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ACI Worldwide posts Q4 income rise

15 February 2011  |  2449 views  |  0 Source: ACI Worldwide

ACI Worldwide (Nasdaq:ACIW), a leading international provider of payment systems, today announced financial results for the period ended December 31, 2010.

"2010 was a year in which ACI began to accelerate along its profitability curve. We achieved solid growth in revenue over the prior year and extraordinary growth in sales as customers purchased global or multi-country product offerings. Critically, we achieved a 260 basis point improvement in operating income profitability. Our 60-month backlog of committed and renewable client bookings continues to grow nicely and we anticipate another good year in 2011, characterized by continued progress on global account deals, better products with faster and improved services implementations and more incremental growth in profitability and EBITDA margin," said Chief Executive Officer Philip Heasley.

FINANCIAL SUMMARY

Sales

Sales bookings in the quarter totaled $174.8 million which was an increase of $4.7 million, or 3%, as compared to the December 2009 quarter. The stronger quarter was driven by a large UK merchant acquirer renewal, a new Japanese BASE24-eps payment hub customer, an Italian processor and Americas bank renewals with add-on sales including those which are sizable BASE24-eps migrations. Notable changes in the mix of sales compared to last year's quarter included a rise of $17.1 million in new application sales.

On an annual basis, sales bookings rose by $100.6 million to total $525.2 million in fiscal year 2010 as compared to $424.6 million for the twelve months ended December 31, 2009. The positive variance was driven by a rise of $78.5 million in term extension sales as well as $34.7 million in add-on sales.

Revenues

Revenue was $141.2 million in the quarter ended December 31, 2010, an increase of $15.3 million, or 12%, over the prior-year quarter revenues. The rise in revenue over the prior-year quarter reflects higher monthly recurring revenue of $16.7 million. Deferred revenue increased $15.1 million over the prior-year quarter.

Revenue for the twelve months ended December 31, 2010 was $418.4 million, an increase of $12.6 million, or 3%, over revenues of $405.8 million for the twelve months ended December 31, 2009. Revenue growth is largely attributed to higher monthly recurring revenues during the 2010 period as compared to the prior-year.

Backlog

As of December 31, 2010, our estimated 60-month backlog was $1.566 billion, an increase of $54 million as compared to $1.512 billion at December 31, 2009. The increase was primarily attributable to the larger average deal size signed during calendar 2010. As of December 31, 2010, our 12-month backlog was $381 million, an increase of $26 million as compared to $355 million for the quarter ended December 31, 2009.

Operating Expenses

Operating expenses were $98.4 million in the December 2010 quarter compared to $90.9 million in the December 2009 quarter, a rise of $7.5 million, or 8%. Operating expense rise was led primarily by increased advertising and promotions expense and higher than normal deferred services cost recognition as well as by higher reserves taken for bad debt expense.

Operating expenses for the year ended December 31, 2010 were $364.8 million, a rise of $0.6 million or essentially flat as compared to $364.2 million for the prior-year ended December 31, 2009. Operating expense variances year-over-year were led primarily by a $9.1 million reduction in general and administrative costs which was offset by a rise of $8.8 million in selling and marketing costs associated with more robust sales during 2010. Maintenance and services expense rose $4.2 million year-over-year primarily due to higher personnel costs and the release of deferred costs associated with project implementations whereas research and development expenses decreased $3.4 million over prior-year, largely due to lower contractor and personnel costs.

Operating Income

Operating income was $42.8 million in the December 2010 quarter, an increase of approximately $7.8 million, or 22%, as compared to operating income of $35.0 million in the December 2009 quarter.

Operating income for the fiscal year ended December 31, 2010 was $53.6 million, an improvement of $12.0 million, or 29%, over $41.6 million of operating income for the fiscal year ended December 31, 2009.

Liquidity

We had $171.3 million in cash on hand at December 31, 2010. Cash on hand increased $27.4 million as compared to September 30, 2010 primarily as a result of strong cash collections. As of December 31, 2010, we also had $75.0 million in unused borrowings under our credit facility.

Operating Free Cash Flow

Operating free cash flow ("OFCF") for the quarter was $28.0 million as compared to $29.8 million for the December 2009 quarter. OFCF for the twelve months ended December 31, 2010 was $62.8 million, a rise of $32.5 million over the twelve months ended December 31, 2009. The improvement in OFCF was driven by higher operating income as well as by continued strong accounts receivable collections year-over-year.

Other Expense

Other expense for the quarter was $0.4 million, compared to other expense of $2.8 million in the December 2009 quarter. The improvement in other expense versus the prior-year quarter resulted primarily from a $1.1 million positive variance in foreign exchange losses and $0.6 million positive variance in interest expense.

On an annual basis, other expense for the twelve months ended December 31, 2010 was $4.9 million as compared to other expense of $8.5 million for the twelve months ended December 31, 2009. The improvement was led by $2.1 million positive variance in foreign exchange losses as well as the expiration of the fair value interest rate swap which resulted in an improvement of $1.5 million in the non-cash loss attributed to the swap.

Taxes

Income tax expense in the quarter was $15.3 million, or a 36% effective tax rate, compared to $12.6 million, or a 39% effective tax rate, in the prior year quarter. Furthermore, as mentioned in previous quarters, the company continues to incur a fixed amortization charge of $0.6 million per quarter related to the transfer of certain intellectual property rights outside the United States.

Income tax expense for the year ended December 2010 was $21.5 million or a 44% effective tax rate, as compared to $13.5 million, or a 41% effective tax rate, for the prior year ended December 2009. The effective tax rate for both years was higher than the U.S. effective tax rate of 35% due to the inability to recognize income tax benefits during the period resulting from losses sustained in certain tax jurisdictions. The year-over-year increase in the effective tax rate was largely due to a 2009 beneficial release of a $1.6 million tax reserve which did not recur in calendar 2010.

Net Income and Diluted Earnings Per Share

Net income for the quarter and year ended December 31, 2010 was $27.1 million, compared to net income of $19.6 million during the same periods last year, an increase of $7.5 million or 39%.

Earnings per share for the quarter and year ended December 2010 was $0.80 per diluted share, a rise of 40% compared to $0.57 per diluted share during the same period last year. The improvement was largely due to stronger revenue, flat expenses, a reduction in foreign exchange losses and the expiration of the interest rate swap.

Weighted Average Shares Outstanding

Total diluted weighted average shares outstanding were 33.7 million for the quarter and 33.9 million for the year ended December 31, 2010 as compared to 34.2 million shares outstanding for the quarter and 34.6 million for the year ended December 31, 2009.

2011 Guidance

ACI is guiding on three metrics for calendar year 2011. We currently expect Revenue to achieve a range of $440-450 million, Operating Income of $62-65 million and Operating EBITDA of $98-101 million. We further anticipate sales bookings in the high $400s million during calendar 2011 and expect OFCF to trend higher with Operating EBITDA growth.

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