and our geographic profit mix combined with the lower pretax earnings led to an effective tax rate of 195 percent for the period ending June 30, 2007. The equivalent period ending June 30, 2006 had a rate of (33.1) percent due to a $12.6 million tax benefit related to the release of valuation allowances during the quarter.
Net Income (Loss) and Diluted Earnings Per Share
Net loss for the quarter was $2.7 million, compared to net income of $22.5 million during the same period last year.
Earnings per share for the quarter ended June 2007 was $(0.07) per diluted share compared to $0.59 per diluted share during the same period last year. The year-over-year quarterly variance is primarily due to the following factors: change in tax rate $(0.48), dilutive impact of acquisitions $(0.04), expense related to the review of historical stock options and expense related to the settlement of vested options $(0.08), employee related costs $(0.02), investment in global offices and change in deferred costs $(0.03).
Total weighted average diluted shares outstanding were 37.1 million as of June 30, 2007 as compared to 38.5 million shares outstanding as of June 30, 2006. Shares repurchased in the quarter totaled 463,100 shares at an average price of $33.90 or $15.7 million. Year to date we have repurchased 1,373,720 shares at an average price of $30.41.
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