ACI Worldwide (NasdaqGS:ACIW), a leading international provider of software for electronic payment systems, today announced financial results for the quarter ended September 30, 2008.
``ACI turned in a very strong quarterly performance. We achieved 28% GAAP revenue growth as we completed new customer installation projects. The company sales performance was excellent in an extremely volatile financial services environment where we demonstrated strong discipline in management of accounts receivable,'' Chief Executive Officer Philip Heasley said.
Heasley further added, ``Notwithstanding the market turmoil, we do not currently see any reason that our products should be significantly affected as our solutions enhance the productivity of bank processing. Even in a credit-constrained environment, it will continue to be critical for the payments side of the banks to achieve further productivity improvements.''
Notable new business during the quarter included:
- EMEA: Products selected across the region included BASE24-eps(tm) and BASE24-atm(r) combinations, ACI Proactive Risk Manager(tm), ACI Smart Chip Manager(tm) and application infrastructure tools. Customer geographies included Poland, Hungary, France, Dubai, United Kingdom and Nigeria.
- Asia: Two new BASE24-eps(tm) sales in Korea and in Malaysia as well as three capacity deals signed in India and in Korea.
- Americas: Latin American banks purchased significant add-on modules to BASE24(r) as well as products such as BASE24-eps, NET24-XPNET(tm), and Proactive Risk Manager(tm).
- United States: A large consumer retail chain renewed its Base 24 retail infrastructure while a sizable European investment bank purchased ACI Enterprise Banker(tm) for its Americas territory.
- Six new customers signed, including new users of ACI Enterprise Banker(tm), BASE24-eps and Proactive Risk Manager.
- Twenty three new applications added to existing customer relationships ranging from ACI Retail Commerce Server(tm) and ACI Proactive Risk Manager for Enterprise Risk(tm) to Smart Chip Manager.
Operating Free Cash Flow
Operating free cash flow for the quarter was $(0.3) million compared to $1.6 million for the September 2007 quarter. The year-over-year decrease of $1.9 million in our operating free cash flow resulted primarily from higher personnel and related expenses, including contractors and, to a lesser extent, capital expenditures.
We had $94.3 million in cash and cash equivalents on hand at the end of the third quarter of 2008, an increase of $33.5 million as compared to the September 2007 quarter.
Sales bookings in the quarter totaled $106.6 million compared to $91.0 million in the September 2007 quarter. The $15.6 million, or 17%, rise in year-over-year sales is comprised primarily of two categories: add-on business and term extensions. These two categories were also strong performers in the same quarter last year. Add-on business accounted for $58.2 million of September 2008 sales compared to $35.4 million in September 2007 sales while term extensions contributed $32.9 million in the current period quarter compared to $25.8 million in the prior year quarter. Add-ons were comprised of capacity, migrations to BASE24-eps(tm), and cross-selling of products to existing customers. We also booked a more normalized proportion of renewals at our existing larger customers as a sub-set of quarterly sales as compared to the immediately preceding quarter.
As of September 30, 2008, our estimated 60-month backlog was $1.403 billion compared to $1.427 billion at June 30, 2008, and $1.341 billion as of September 30, 2007. The sequential decrease of $24 million or 2% in our 60-month backlog was primarily due to foreign exchange translation loss of $38.8 million on a sequential quarterly basis. As of September 30, 2008, our 12-month backlog was $321 million, as compared to $339 million for the quarter ended June 30, 2008, and $328 million for the quarter ended September 30, 2007, reflecting a $9.6 million translation loss in foreign exchange as well as several large deals moving out of backlog into current period GAAP revenue predominantly in Western Europe and in the United States.
Revenue was $108.6 million in the quarter ended September 30, 2008, an increase of $23.7 million, or 28%, over the prior-year period revenue of $84.9 million. The increase was largely attributable to a rise of $17.6 million in software license fee revenues over the prior year. Our September 2008 GAAP revenue was derived principally from our backlog; 81% originating in 12-month backlog and 19% of the revenue was provided by current-period sales of license fees and capacity. On a year-over-year basis, initial license fee revenue increased by 97%, or $12.4 million, to $25.2 million due to recognition of $8.6 million growth in initial license fee revenue as well as an additional $3.8 million in capacity fee revenue. This increase was driven by recognition of initial license fee revenues associated with new deals or term renewals signed during the current period as well as customer ``go-live'' events. Our monthly recurring revenue figure in the quarter was $63.4 million, a rise of $7.6 million, including the impact of $3.5 million in short-term, time-based license fees, over the prior-year period's monthly recurring revenue of $55.8 million.
Sequentially, our total deferred revenue decreased from $144.3 million to $128.6 million, a reduction of $15.7 million compared to a sequential increase of $4.5 million in the September 2007 quarter. Total quarterly deferred revenue rose by $1.3 million on a year-over-year basis. The reduction in sequential short-term deferred revenue from $121.1 million to $105.4 million reflects our progress this quarter in moving projects out of backlog into current period GAAP revenue recognition as we gained acceptance of several sizable projects in Europe, including residual Faster Payments services acceptance events in the UK and implementations completed in the United States.
Operating expenses were $105.6 million in the September 2008 quarter compared to $92.5 million in the September 2007 quarter, an increase of $13.1 million or approximately 14%. Expense variance between the two periods was driven by a $9.2 million increase year over year, primarily from personnel and related expenditures associated with the installation of customer projects, a rise of $4.4 million in general and administrative costs related to the IBM IT Outsourcing transition costs as well as $1.1 million in year over year severance variance.
Other Income and Expense
Other income for the quarter was $0.4 million compared to other expense of $2.5 million in the September 2007 quarter. The variance of $2.9 million in other income on a year over year basis resulted primarily from reduction of $1.3 million in a FAS 133 non-cash charge on our interest rate swaps, and a reduction of $1.0 million in interest expense compared to the prior year quarter partially offset by a reduction of $0.6 million in interest income.
Income tax expense in the quarter was $1.7 million or 49%, compared to a benefit of $1.5 million in the prior year quarter. The tax expense cost and high effective rate were due to losses in tax jurisdictions for which we received no tax benefit and by income in tax jurisdictions in which we accrued tax expense.
Net Income (Loss) and Diluted Earnings Per Share
Net income for the quarter was $1.7 million compared to net loss of $8.6 million during the same period last year, a rise of $10.3 million.
Earnings (loss) per share for the quarter ended September 2008 was $0.05 per diluted share compared to $(0.24) per diluted share during the same period last year.
Diluted Weighted Average Shares Outstanding
Total diluted weighted average shares outstanding were 34.6 million for the quarter ended September 30, 2008 as compared to 36.3 million shares outstanding for the quarter ended September 30, 2007.
ACI reiterates its guidance metrics. This does not include the potential impact from foreign exchange rate movements and potential term extension delays into the first quarter of 2009. We expect operating free cash flow of $45-50 million for calendar year 2008, unchanged from our previous announcement in August 2008. Rev-log guidance for calendar 2008 remains unchanged at $190-195 million. Should prevailing September 30, 2008 foreign exchange rates remain the same, we would anticipate a negative exchange translation impact of approximately $40 million on the 60-month backlog metric. Sales guidance is unchanged at $430-440 million.
Restructuring Plan Update
We removed $25.0 million in annualized expense from our business as a result of third quarter 2008 restructuring activity and anticipate that the balance of the year will achieve a cost take out of a further $7.1 million in annualized expenses. We still anticipate achieving net cost take-outs of up to $30 million during 2008 and 2009 through a reduction in the work force, cuts in budgeted expenditures, consolidation in non-core products, and facilities. We expect to reinvest up to $16 million in the business funded by cost savings achieved during our restructuring. Areas that will receive future cash investments include the wholesale and risk management products as well as services capabilities.
As stated last quarter, this is the culmination of our restructuring and integration of previously acquired businesses as we align our staffing levels globally with our geographic and product opportunities. We expect to continue to incur one-time charges in the fourth quarter and future periods associated with these efforts, the amount and timing of which is to be determined as the plan is finalized.
View the tables here:Download the document now 34.3 kb (PDF File)